Time Charterparty
Redelivery
Under a time-charter contract the vessel is to be delivered by the owners to the charterers for their commercial use within stipulated period of time. At the end of this time, subject to any express provision contained in the contract, the charterers obliged to redeliver the vessel to the owners. Therefore time charterparty necessarily contains terms as to its duration. Where a charterparty is for a fixed period such as three or six months, the court may imply a reasonable margin or allowance because it is impossible for anyone to calculate exactly the day on which the last voyage may end, but it is open to the parties to provide that there is to be no margin or allowance.
Timely redelivery is not always a condition of a time charterparty, but may well be an 'intermediate' term since a short delay in redelivery will not justify the termination of the contract. When the charterers insist on their orders which, at the moment of performance, will apparently lead to late redelivery, they may find themselves in repudatory breach shall they not replace that orders for a valid one, if in a result of compliance with such orders, the vessel would proceed on last voyage and consequently being redelivered late.
Lord Mustill in Torvald Klaveness A/S v Arni Maritime Corpn (The Gregos) [1995] 1 Lloyd’s Rep 1 described apportionment of risks related to the late redelivery as below:
Where the charter-party is for a period of time rather than a voyage, and the remuneration is calculated according to the time used rather than the service performed, the risk of delay is primarily on the charterer. For the shipowner, so long as he commits no breach and nothing puts the ship off-hire, his right to remuneration is unaffected by a disturbance of the charterer’s plans. It is for the latter to choose between cautious planning, which may leave gaps between employments, and bolder scheduling with the risk of setting aims which cannot be realized in practice.
See more on redelivery date and damages for late redelivery here.
Legitimate and Illegitimate orders
Since the master and crew are empoyed by the shipowner and therefore under his direct orders there is a high possibility of conflicting orders coming from the owners and the charterers with regard to same voyage orders (due to e.g. different views on risk apportionment as between the time charterers and the owners). It is therefore usual for time-charter contract to contain an Employment and Indemnity clause. Such a clause provides, generally, that the master is to be under the orders of the charterer as regards employment, agency and other arrangements and that the charterer is to indemnify the owner against consequences or liabilities arising from the master, officers or agents signing bills of lading or other documents or otherwise complying with such orders.
Then in situation when the orders of the charterer are carried out, or bills of lading are signed, and loss or damage is sustained as a result of compliance with the orders, the charterer must indemnify the shipowner. The ‘orders’ must come within the scope of the words ‘employment, agency and other arrangements’. For these purposes, ‘employment’ means employment of the ship to carry out the purposes for which the charterer wishes to use her and does not extend to navigation of the ship or incidents of navigation.
It is necessary to stress that for the charterers’ orders to be the subject of the indemnity, the consequences of such orders should be direct consequences as distinct from mere consequences. Mr Justice Colman in Ullises Shipping Corp v FAL Shipping Co Ltd (The Greek Fighter) [2006] EWHC 1729 (Comm) at para 302 defined the scope of the indemnity obligation in the following words:
In particular, the parties are unlikely to have contracted for the protection of the Owner against losses which are remote as a matter of causation from the charterer’s order. That is because it is in a commercial setting improbable that a charterer would be prepared to assume the risk of eventualities causally remote from his own orders. … Much less would a charterer be likely to assume the risk of eventualities causally contributed to by negligence or other fault on the part of Owners notwithstanding that charterers’ order may have initiated the train of events leading to Owners’ loss. For these reasons it is improbable that a charterer would ever willingly enter into an indemnity which protected Owners from losses not predominantly or proximately caused by the charterers’ orders under the charter.
Besides, some orders of the charterers can be considered as illegal, i.e. when such orders will make the contract itself as illegal, as for example an order to visit a prohibited port, or when the charterers sending the vessel on illegitimate last voyage.
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