Lectures on shipping practice and voyage charter based on GENCON form

SMUADB Training Program 2011

Pro. Yao Hongxiu

2011-06-18
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Lectures on shipping practice and voyage charter based on GENCON form

Section One
Chartering Operation (a) Voyage charter (single v/c, return v/c, consecutive single/return v/c, COA) (b) Time charter (c) Bareboat/Demise charter Chartering market London Market New York Market Hamburg Market Oslo Market Tokyo Market Hong Kong Market Shipbroking practice (a) Business Scope of Shipbroking Chartering Sale and purchase of shipping property Agency

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(b) Individuals of shipbrokers Owners broker Chartering agent / charterers broker Cable broker Loading broker / liner broker Port agent Sale and purchase broker (c) Commission (d) Shipowners/charterers v. brokers Principal and agent relationship governed by the laws of agency Negotiation of charter parties (a) Order/Enquiry Firm/Prospective order (b) Offer Firm offerbinding on offerer time limit for reply(which time to be specified, e.g. local time/owners or charters side, GMT) Conditional firm offersubfree / subopen / sub unfixed elsewhere (c) Counter offer/New offer (d) Acceptance Main term fixture, but subdetailswhether a c/p is established or not between owner and charterer?
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English law: no Other subs: sub board approval

American law: yes

PRC law: yes

sub receivers/shippers approval sub L/C obtainable substem subcontract (e) Fixture Recap (f) Signing the charter party Legal functions of various charter party clauses English law: condition, warranty, intermediate PRC law: main /minor obligations

Interpretation of main clauses of a voyage charter based on GENCON form 46/94

Vessels Particulars/ Descriptions: Name of the vessel, flag, class, DWT & capacity (bale/grain), ships type, LOA/BEAM, others Seaworthiness Clause Clause 2 of GENCON form (Owners responsibility clause) an intermediate clause

Standards of seaworthiness:
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absolute warranty of seaworthiness seaworthiness by exercising due diligence(Hague Rules 1924 or Hague-Visby Rules 1968 or CMC article 47)

- seaworthiness under GENCON form Personal want of due diligence on the part of the owners or their manager to make the vessel in all respects seaworthy Deviation clause(clause 3 of GENCON form) (a) implied obligation for the shipowner under English law no unjustifiable deviation (b) Deviation provision under Hague/Hague-Visby Rules and CMC article 49 (c) Clause 3 of GENCON form (d) P&I Bunkering clause LAYCAN clause (clause 9 of GENCON form) (a) Laydays clause - Laydays not to commence before Cancelling clause - should the vessel not be ready to load(whether in berth or not) on the cancelling date indicated in box 21, the charterers shall have the option of cancelling this C/P. (b) The right of the charterers to cancel the C/P (c) The right of the charterers to claim damages against the owners (d) Interpellation provision under clause 9 of GENCON Clauses relating to the cargo (a) Cargo description
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(b) Cargo quantity (c) Dead freight (d) Charterers obligation to provide cargo Safe Port/Safe berth clause (a) Definition of a safe port(the Eastern city1958) (b) Interpretation of the safe port (c) Whether the owner or the charterer is liable to the safety of a port (d) Interpretation of a safe berth Loading/Discharging cost(GENCON clause 5) (a) FI, FO, FIO, FIOS, FIOT, FIOST, Liner term/Gross term, Gross Load, Gross Discharge, scale Load/Discharge (b) Who bear the risks, liabilities arising from cargo handling under FIO/FIOS/FIOT/FIOST term? e.g., cargo damage/stevedore damage to the vessel

