Voyage Charters. Laytime. Last updated 15-Aug-2014

224 The usual solution in respect of duration of port stay is to allow an appropriate period time to cover loading and discharging, generally called ‘laytime’ or, sometimes, ‘lay days’, which is at the charterer’s free disposal, and to grant him the possibility, in case of need, of detaining the vessel beyond the agreed time, against payment of compensation to the owner for the use of the additional time; such compensation is called ‘demurrage’. Laytime and demurrage thus fulfil functions of fundamental importance, from both an economic and a practical standpoint, and then-terms are invariably regulated in standard voyage charterparty forms.
UNCTAD, Charter Parties, Report by the Secretariat of UNCTAD, 1974.

Overview

Usually a certain amount of time is agreed between the owner and the charterer for loading and unloading operations. This amount of time is called ‘lay days’ or ‘laytime’. In absence of express provision a reasonable time is implied by the law, that is a reasonable time under the circumstances. Thus, it was held that the charterer fulfilled his obligations to load or discharge notwithstanding protracted delay, so long as such delay is attributable to causes beyond his control, and he has neither acted negligently nor unreasonably.

When the language of the contract does not expressly, or by necessary implication, fix any time for the performance of a contractual obligation, the law implied that it shall be performed within a reasonable time. The rule is of general application, and is not confined to contracts for the carriage of goods by sea. In the case of other contracts the condition of reasonable time has been frequently interpreted; and has invariably been held to mean that the party upon whom it is incumbent duly fulfils his obligations notwithstanding protracted delay, so long as such delay is attributable to causes beyond his control, and he has neither acted negligently nor unreasonably.
Per Lord Watson in Hick v Raymond [1893] AC 22 at p.32

In the absence of express stipulations the charterer is impliedly under an absolute obligation to provide a cargo according to the charter. Since the shipowner is not concerned with the methods by which the charterer intends to acquire the cargo, the arrangements for procuring that cargo are outside the scope of the contract. However, if the ship cannot arrive so as to enable laytime to commence but for the cargo is available for her defaulted charterer will be liable in damages to the shipowner for delay caused by the non-availability of such cargo. The provision of the cargo and the nomination of the berth must be made in sufficient time to enable the vessel to be completely loaded within the lay days. But failure to do so from the part of the charterer does not give a right to the owner to rescind the charter unless the delay becomes so prolonged that the breach assumes a character so grave as to go to the root of the contract.

Although the charterer is under obligation to load and discharge the cargo, it shall be stressed that both loading and discharging are joint operations, because both operations inevitably require not only shore side workforce and equipment but also ship’s crew involvement in a varying degree. For instance, discharge of crude oil or petroleum products from tanker almost completely depends on ship’s pumping ability whereas receiving terminal provides only crew to connect ship’s manifolds to shore arms.

Arrival of ship at the port signifies an end of either loading or carrying voyages and the moment from which liability of the charterer as to his part of the joint act of loading or unloading starts to accrue. Usually a certain amount of time is agreed between the owner and the charterer for loading and unloading operations. In absence of express provision a reasonable time is implied by the law. This amount of time is called ‘lay days’ or ‘laytime’.

It seems that older authorities like Nielsen v Wait (1885) 16 QBD 67 CA, regarded lay days provision in charterparty as "always in favour of the charterer". On the view that it allows the charterer to keep the vessel for his services without obligation to pay freight (Freight is primary payment obligation arising under a voyage charter). M. Summerskill in his Laytime, 4th ed. 1989, says at p.2, that laytime is "usually … an undertaking by the charterers for the benefit of the owners", referring to Dixon CJ judgment in an Australian case of President of India v Moor Line Ltd. [1958] 2 Lloyd’s Rep. 529. The later view makes better sense nowadays, since in modern interpretation laytime represents certain amount of time which allotted to the charterer for the purpose of performing his duty to load and discharge. With abandonment of stipulation as to ’reasonable dispatch’ and introduction of fixed time period for these operations the charterer is under pressure to release the vessel in time, otherwise he is to pay damages to the owner.

As a general rule, laytime starts when vessel tenders Notice of Readiness, if express provisions of contract do not speak to the contrary. See for example cl.6.3 of BPVOY4 form.

BPVOY4, cl.6.3, lines 258-281:

6.3 Notwithstanding tender of a valid NOR by the Vessel such NOR shall not be effective, or become effective, for the purposes of calculating laytime, or if the Vessel is on demurrage, demurrage unless and until the following conditions have been met:-
   6.3.1 in the case of the Vessel proceeding directly to the loading or discharging ptace, she is securely moored and her gangway, if it is to be used, is in place; or
   6.3.2 in the case of the Vessel not berthing upon arrival and being instructed to anchor, she has completed anchoring at an anchorage where vessels of her type customarily anchor at the port or, if she has been instructed to wait, she has reached the area within the port where vessels of her type customarily wait; and
   6.3.3 free pratique has been granted or is granted within six (6) hours of the Master tendering NOR. If free pratique is not granted within six (6) hours of the Master tendering NOR, through no fault of Owners, Agents, or those on board the Vessel, the Master shall issue a protest in writing ("NOP") to the port authority and the facility at the port -("Terminal") failing which laytime or, if the Vessel is on demurrage, demurrage shall only commence when free pratique has been granted; and
   6.3.4 in the case of calls at US ports, a US Coast Guard Tanker Vessel Examination Letter ("TVEL") has been issued, or in the case of calls at non-US ports where any similar certificate is required to be issued by a state authority at those ports prior to loading or discharging of cargo, such certificate has been issued.

When laytime is exceeded the charterer is in breach of the voyage charter contract and becomes liable to pay the shipowner liquidated damages by way of demurrage at the agreed rate. The charterer entitled to keep the vessel for all the lay days even if he could have finished cargo operation earlier.

The owner is obliged to place the vessel at the charterer’s disposal at definite geographical location mentioned in a voyage charter contract. Such location may be either a berth - in case of a berth charter, or a port - in case of a port charter. This stipulation is very important because, as mentioned above, only arrival of the vessel at agreed place signifies an end of either loading or carrying voyages. Until that moment the charterer under no duty to provide the cargo and the owner alone bears all the liability for any delays.

There are several conditions to be fulfilled before laytime starts to run:

First, the ship must have arrived at her destination, and so be within the designation of an "arrived" ship. Till then she is not entitled to give notice of readiness to load. Secondly, she must have given the prescribed notice of readiness to load. Thirdly, she must in fact be, so far as she is concerned, ready to load.
Leonis Steamship Company, Ltd v Rank, Ltd [1908] 1 K.B. 49 by Kennedy LJ at p.518

In non-schedule trades, such as crude oil and petroleum products, for example, the vessel can arrive at the load port earlier then agreed in contract, because she may not have been employed immediately prior to her current voyage charter. In these cases beginning of laytime also depends on whether the charterparty allows to utilise all time used before the original projected start of laytime as additional time which is added to the standard allowance, i.e. whether it expressly allows to start laytime running before commencement of laydays. See more on NOR and Laycan page.

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