Delays in loading or discharge, disputed demurrage calculations and unpaid hire can create substantial financial exposure for shipowners and charterers. Resolving these disputes requires careful examination of the agreed charter terms, the applicable law and the records of what occurred.
The contractual framework
A charterparty dispute should be assessed against the complete agreement. This may include the fixture recap, standard form, rider clauses and subsequent amendments. Where provisions differ, their effect and priority must be determined under the contract and governing law.
Voyage charters and time charters involve different payment arrangements. Laytime and demurrage commonly arise under voyage charters, while hire and off-hire disputes commonly arise under time charters. These concepts should be examined within the particular agreement.
Laytime and notice of readiness
Laytime is the agreed period available for loading or discharge without an additional payment beyond freight. Establishing when that period begins requires more than confirming the vessel’s arrival.
The validity of the Notice of Readiness (NOR), the vessel’s readiness, the place of tender and any contractual notice period may affect the calculation. Waiting time, weather interruptions, holidays and operational stoppages must be considered under the relevant wording.
BIMCO’s Laytime Definitions for Charter Parties 2013 provide standard definitions for these issues. They are contractual definitions, rather than legislation or an international convention. Their preamble provides for their application when expressly incorporated into the charterparty.
Demurrage claims
Demurrage generally concerns the agreed payment for qualifying delay after laytime expires. A claim requires a supported calculation showing the time allowed, time used, relevant exclusions and contractual rate.
Exceptions applicable during laytime should not automatically be carried into the demurrage calculation. For example, Definition 30 of BIMCO’s 2013 definitions provides that laytime exceptions do not apply to demurrage unless the charterparty specifically states otherwise. The agreed wording and governing law remain essential.
Statement of Facts entries should be checked against the NOR, port records, weather information and operational correspondence. A calculation may be disputed because the parties disagree about when time began, which periods count or who was responsible for an interruption.
Hire payments and off-hire
Under a time charter, the agreement normally specifies the hire rate, payment dates and payment arrangements. Any deduction, suspension of performance or withdrawal of the vessel requires careful assessment of the contractual rights and applicable law.
Off-hire provisions may relieve the charterer from paying hire in defined circumstances. However, delay or reduced availability does not automatically place the vessel off-hire. The event must fall within the clause, and the relevant requirements concerning causation and time lost must be satisfied.
Before withholding hire or taking action for non-payment, the parties should check any notice provisions, grace periods and restrictions on deductions. An incorrect deduction or premature withdrawal may give rise to a further dispute.
Applicable law and compensation
The governing law and dispute resolution provisions should be identified at an early stage. A charterparty involving a Myanmar port does not, by itself, establish that Myanmar law governs every contractual issue.
Where Myanmar’s Contract Act, 1872 applies, section 73 addresses compensation for loss caused by breach of contract. It concerns loss arising naturally from the breach or contemplated by the parties when contracting, and excludes remote and indirect loss. Its application to a particular claim requires examination of the contractual obligation, breach and resulting loss.
Claim deadlines and supporting documents
Charterparties may impose specific deadlines for submitting claims and supporting documents. These requirements must be distinguished from statutory limitation periods and deadlines for commencing arbitration or court proceedings.
Preserve the charterparty, fixture recap, rider clauses, NOR, Statement of Facts, loading and discharge records, hire statements, payment records and correspondence. A claim should explain both the contractual basis and the calculation of the amount sought.
Legal assistance from ILPC
ILPC provides legal advice and representation in charterparty disputes, including laytime and demurrage calculations, unpaid hire, off-hire claims and contract interpretation. We assist with reviewing documents, assessing claims, negotiations and dispute resolution.
Contact ILPC with the relevant charter documents, operational records and correspondence to discuss the available options.
Disclaimer
This publication is provided for general information only. It does not constitute legal advice and should not be relied upon as such. Specific advice should be sought in relation to any particular matter.
