This is a contract for the hire of a whole or part of ship setting in detail the rights and obligations of the owners and liners or charterers.Charter are usually arranged by ‘ship brokers’ who have know-how of this type of work. Charters are divided into time charters and voyage charters. The former are for specified period of time, while the matter are for particular voyage.Where under a charter, the charterer virtually becomes, for the time being owner of the ship, making all arrangements for working and insuring the vessel.
Charter party bill of lading covers the shipment on chartered ships-issued subject to charter party agreements which supersede the usual memorandum of conditions of carriage appearing on the reverse of bill of lading.These bills of lading are not acceptable unless specially authorised.
A charter party specifies among other details, the particular ports to which the ship is to go, the cargo to be carried and the freight to be paid for the hire of the ship. It is open to the charterer to sublet a portion or whole of the vessel unless he is prohibited to do so under the terms of the charter party.
In voyage charters, the charterer is required to load and unload within a specified period of time known as ‘ lay days’. Where the lay days are exceeded the charter incurs a panel charge known as ‘ demurrage; where some days are saved from the lay days, the charterer is rewarded with an allowance termed as ‘ dispatch money’.
A shipper who has chartered a vessel may provide shipping space to other exporters and issue bills of lading. If and when a bill of lading is issued by the charter of a ship, such a document will be subject to the terms and conditions of the charter party i.e. the contract between the charter and the owners of the vessel. A bank, which is called upon negotiable a bill of exchange accompanied by a charter party bill of lading or where it is offered as collateral for a loan or advance, will not accept such a bill of lading until it has examined and is satisfied with the terms and conditions of the charter party.