What Is a Charter Party?
A charter party (from the Latin carta partita — "divided document") is a contract between a shipowner and a charterer for the hire of a vessel or its cargo capacity. It is one of the most fundamental documents in commercial shipping, governing the rights and obligations of both parties throughout the voyage or hire period.
If you work in shipping, ship management, maritime law, or international trade, the ability to read and understand a charter party is an essential skill. This guide walks you through the basics.
The Three Main Types of Charter Party
| Type | What Is Hired? | Who Manages the Vessel? |
|---|---|---|
| Voyage Charter | Cargo space for a specific voyage | Shipowner |
| Time Charter | Use of the vessel for a fixed period | Shipowner (commercially directed by charterer) |
| Bareboat (Demise) Charter | The vessel itself | Charterer (full operational control) |
Voyage Charter
The charterer pays freight for the carriage of a specified cargo from port A to port B. The shipowner bears most operating costs and navigational responsibility. Common in bulk commodity trades.
Time Charter
The charterer hires the vessel for a defined period, directing its commercial employment while the owner remains responsible for the crew, maintenance, and insurance. The charterer pays hire rate plus bunkers. Very common in container and tanker trades.
Bareboat Charter
The charterer takes full possession and control of the vessel, typically crewing and maintaining it themselves. Essentially equivalent to ownership for the charter period. Used in ship financing arrangements and some ferry operations.
Key Clauses to Understand
Description of the Vessel
The charter party opens with a detailed description of the vessel: name, flag, class, deadweight, capacity, speed, and fuel consumption. These are warranties — if the vessel fails to match them, the charterer may have grounds for a claim. Always verify these details against the vessel's documents.
Laydays / Cancelling Clause
This defines the window during which the vessel must be ready for loading. If the vessel arrives after the cancelling date, the charterer typically has the option to cancel the charter without penalty. Laytime and cancelling dates are critical in voyage charters.
Freight / Hire Rate
In a voyage charter, freight is usually expressed as a rate per tonne of cargo. In a time charter, hire is expressed as a daily rate. Look for provisions governing when freight or hire is earned (e.g., "freight earned on shipment, vessel and/or cargo lost or not").
Laytime and Demurrage
Laytime is the agreed time the charterer has to load and discharge cargo. If loading or discharging takes longer, the charterer pays demurrage — a pre-agreed daily rate for the delay. If operations are completed ahead of time, the charterer may receive despatch — a payment from the owner for time saved. Demurrage disputes are one of the most common sources of litigation in shipping.
Safe Port / Safe Berth
A fundamental charterer obligation: the charterer warrants that they will only nominate ports and berths that are safe for the vessel to use. A port is considered safe if the vessel can reach it, use it, and depart from it without abnormal danger.
Off-Hire Clause (Time Charter)
Specifies the circumstances under which the charterer is entitled to suspend hire payments — typically when the vessel is not in a state to perform the service required due to breakdown, drydocking, or crew deficiency. This clause is frequently disputed and deserves careful reading.
General Average and New Jason Clause
Standard clauses invoking the law of general average (shared sacrifice for shared benefit) and protecting the shipowner's right to contribution even if negligence is involved.
Standard Forms and Their Importance
Charter parties are rarely drafted from scratch. Instead, parties use industry-standard forms published by organizations such as BIMCO (Baltic and International Maritime Council) and adapt them with additional clauses ("riders"). Common forms include GENCON for voyage charters, NYPE for time charters, and BARECON for bareboat arrangements. Knowing the standard form helps you quickly spot what has been changed or added.
Practical Tips for Reading a Charter Party
- Always read the printed form and all rider clauses — riders frequently override printed terms
- Pay close attention to any definitions box at the start
- Note all time-sensitive provisions and build reminders for key dates
- If a clause is ambiguous, seek legal advice before signing — not after a dispute arises
- Keep a clean executed copy safely filed — disputes can arise years after the voyage
Conclusion
Charter parties can be dense and technical, but they follow logical structures once you understand the key building blocks. Whether you're reviewing a contract for the first time or deepening your commercial shipping knowledge, mastering charter party fundamentals is an investment that pays dividends throughout a maritime career.