Chapter 1 attempted to cover the law and practice of "Chartering". When a vessel is chartered far a voyage ("voyage charter") the shipowner not only provides the ship to carry the cargo but also makes it available for a certain period of time during which the cargo can be loaded and discharged. The payment for the service of carrying the cargo is "freight" and freight, perhaps calculated by "voyage estimating", takes into account the time spent on the voyage, the fuel consumed during that time, the port costs, the cargo handling costs (if these are paid for by the owner), and other costs. Although the freight is for the service provided, it is not charged for separate periods of time during which the service is provided. Therefore, although part of the service is to make the vessel available for loading and discharging the cargo ("cargo operations") the time for this part of the service is not separately charged for. However, it can be (and usually is) taken into account by an owner when he assesses the freight he should charge. In any event, he is charging the user for the total time the vessel is being used.
Because the vessel is being made available for cargo operations without a separate payment for the time during which it is made available, "Laytime" can be defined accordingly. In the "Charterparty Laytime Definitions 1980" this is:
". . . the period of time agreed between the parties during which the Owner will make and keep the ship available for loading/discharging without payment additional to the freight."
The amount of "laytime", measured in days or in hours, can be considered to be a "store" or "reservoir" of time. The users of a vessel can draw on this amount of time for the purposes of cargo-handling operations, in particular for loading and discharging. Sometimes, even if no cargo operations are being carried out, the rime during which the vessel is at the disposition of the charterer is also part of this store of time. For example, a charterparty may contain the words, "Time lost waiting for berth to count as laytime".
Because the laytime is a "reservoir" of time, it can be used up gradually. It may be helpful to use an analogy of a stopwatch or clock working backwards. This can be referred to as the "laytime clock". (Another pictorial analogy is that of an "hourglass" with the store of time being similar to the amount of sand in the top chamber with a valve between-the chambers to start and stop the flow of sand.) The commencement of the use of laytime ("commencement of laytime") occurs when some agreed event "triggers off" the laytime clock. The laytime commences either immediately or after a specified period (the "notice time") or at some specified, precise time after the Notice of Readiness has been given and has been accepted. For example, the laytime may be said to commence either six hours after the Notice of Readiness is given or at 08 00 the next working day, and so on. The use of the time operates against the Charterer and it is said "laytime counts" against him.
Other, agreed events may operate to stop the laytime clock and when the event has passed, the laytime clock resumes. Such events are generally known as "exceptions to laytime". These "exceptions" can also be called "interruption to laytime". The events which interrupt or suspend the "counting" or "running" of laytime can be physical (for example, rain and bad weather) or non-physical for example, Sundays and holidays).
If cargo operations are carried out during a period, which is subject to an exception and therefore does not count against the Charterer, he will obtain the benefit of the use of the vessel without losing his store of time. This protection can be expressly provided in the charterparty by words inserted in the clause dealing with laytime. If the laytime has commenced and an exception occurs, words such as "even if used" inserted after the description of the exception, mean that the exception will operate to stop the laytime-loss to the Charterer, even if cargo operations take place during the excepted period. For example, the laytime could be specified in the charterparty with the words added, "Sundays and Holidays excepted, even if used".
On the other hand, the cargo operations during the excepted periods can work in the shipowner's favour if words such as, "Sundays and Holidays excepted, unless used" are inserted in the charterparty. The actual hours of work count as laytime used.
A compromise can, of course, be reached in the charterparty by inserting words such as, “ . . . unless used when only half time actually used shall count".
If the vessel is detained longer than the period of laytime allowed, the Charterer must compensate: the owner for the time so lost. This compensation can be "damages for detention" or "demurrage". The main difference between these terms is that the former is "unliquidated damages", that is, the rate of compensation is not agreed in advance by the parties and may be determined by an arbitrator or judge, while the latter is "liquidated damages", agreed in advance. Demurrage is defined as:
". . . the money payable to the Owner for delay for which the Owner is not responsible in loading and/or discharging after the laytime has expired."
"Laytime" is, therefore, concerned with time and the cost of the use of time to either the charterer or the shipowner. Because time has some money value, the use of this time has to be calculated as accurately as possible.
If, however, the cargo operations are completed before the laytime expires, the vessel is considered to be released earlier to the owner's control. In return for this "benefit" money can become payable by the owner to the Charterer. This is "despatch".
In some cases, for example in the GENCON charterparty and in tanker charters, no despatch is payable unless a "rider clause" is added. Generally, the rate of despatch is half that of demurrage.
"Laytime" can be fixed between the parties (for example "five days"), or calculable (for example, the vessel is to load 10,000 metric tons at the rate of 2000 m.t. per day). This is a fairly simple task to determine the amount of laytime allowed to the charterer.
