Introduction
Exporting products to other countries in large quantities necessitates ships and other associated transportation vessels. Chattering provides the opportunity for businesses to supply internationally. Ship owners lease out their boats to businesses and suppliers based on the requirements of different charters. This article compares time charter and bareboat charter to determine the best option for the ten-year meat supply contract with a British supermarket.
Terms
- Charter– Grant of rights to another party.
- Charterer– The person who hires the vessel (The meat supplier).
- Vessel owner– The lawful owner of a vessel.
Time Versus Bareboat Charter
A time charter is a shipowner leasing a ship to a charterer for a specific period, during which the ship may call at any port and transport any cargo, subject only to the requirements of applicable laws. On the other side, the bareboat charter involves the vessel owner leasing the vessel without any provisions unless modifications are made in the contract (Dimitrakieva, Kostadinov, and Atanasova, 2021). The charterer must return the ship in its original condition after the contract period is over. An example of a time charter is where a business leases a vessel for 90 days. The time charterer pays daily fees for the use of the vessel, and delays are for their account, with the vessel owner paying for most expenses (Kim, 2020). Unlike time charter, the bareboat charter will require the charterer to operate at their own expense and fully control the vessel for 90 days, based on the contract terms. The main difference between the two, therefore, exists in the level of control given to the charterer. More freedom is offered in the bareboat charter than in the time charter, with most benefits with the latter.
Charterer’s Obligations
Legal Obligations
Among the most prominent obligations of the charterer in both cases is becoming liable to pay for any personal injury or property damage arising from handling dangerous cargo. The charterer is therefore required to ensure appropriate quantity and quality of cargo is procured, as described in the contract. Additionally, the vessel should operate within the environmental law in the waters it operates. In a time charter, the vessel owner is responsible for this requirement, while in a bareboat, the charterer takes responsibility.
Moreover, the charterer is responsible for selecting safe ports for cargo loading and offloading in both cases. These are ports easily reached without any abnormal occurrence or danger unavoidable by good seamanship or navigation (Todd, 2015). The vessel owner may challenge the nomination of the ports by the charterer when they question the safety of the ports to avoid associated risks. The charterer should therefore remain in continuous communication with the owner for a less risky and profitable engagement.
Finally, the charterer ensures that the legal certifications of the boat are renewed timely to avoid legal-related delays. The charterer is responsible for ensuring that the boat complies with all applicable class regulations at all times in a bareboat charter. This is a requirement for the contract to remain in effect and a necessary condition. The responsibility is consistent with the High Court decision in Silverburn Shipping (IoM) Ltd v. Ark Shipping Company LLC (2019). As a result of the chatterer’s irresponsibility, the class certificates expired, prompting the vessel owners to terminate the contract. The meat exporter must strictly follow the contract’s provisions and choose a bareboat charter as outlined in this ruling.
Commercial Obligations
A bareboat charter is associated with the charterer assuming full responsibility for the vessel the moment they take possession. The ship’s owner transfers ownership to the charterer for the agreed-upon time but does not provide any crew, provisions, insurance, or other services (Gilabert, 2021). The charterer has reduced responsibilities in the case of the time charter. Most of the focus is on business operations, as the vessel owner handles all legal and financial expenses. They must, however, pay regularly based on a pre-agreed period; otherwise, they may face legal problems. For example, the English court ruled in favor of the defendant in the MSC Mediterranean Shipping Company SA v Cottonex Anstalt case (2016). The charterer, in this case, was unwilling to continue paying for the vessel because the business it was chartered for ended early, forcing an early re-delivery (English law – Early re-delivery under a time charter, 2014). Based on the ruling, vessel owners have an added advantage, requiring charterers to keep paying if the vessel is returned before the indicated time in the contract. Finally, the charterer has to get involved in the commercial processes involved in the meat supply in both cases.
Recommendation
While bareboat and time charter are viable options, a bareboat charter is the better choice for the meat exporter. The recommendation is based on considerations of the contract period, cargo type, and associated UK charter laws. The type of cargo involved in this case is refrigerated cargo, which is perishable, and as a result, the products must be delivered on refrigerated ships. The ships must have control devices that keep their cargo from deteriorating in high temperatures (Wilson, 2010). Choosing a time charter would submit these responsibilities to the vessel owner, who should ensure all required refrigeration equipment is in place. The charterer is assured of compensation in case of damage as indicated in the contract. Additionally, the charterer can agree with the vessel owner to end their contract in case the contract to supply meat is terminated earlier than indicated (Dimitrakieva, Kostadinov, and Atanasova, 2021). These benefits are absent if a bareboat charter is chosen, where a single full payment is paid unrecoverably. The bareboat is ruled out because the vessel owner’s legal risk is significantly lesser than a bareboat charterer.
Conclusion
Overall, a time charter is the best option because of the reduced responsibilities and favor in case laws. However, the type of cargo involved requires careful handling, a duty bestowed upon the vessel owner. The charterer will pay the freight in installments, allowing further agreements in case a need to terminate the contract earlier arises. The charterer will handle the commercial responsibilities only. The charterer will make maximum profits as long as they comply with the law and the demand in the UK remains constant.
Reference List
‘Ark Shipping Company LLC v Silverburn Shipping (IOM) Ltd‘ (2019) Web.
Dimitrakieva, S., Kostadinov, O. and Atanasova, K., (2021) ‘Comparative analysis of the contracts for maritime transport services; chain of charter parties’, Pedagogika-Pedagogy, 93, pp.51-62.
English law – Early re-delivery under a time charter (2014) ‘Insight’, p. 209. Web.
Gilabert, A. (2021) ‘Insurance related problems in bareboat charter agreements’, Journal of Shipping and Trade, 6(1), pp. 1-18.
Kim, I. H. (2020) ‘Internal legal relationship under the time charter party’, JURIS Arbitration Law, 30, p. 163.
‘MSC Mediterranean Shipping Company SA v Cottonex Anstalt‘ (2016) Web.
Todd, P. (2015) Principles of the Carriage of Goods by Sea. London: Routledge.
Wilson, J. (2010) Carriage of Goods by Sea. Harlow: Pearson.