The Legal Position of the Time Chartered Operator: Evaluating the Legal Risks and Potential Responses of the Time Charterer Which Sub-Charters on Voyage Terms

Abstract

There are many major shipping companies which operate fleets comprised largely of vessels which are time chartered and subsequently sub-chartered on voyage terms. Legal risks will arise for the time charterer due the differing natures and terms of time and voyage charters. The essential question examined in this thesis is that of whether, and to what extent, legal risk can be minimized by the negotiation of equivalent contractual terms under time and voyage charter parties.

The key areas addressed in this thesis are delivery under time charters compared to readiness under voyage charters, off hire under time charters versus suspension of laytime under voyage charters, obligations relating to cleanliness of cargo spaces, rights and responsibilities relative to safe berths and ports, the time charterer's position under bills of lading, and issues relating to redelivery of the vessel and consequent voyage charter liability if the vessel is unable to undertake the final voyage. The methodology applied is an examination of the case law, with a primary focus on the extensive body of English jurisprudence. This analysis of the case law is accompanied by a consideration of provisions of major charter party forms.

The analysis leads to the conclusion that risk, to varying degrees, can be minimized through the application and clarification of contractual language. With respect to readiness of the vessel it is considered that risk will be reduced through agreeing contractual language which requires early notification of the vessel's delay. As regards off hire and laytime wording that clarifies non physical deficiencies is proposed. With regard to vessel cargo spaces intermediate cleanliness is identified as the greatest risk. Safe port and berth warranties are determined to represent an area of easily manageable risk, while letters of indemnity relating to bills of lading continue to represent very significant risk with suggested but no certain solution. Finally, with respect to redelivery a final voyage clause for time charters has been proposed which serves to almost eliminate risk in this area.

Therefore, it is broadly concluded that risk can be managed but not eliminated through drafting of appropriate contractual terms.