However, when the laytime is neither fixed nor calculable but only "reasonable" (for example, the vessel is to be loaded "as fast as it can be loaded") problems can, and do, arise. In addition, when the laytime is calculable, but the method of calculation contains elements of uncertainty, then also disputes can arise. For example, if the cargo is to be discharged at "200 metric tons per workable hatch per day" the laytime can be calculated in a relatively simple manner. However, if the charterparty provides fox the ". . . cargo to be discharged at the average rate of 1,000 metric tons basis five or more available workable hatches, pro rata if less number of hatches, per day" problems with calculation can arise if some cargo holds are empty and if the ship's cargo-handling equipment is not available for certain hatches.
Therefore, each side will attempt to calculate laytime most advantageously to that side and may attempt to insist that the reservoir of laytime was (or was not) used up in the manner agreed in the voyage charter. This leads to many disputes, which are brought before arbitrators and courts. In this chapter, some of the facts on which the disputes arose will be identified. This will be done in conjunction with definitions and explanations of the terminology relating to "Laytime" and "Timesheets".
Because the calculations are so important, accurate (and honest) records ought to be kept and consulted as a diary of activities, whether these are for cargo operations, or whether these are exceptions to laytime or waiting periods. These records take the form of "Timesheets", whether or not each is supported by a separate "Statement of facts". Therefore, this chapter will also contain suggested specimen Timesheets for different circumstances and. types of voyage charters.
Action of authorities. Delay may be caused by decisions of harbour and port authorities. These decisions are outside the charterer's control and the charterer cannot be held to be responsible for the delay. The results of such action can vary from preventing a vessel's berthing through negligent cargo handling by dock authorities to the vessel's being ordered to leave a berth temporarily for reasons determined only by the authorities. In such circumstances, the charterer does not lose laytime. The delay may not justify the owner's claim for demurrage for delay caused by such action.
All purposes. See Days all purposes and Reversible laytime.
Always accessible. (Also Reachable on arrival. See also Reachable on arrival in Chapter 1.) This phrase affects a vessel's being considered as an "arrived ship", thus allowing the Notice of Readiness to be given and the commencement of laytime counting against the charterer. The expression means that when the vessel arrives at the port the charterer will make a berth available and the vessel can proceed to the berth without delay. The word "accessible" means that the berth is capable of being approached because it is unobstructed. Any obstruction preventing the berth's being "accessible" would have to be a physical obstruction, either natural (for example, insufficient depth of water) or "man-made" (for example, congestion of the port). Weather "obstruction", such as fog, would not make the berth or port inaccessible.
Arrived ship. (See also Arrived ship in Chapter 1.) For laytime to commence counting against. the charterer the vessel must reach the agreed destination and be physically and legally ready to commence cargo operations and the Notice of Readiness must be given correctly by the master. This "triggers off" the commencement of the laytime either immediately when the Notice of Readiness is accepted or after an agreed, fixed period.
As fast as the vessel can . . . (FAC). The laytime is a period of time that may be calculated by reference to the maximum rate at which the vessel, in full working condition, is capable of cargo operations, that is, of receiving or delivering the cargo. In this situation, the laytime is not fixed and can be rather uncertain, depending on an opinion of the speed at which the vessel can receive or deliver the cargo. The quantity of laytime depends on the vessel's capability and will therefore be an obligation on the shipowner, whereas if the description of the rate of cargo operations is simply "with customary despatch", ("CD"), this is an obligation on the charterer. This latter expression means that the charterer must load and/or discharge the cargo as fast as is possible in the circumstances prevailing at the time of loading or discharging.
Averaging. "To `average' means that separate calculations are to be made for loading and discharging and any time saved in one operation is to be set against any excess time used in the other." (Charterparty Laytime Definitions 1980)
(Note that this meaning of "average" is very different from the meaning given to it in "General Average".)
The options of averaging laytime and of using "reversible laytime" are options to the charterer, for whom each method has advantages over a method where demurrage and despatch are separately calculated and paid. Usually the rate of despatch is half that of demurrage.
"Reversible" means that an option is given to the charterer to add together the loading and discharging laytime as if one reservoir of laytime is allowed for both operations.
It is clear that if an option to average is given in the charterparty the charterer would take advantage of it, especially if he controls the cargo-handling operations and is likely to earn despatch on all time saved.
