Maritime Law in context of charter parties and its implications

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What is Charter Party in Martime Law?

Within maritime law, a charter party (from the Latin charta partita – a divided legal paper) is a contract between the owner of a vessel and the “charterer” (a person who wishes to hire the boat) by which the vessel is rented out for a period of time or a specific journey. The name comes from the fact that the document is written in duplicate, with one half retained by each party – meaning that both sides are aware of the rights given to them under law by the agreement. For the most part a charter party is issued on a vessel which is intended to be used for freight transport.

Kinds of Charter

There are two differing kinds of charter (for the most part): a “time charter” which allows the hiring of a vessel for a specific period of time, covering any number of journeys made within that time and a “voyage charter” which covers one specific A-to-B journey. Among time charters there is also a subset which is named a “demise-“ or “bareboat charter”, in which the charterer takes full legal responsibilities over the vessel and all crewing and maintenance matters – becoming de facto owner of the boat for the duration of the charter.

Carriage of Goods by Sea Act

In the US, these charter agreements are covered by the Carriage of Goods by Sea Act (or COGSA), which allows breaches of the charter to be pursued through a state court. This coverage comes not from the strength of the charter itself, but from the attendant issuing of a “bill of lading” which is required by law. Though there are exceptions to this coverage, they are not common and it is certainly not worth risking them as the case can still be pursued through admiralty law.

Clauses in Charter Contracts

There are certain clauses that are inserted in most charter parties. A Bunker Clause, for example, stipulates that the charterer shall pay for all fuel contained in the ship’s bunker or bunkers when he or she takes control of the vessel, and that the owner will pay for all fuel left on the return of the vessel. As part of the agreement and clause, it is seen as right and proper to agree upon a maximum and minimum amount of fuel to be contained in the bunkers on the vessel’s return,

These rules and regulations are not dissimilar to tenancy agreements on land, and are there to protect both parties by establishing good faith between owner and charterer, avoiding a temporary owner causing damage to a vessel which they will not, after all, need to maintain beyond the period of the charter.