Introduction
Maritime transport has always been a relevant method of shipment of goods. A large consignment of goods can be shipped at once since the capacity of ships is relatively high. It saves not only money but also time. Ship charter is currently one of the most popular in the maritime industry. More than half of the world’s marine fleet operates under a charter (Chen et al., 2021). It is a rental of use of the vessel by the shipowner to another firm, the charterer, to transport goods.
The charter party is a formal agreement between the shipowner and the charterer to utilize a vessel for the rental, transportation of passengers or cargo, entertainment, research, or other purposes (Voudouris and Plomaritou, 2020). The charter party, therefore, establishes the rights and obligations of the contracting parties.
Also, freight plays a significant role. For sea freight, an agreement is signed that determines the procedure for hiring a vessel for international transportation (Plomaritou & Voudouris, 2019). According to the Carriage of Goods by Sea Act of 1992, the bill of lading certifies the existence of a contract of carriage between the parties and defines its terms. It is signed following the charter party provisions once they verify that all cargo was loaded into the ship and the shipowners have gathered the freight.
The Differences Between Time Charters and Bareboat Charters
There are three kind of vessel charter agreements that are now in use: journey charter, time charter, and bareboat charter. The last two are relevant in cases when more than several shipments are sent, involving renting a vessel for a certain period. There are some differences between time and bareboat charters.
In commercial shipping, a time charter is a deal to rent a ship with a crew for a set period. A time charter in English law is usually understood as a contract concluded for a specific time, according to which the charterer can use the vessel for the carriage of his own or other people’s goods. The captain, appointed by the shipowner, must issue bills of lading for such goods accepted by him for transportation. The shipowner agrees to rent the charterer the use of the ship and the services of ship crew members for a specific amount of time for cargo transportation or other commercial shipping activities. The parties are dealing with a particular kind of contract for the carriage of goods by sea if the ship is rented for the purpose of transporting goods.
A bareboat charter is a ship leased as a time charter for a specified amount of time but with no skipper or crew, storage, insurance, or other provisions. The charterer has used the ship for a long time and is considered the effective owner.
The Different Legal and Commercial Obligations of the Charterer
These differences between time and bareboat charters imply the charterer’s different legal and commercial obligations. One of the most important obligations is seaworthiness – compliance of the vessel with all technical requirements and cargo carriage requirements, as described in Article III (1) Hague-Visby Rules (Carriage of Goods by Sea Act 1971). Other liabilities, included in Article III (2), include proper and careful “loading, handle, stow, carry, keep, care for, and discharge the goods carried.”
Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd case was an example of unseaworthiness when the vessel was already in bad condition when delivered due to age. The Court of Appeal stated that the shipowners were entitled to damages because of supplying the old vessel. Depending on the charter type, these liabilities are divided between the owner and the charterer.
First, a time charter is recognized as a contract of carriage, and a bareboat charter is recognized as a lease. If the charterer does not own and control the vessel fully, the contract is considered a type of transportation. Common law and doctrine have traditionally treated the time charter as a form of a contract of carriage (Todd, 2015).
In the 1942 C&L Securities v. Dickinson case, the court stated: “The essence of the time charter in its modern form lies in the agreement between the shipowner and the charterer that for a specified period the shipowner will provide services through his employees and crew in order to transport cargo that will be loaded on board the vessel by the charterer.” Thus, ownership is a constitutive feature when referring the charter to the legal model of the lease.
Under a time charter, the shipowner covers the crew’s maintenance and other fixed costs (insurance premium, depreciation costs, and others). The charterer takes on variable expenses (fuel, water, navigation costs). Compared to a trip charter, the provisions of a time charter place more responsibility and associated costs on the charterer. However, they also offer the charterer additional rights to dispose of the vessel in certain circumstances (Dimitrakieva et al., 2021). In practice, the right to use a ship is not absolute, and charters limit the geography of movement and the type of cargo that can be transported.
Under a bareboat charter, because the charterer becomes the de facto owner of the vessel during the specified time, the charterer becomes liable for maintenance, insurance costs, damage compensations to the owner, and wages to the crew. Suppose the vessel is damaged due to certain unsafe harbor conditions that a voyage or time charterer failed to advise the shipowner. In that case, the chartered vessel may be held responsible for resulting losses, including physical damage to the vessel and the loss of resulting utilization (Wilson, 2010). While the boat should be under complete control of the charterer, the owner may impose some restrictions, such as requiring specific certifications of the captain and crew, placing sailing limits on regions, or operating at night.
Recommendations
Considering the differences, it seems that the bareboat charter is the better option. A 10-year supply contract has been signed, which assumes long-term use of the charter. In comparison, a time charter offers fewer expenses due to management and legal liabilities lying with the owner. However, it has no advantage over bareboat charter in the long run. When using a bareboat charter, there is the opportunity to control the process thoroughly and ensure that expenses are handled efficiently and that the services provided are of high quality.
Conclusion
Overall, charters are a convenient way to transport goods by sea. Legally, maritime transportation includes many nuances that require close attention. There are many similarities between time charters and bareboat charters, but the level of liability differs.
Reference List
Carriage of Goods by Sea Act 1971 (UK). Web.
Carriage of Goods by Sea Act 1992 (UK). Web.
Chen, H., Ballou, P. (2021) ‘Art and science of ship voyage optimization: a critical review’. Web.
Dimitrakieva, S., Kostadinov, O. and Atanasova, C. (2021) ‘Comparative analysis of the contracts for maritime transport services. Chain of charter parties’, Pedagogika-Pedagogy, 93(6s), pp. 51–62.
‘Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd’ (1962) 2 QB 26 (CA). SWARB Web.
Plomaritou, E., Voudouris, I. (2019) ‘The relationships of bill of lading, charter party and other transport documents’, Journal of Economics, Management and Trade, 24(6), pp. 1-8.
‘Sea & Land Securities v Dickinson’ (1942) Lloyds Rep 159 at 162. i-law Web.
Todd, P. (2015) Principles of the carriage of goods by sea. New York: Routledge.
Voudouris, I., Plomaritou, E. (2020) ‘Documents of the shipping transport: historical origins, legal validity & commercial practice’, Journal of Shipping and Ocean Engineering, 10, pp. 47 – 56.
Wilson, J. (2010) Carriage of goods by sea. Harlow: Pearson.