Berth charter. The vessel will be "arrived" when it reaches the agreed destination and this depends on the nature of the charter, whether it is a "berth charter" or a "port charter". In The Kyzikos, 1989, decided in the English House of Lords, the characteristics of these two types of charters were stated as follows:
"The characteristics of a port charter-parry are these. First, the contractual destination of the chartered ship is a named port. Secondly, the ship, in order to qualify as having arrived at the port, and therefore entitled to give notice of readiness to discharge, must satisfy two conditions. The first condition is that, if she cannot immediately proceed to a berth, she has reached a position within the port where waiting ships usually lie. The second condition is that she is at the immediate and effective disposition of the charterers. By contrast, the characteristics of a berth charterparty are these. First, the contractual destination of the chartered ship is a berth designated by the charterers within a named port. Secondly the ship in order to qualify as an arrived ship, and therefore entitled to give notice of readiness to discharge, must (unless the charter-party otherwise provides) have reached the berth and be ready to begin discharging."
In the above statement, for "discharging", read also "loading".
Colliery. A "colliery" is a coal mine and in voyage charters for the carriage of coal the laytime agreed may depend on the working hours of the mine, if the coal cargo has to be delivered to the vessel. The word is connected to expressions that affect laytime.
Colliery guarantee. This is an undertaking in a contract between the colliery owners and the charterer or shipowner. The colliery agrees to supply the cargo and load the vessel on usual colliery terms. If a reference to "colliery guarantee" is incorporated in a coal charterparty the charterer is relieved from any liability for delay to the vessel if the colliery does not supply the coal within the agreed laytime.
Colliery scale. Scale rates can be incorporated into a charterparty depending on the place of loading. These are rates, which are set by organisations, which publish standard-form- charterparties after discussion with shipowners and collieries at the ports of loading. The scale rates also contain rates for demurrage.
For example, a "slip" which is incorporated into the POLGOALVOY 1976 voyage charterparty for coal from Poland and which was amended so as to apply to all fixtures concluded on and after 1 April 1990, contains loading and demurrage scales: For example, for vessels over 9,000 (metric) tons of cargo, an extract from the scales is given below:
Bill of Lading Quantity Daily Demurrage rates
over 9,000 tons to 16,000 tons US$ 4.000
16,000 25,000 6,000
25,000 35,000 6,500
…
Bill of Lading Quantity Gdansk-Northern Port Swinoujscie
over 9,000 tons to 25,000 tons 8,500 7,000
25,000 35,000 11,000 10,000
… and so on.
Colliery turn. This refers to the order in which vessels are taken into the loading and/or discharging berth. This may change the requirements for the commencement of laytime. Normally, time does not count during turn time. This may be an advantage if the coal suppliers and charterers are connected with a colliery. The "turn"-or position in the loading sequence-may depend on the vessel's arrival being reported to the appropriate authorities or on the readiness o£ the colliery to supply a particular cargo.
Colliery working days. This is a description of type of laytime depending on the ordinary working hours of the colliery from which the coal will be delivered to the vessel. The working days are related to normal times and in normal circumstances. Colliery holidays will be "holidays" if an exception to laytime exists in the charterparty (for example, "SHEX"). If the workers in a colliery are on strike, the delay is not excepted from the laytime, unless, of course, there is an appropriate "strike clause", unless a Sunday or holiday occurs during the strike.
Commencement of laytime. "Laytime" is the period during which the owner makes the vessel available for cargo operations. It is important to know when the period begins. For certainty, the charterparty usually expressly relates the commencement of laytime to the happening of a particular event. This event is the giving of a Notice of Readiness. However, the Notice of Readiness must be valid when it is given. This will require two prerequisites to be fulfilled, namely, the vessel must be an "arrived ship" and it must be physically and legally "ready" to receive or deliver the cargo. If the Notice of Readiness is invalid when given, it will be ineffective to trigger the laytime (or to start the "laytime clock") upon the expiry of the stipulated period of notice. If the vessel is not actually ready, the giving of a document named "Notice of Readiness" will not relate to the true facts and the owners will not be entitled to advance the commencement of laytime.
The words "unless the charterparty otherwise provides" have a meaning if the phrase "whether in berth or not" is inserted into the "laytime clause" of a berth charter: These words, usually abbreviated to "WIBON", were designed to convert a berth charter into a port charter. This effect operates only in the situation where a berth is not available for the vessel on its arrival. It does not apply where a berth is available but unreachable because, for example, of bad weather. The phrase ensures that under a berth charter, the Notice of Readiness can be given as soon as the vessel has arrived within the port so that laytime would start to run on its expiry. The "expiry" is usually stated in the laytime clause, so that the laytime commences to count against the charterer at a specific instant or after a specified number of hours, after the "notice" has been given.
