• The main and primary effect of the chartering agreement is the transfer of ownership of the interests of the ship to the lessee, who in return pays the lease to the owner.
• But what are the elements of this agreement, what clauses must be included in it, and what will be the collateral obligations of the parties?

Sample of a ship charter contract and its provisions

A ship charter contract, like any other contract, is a legal entity that is subject to the national law of a country. In fact, it is interesting to know that legal entities, like contracts, also have nationality.

The nationality of a contract means that, firstly, the contract must be drawn up in accordance with the mandatory laws of the country concerned, and secondly, the method of resolving disputes, the obligation to fulfill obligations, and other matters are implemented in accordance with the national law of the country concerned.

If the parties to a contract are citizens of two countries, or if the subject of the contract is located in another country, or the place of execution of the contract is located in another country, the contract will be international.

International contracts are more than anything else bound by the agreements of the two parties, and the law governing the contract and the method of resolving disputes arising from the contract are also determined by the parties in the contract.

Due to the diversity of national and international laws, the provisions of contracts, whether they are national or international in nature, differ from each other, but some of the elements are so fundamental that their absence in the contract cannot be imagined, and the parties must necessarily agree to them and commit themselves to them in the contract.

Regarding the ship charter contract, there are also some items that must be mentioned in the contract, each of which we will briefly explain below.

Ship owner Information

The ship owner is one of the parties to the contract who must own the ship and, due to the authority he has acquired from his ownership, transfers the interests of his ship to the charterer for a certain period or a specific voyage.

As a result, the identity information of the shipowner must naturally be included in the contract.

Ship Charterer Information

The charterer is the other party to the contract who takes possession of the interests of the ship and pays the ship’s rent to the owner in return.

Each ship has the nationality of a specific country and therefore has a specific name, number and registration information.

The capacity of ships also varies. Since the subject of the ship chartering contract is the interests of the ship, it is natural that the ship’s information must also be mentioned in the contract. This information will consist of at least the name, specifications and capacity.

The Quantity and specifications of the cargo

The subject of the chartering contract is the rental of the ship, but for how long is the ship rented or what shipment is to be transported or what trip is to be made?

The answer to these questions is another part of the ship charter contract. That is, it must necessarily be stated in the contract that the parties agree to transfer the benefits of the ship for a specific period or a specific voyage, and also the conditions of the cargo and shipment, including positive and negative conditions, must be stated in the contract. Of course, it is not necessary that the cargo specifications be precisely predicted, but it is necessary that the scope of the parties’ agreements regarding permitted and prohibited cargoes be stated in the contract.

Destination ports or places of loading and unloading

The benefits of the ship naturally include the transportation and transfer of shipments by sea. Now, for what voyage or voyages is the charterer allowed to use the benefits of the ship, what should be the conditions of the ports and places of loading and unloading, should certain ports be excluded from the charterer’s jurisdiction or should only certain ports be allowed for use? All these points should also be mentioned in the contract.

The overall rate of rent and freight

What the charterer pays to the owner, that is, the obligation of the charterer to the ship owner, includes the charter price of the ship.

Consequently, it is natural that the consideration of the contract, that is, the amount of rent, the terms and method of payment, the person or persons to whom the payment must be made, and the period during which the payment must be made, should be mentioned in the contract.

In fact, this clause is one of the conditions that must necessarily be mentioned in the contract for the contract to be considered valid.

Time and place of delivery of the ship

The ship must be made available to the charterer in accordance with the agreements of the parties in order to enable the charterer to use its benefits.

The delivery of the ship, which may be with or without a crew, means that the operational management of the ship during the voyage must be handed over to the charterer. This must be done at a specified time or place, the time and place of which must be mentioned in the contract.

Otherwise, the manner of execution of the contract will not be clear and may even distort the validity of the contract.

Obligations and other conditions of the ship owner and the charterer

In any contract, in addition to the main obligation, which includes the consideration of the contract, the parties may also have undertaken additional obligations, which must necessarily be mentioned in the contract.

For example, both the owner and the customer may be considered responsible for supply certain specific conditions and, in the event of a breach of the obligation, be liable for damages.

All of these matters must also be mentioned in the contract. Finally, the silence of the contract regarding collateral obligations is generally means the absence of any collateral obligations.

Parties to the contract in a ship charter

We introduced the basic conditions that must be included in a ship charter contract in the previous paragraph.

We also mentioned that the parties to the contract and their characteristics must necessarily be mentioned in the contract, and that the obligations, rights, and powers resulting from the contract will be implemented in their favor.

However, it is interesting to know that there may be three parties involved in a ship charter contract.

That is, in addition to the owner and the charterer , there is usually a third party in ship charter contracts, that  we will introduce below.

The ship owner

As we mentioned, each ship is under the nationality of a specific country.

In fact, each ship is registered under a specific name and number in special books that not only indicate the nationality of the ship, but also include the current owner and previous owners of the ship, the characteristics and features of the ship.

Like any other property, the ship also has a title deed. The title deed not only identifies the owner of the ship, but also gives the owner royal powers and rights, including the right to enter into various contracts regarding the ship, such as a charter party.

As a result, the person or persons identified and introduced as the owner of a particular ship in the registration documents constitute one of the parties to the charter party, whose signature and intent are necessary for the creation and execution of the charter party and must be verifiable.

Charterer

The charterer or lessee of a ship is the other party to a ship chartering contract. A charterer is any natural or legal person or persons who, in return for payment of a rental fee, acquires the full ownership of the ship for a specific period of time or for a specific voyage.

As a result, the lessee, according to the terms of the chartering contract, becomes the owner of the ship’s interests and can exercise this right in accordance with the terms of the contract.

The lessee, like the ship owner, is essential to the validity of a chartering contract and a breach of this person’s information will result in a breach of the contract.

Forwarder

Forwarders are actually brokers who act as intermediaries between the charterer and the ship owner.

The explanation is that not only can charterers not identify and find the ship they want, but owners also have difficulty finding a suitable charterer.

In a ship charter contract, a forwarder can guide each charterer by having information about the types of ships and their owners and arrange a suitable charter contract between the charterer and the ship owner.

Naturally, this group also receives a fee for providing their services. Their fee basically includes a commission that is equal to a percentage of the ship’s fare and is determined by agreement between the parties before signing the contract and is paid by one of the parties or both the owner and the charterer.

It should also be noted that the forwarder has no responsibility for the obligations of either party, and the execution of the contract neither creates any rights for him nor imposes any obligations on him. The forwarder is the only intermediary between the owner and the charterer until the signing of the contract, and as soon as the ship chartering contract is signed, the role of the forwarder ends.