What is a Charter Party?

The most general determination of a Charter Party term is:

A contract by which an entire ship, or some principal part thereof, is let to a merchant for the conveyance of goods on a determined voyage to one or more places.

Charter parties could be divided in the following basic categories:


* Bareboat or Demise charter

Is an arrangement for the hiring of a vessel whereby no administration or technical maintenance is included as part of the agreement. The Charterer obtains possession and full control of the vessel along with the legal and financial responsibility for it. The Charterer pays for all operating expenses, including fuel, crew, port expenses and P&I and hull insurance. In commercial demise chartering, the charter period may last for many years; and may end with the Charterer acquiring title (ownership) of the ship. In this case, a demise charter is a form of hire-purchase from the Owners, who may well have been the shipbuilders. Demise chartering is common for tankers and bulk-carriers.

* Voyage charter

This is the most commonly used Charter Party. Under this particular agreement, the Owner of the ship agrees to lease the cargo to the Charterer for a particular voyage. The cost paid for such as lease includes costs like fuel, loading and unloading of the cargo etc. The vessel Owner supplies the Charterer with the vessel and sometimes the crew for a voyage to a designated port. However, there is a specific time limit under this kind of contract. The time mentioned in the lease contract includes the time needed for loading and unloading of the cargo, exceeding which may need the Charterer to remunerate the Owner in terms of compensation charges. Besides, a voyage charter specifies a period, known as laytime, for unloading the cargo. If laytime is exceeded, the Charterer must pay demurrage. If laytime is saved, the charter party may require the Shipowner to pay despatch to the Charterer.

* Time charter

Is the hiring of a vessel for a specific period of time; the Owner still manages the vessel but the Charterer selects the ports and directs the vessel where to go. The Charterer pays for all fuel the vessel consumes, port charges, and a daily hire to the Owner of the vessel.

Trip time charter

Is a comparatively short time charter agreed for a specified route only (as opposed to the standard time charter where Charterer is free to employ the vessel within agreed trading areas).

* Lump sum charter

In this particular type of charter party, the Owner agrees to lease his vessel to the Charterer for a specified cargo to be shipped to a specified port.

Contract of Affreightment

Is similar to a voyage charter. This type of charter party particularly suits to bulk cargos that often need more than one voyage for complete shipment. Under this contract, the Owner offers to carry the mentioned cargo at a price decided at rate of per tonnage or per voyage. This type of contract is especially found in industrial cargos like that of coal, stones, building material, metallurgical materials etc.

One may find a full list of available standard contracts on the following link.

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