Section Two
Laytime/ Demurrage/ Despatch (a) Laytime
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Definition of laytime (rule 4 of LAYRULES 1993) (b) calculation of laytime Days/Running Days(Rule 7 of LAYRULES 1993) Working Days/WD(Rule 10 of LAYRULES 1993) Weather Working Days/WWD/WWD of 24 hours/WWD of 24 consecutive hours(Rule 12 of LAYRULES 1993) -SHEX/UU/EIU/SHINC -Weather permitting Cargo to be loaded/discharged at the average rate of tons per day/per WWD/per workable hatch/per hatch Customary Quick Despatch(CQD) (c) The commencement of laytime (1)A vessel should be an arrived vessel Port charter: commercial area, theJohanna Oldendorff[1973] 2 Lloyds Rep.285, The definition of port (Rule 1 of LAYRULES 1993) Berth charter: A vessel being berthed becomes an arrived vessel. The definition of berth(Rule 2 of LAYRULES1993) WIBON (whether in berth or not) or Berth or no berth (Rule 22 of LAYRULES 1993).TheKyzikos[1989] 1 LR. A berth reachable on her arrival/always accessible WIPON=whether in port or not Time lost in waiting for berth to count as laytime(Rule 21 of
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LAYRULES 1993 / Paragragh(c) of clause 6 of GENCON 1994 (2)Ready to load or discharge in every respect Readiness just for loading or discharging Physical/documentary readiness Whether idle formalities are a part of readiness? The Nikolas(1987)Hong Kong Arbitration Some CMAC arbitration cases and maritime courts cases WIFPON/WCCON(free pratique and customs clearance) (3)To tender notice of readiness (NOR) To whom must the NOR be given? How NOR is given? When may NOR be given? (d) Laytime exception (e) Demurrage - Definition (Rule 24 of LAYRULES 1993) - Once on demurrage, always on demurrage (f) Despatch - Definition (Rule 25 of LAYRULES 1993) - ATS/WTS(AWTS) (g) To average laytime/Reversible laytime (Rule 17/18 of LAYRULES 1993) Owners s responsibility clause(GENCON clause 2) Responsibility for cargo
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GENCON1976stowage (unless stowage performed by shippers/ charterers or their stevedores and servants) or by the personal act or default of the owners or their manager GENCON1994no responsibilities of management of cargo, but by the personal act or default of the owners on their manager Rider clause (paramount clause/Hague or Hague Visby Rules) changes the Responsibilities of the owners under GENCON Cesser and lien clause Cesser clause: charterers liability under this charter to cease on cargo being shipped(clause 31,Baltimore Form C Berth Grain Charter Party 1974) Lien clause: (Clause 8 of GENCON76) The Owners shall have a lien on the cargo for freight, dead-freight, demurrage and damages for detention... (Clause 8 of GENCON94) The Owners shall have a lien on the cargo and on all sub-freights payable in respect of the cargo, for freight, deadfreight, demurrage, claims for damages and for all other amounts due under this Charter Party including costs of recovering same.

(In order to reflect common practice nowadays, the old reference to damages for detention has been deleted. In addition, the Clause has been brought up to date in
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accordance with the more modern lien clauses making no reference to cesser type provisions (i.e. provisions effectively providing that all responsibility of the charterers ceases on shipment of the cargo).)

Liens provided by CMC(Article 87) Owners lien on cargo (possessory lien) Owners lien on subfreight (equitable assignment) Owners lien for freight, deadfreight, claims for damages (including demurrage and detention and other owners rights of credits) The importance of Incorporation clause for the owners to exercise liens on cargo belonging to the holder of a B/L who is not a party to the C/P. Co-existence doctrine Freight clause (clause 4,GENCON 76/94) (1) Payment of freight under English common law (2) Prepaid/advanced freight:Freight to be prepaid within __banking days after COL/signing & releasing bill of lading/final sailing. When the owners are entitled to earn the freight? TheLorna 1[1982]LMLN NO.79 Clause 4 of GENCON 1994 Article 314 of PRC contract law 1999 (3) Freight to collect/Freight payable at destination
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Freight payable BBB Freight payable on discharge Freight payable X days after discharge (4) Lumpsum freight (5) Some legal issues regarding payment of freight under V/C Freight payable as per C/P or Freight as per C/P stated in the Bill of Lading. owners owners
V/C

charterers

sub V/C (sub charter) V/C

subcharterers voyage charterers

(Head charter) T/C

time charterers

The Costanza M [1980] 1 LLR 505 It is a condition clause under English law. Freight is untouchable, no deduction to freight. Oil Retention Clause Bills of Lading Clause(clause 9/10 of GENCON 76/94) Master to sign Bills of Lading Masters right to refuse to sign Bills of Lading - Bills of Lading manifestly inconsistent with charter - Bills to be illegitimate, e.g. advanced bills or back-dated bills or signing clean bills with LOI Master to sign bills of lading as presented (implied indemnity of GENCON 76 and express indemnity of GENCON 94) Master to sign Congenbill (GENCON 94)

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Incorporating C/P into the Bills of Lading (incorporation clause) Owner

V/C
B/L

Charerer(e.g. CIF seller)

B/L

B/L

Consignee (e.g. CIF buyer) e.g. clause 1 of Congenbilledition 1994 who is the carrier of a B/L issued under a V/C? Exception clauses General strike clause (clause 16 of GENCON 94) War Risks clause (clause 17 of GENCON 94) General Ice clause (clause 18 of GENCON 94) Agency clause (clause 14 of GENCON 94) Brokerage clause (clause 15 of GENCON 94) Law &Arbitration clause (clause 19 of GENCON 94)

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