An example of a "laytime clause" can be found in the GENCON charterparty:
"Commencement of laytime (loading and discharging)
Laytime for loading and discharging shall commence at 1 p.m. if notice of readiness is given before noon, and at 6 a.m. next working day if notice is given during office hours after noon . . .
Time actually used before commencement of laytime shall count.
Time lost in waiting for berth to count as loading or discharging time, as the case may be."
Of course, the above printed clause can be added to and amended by deletions and insertion of other words arid also by the insertion of a "rider clause".
In the case of The Mexico 1, 1990, a document headed "Notice of Readiness" was given by the master when the vessel was not actually ready to discharge the cargo carried under the voyage charter in dispute. This was not a valid notice and, the judge said in the English Court of Appeal, “ . . . unless something happened after the notice was sent to make the laytime start, it never started at all, with the consequence not only that the owners have earned no demurrage, but also that they are obliged to pay the Charterers despatch money for the whole of the laytime".
In this situation, if the cargo operations are in fact carried our, these occur without laytime having commenced. In practice it may very well be accepted that despite no Notice of Readiness having been given, "laytime" commenced. In The Mexico 1 it was conceded by the charterers that laytime began to run when discharge actually commenced. This may make good sense but it was not what the charter states. The charter is a contract and, as the judge said in the above case, "a contract is a contract" and if there is any dispute arbitrators and the courts will regard a contract strictly. If the charterers and the owners who agree to voyage charter terms choose to make laytime refer to the happening of a particular event, that is the way the law will regard the commencement of laytime, not as if the contract contained in the charterparty had expressed the commencement of the laytime in terms of some quite different event. The particular event is the giving of a valid Notice of Readiness.
Customary. This word usually refers to the rate at which cargo operations are to take place and may affect the time the vessel is made available by the owner for these operations. For example, "customary despatch" means that the charterer must ensure that cargo operations are carried as fast as is possible in the circumstances prevailing at the time of loading or discharging. The use of words such as "customary" can make the counting of laytime quite uncertain. The uncertainty is not improved by using other, similar phrases such as that the cargo is to be discharged “ . . . as fast as the vessel can deliver in accordance with the custom of the port . . ." ("C.O.P."). The reference to "custom" means a settled and established practice in the port. The practice is more relevant to the manner in which the cargo operations are to be carried out and not exclusively to the time these would use. The custom or working practices in the port would be a contributory component of the total time available for cargo operations. The time would be "reasonable" and this would take into account all the circumstances of which "custom" is one.
If an indefinite time for cargo operations is qualified or partly defined by express reference to "customary despatch" or "custom of the port" every restriction arising from that custom or practice should be taken into consideration if these occur for external factors and the Charterer cannot overcome them by the use of reasonable diligence. Therefore the Charterer will not be liable for demurrage or delay if this is caused by port practice he could not foresee. Circumstances that could affect customary practice and the speed of (and time taken for) cargo operations are, for example, strikes, action of harbour authorities, limits imposed by cargo-handling equipment on board the vessel and unforeseeable difficulties imposed on shippers and/or receivers.
Custom of the port. See Chapter 1.
Damages for detention. This expression is used to refer to the compensation payable by a Charterer if a vessel is delayed without agreement. This type of "delay" can be known as "wrongful detention" and can occur, for example, if the agreed laytime expires and no rate of demurrage (or "liquidated damages") has been agreed. It can also arise if laytime expires and any agreed, fixed demurrage period also expires. In modern chartering, fixed demurrage periods would be unusual, demurrage being payable for all time lost at the agreed rate. One use of damages for detention may be where the vessel is delayed because the Charterer fails to nominate a berth, which is reachable on the vessel's arrival; end the vessel arrives and has to wait. However, if the charterparty contains a clause dealing with "time lost waiting for berth" being counted as laytime, then demurrage would be more applicable than damages for detention.
Days. When a charterparty provides for laytime to be fixed or calculable this can be referred to a number of "days". The number of days is sometimes called "laydays" but this term is better used for the "Laydays and Cancelling" clause. Laytime can also be described in such a manner that it is neither fixed nor calculable, such as that the cargo is to be loaded "as fast as the ship can receive". This has less certainty than the use of "days" (or hours). Under this heading in this chapter, different varieties of "days" will be discussed.
The word "day" is defined "in the Charterparty Laytime Definitions 1980" as: "a continuous period of 24 hours, which, unless the context otherwise requires, runs from midnight to midnight".
All purposes. ("d.a.p."). When laytime can be added together by the Charterer fur loading and discharging operations as if one total time is specified to cover both operations, this is "reversible laytime" and is referred to as the number of days. far all purposes In a laytime calculation based on reversible laytime a specific clause must the charterer the option and the charterer must exercise the option after dec...
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