Support and advice - BIMCO Bulletin

Support and advice

SUPPORT AND ADVICE March 2020 &Support Advice Time charter – redelivery at the end of the charter period – part II Following the article in the last Bulletin, we have looked at other issues to be considered when the date of redelivery comes closer. The charterers’ principle interest is to have as much flexibility as possible, while the owners naturally want to know – with as much certainty as possible – where and when they will get their vessel back. This may sometimes lead to disputes, both in terms of the redelivery notices to be given and whether the charterers can perform an additional voyage before the vessel is redelivered. Redelivery notices Most time charter parties contain specific and express requirements in respect of the notices each party must give to the other; owners must give delivery notices to charterers and charterers must give redelivery notices to owners at the end of the charter period. Redelivery notices do not constitute a condition and the owners cannot, therefore, refuse to take back their ship if the time charterers have failed to submit the agreed redelivery notices. It is also quite common that these notices may either be “approximate” or “definite”. An approximate notice may logically be just that, that is, subject to change should the ship be delayed, the discharge operation extended, and so on. However, it is important to bear in mind that, in addition to this, a judgement rendered in 2009 (The Zenovia) suggests that approximate notices are not binding on the charterers, who may revise the approximate notices also for purely commercial reasons. This could be relevant in a situation where more time is available to the charterers and they, even if they have already given approximate notices, revise them to include one further voyage before redelivery. This is still subject to the charterers giving legitimate voyage instructions at the time (see below). Since the main purpose of giving redelivery notices is to let the owners know when they will get their ship back so they can secure its next employment, it leaves the owners in an untenable situation if they only know a few days in advance where and when – or indeed if – the ship will be redelivered as previously indicated. It is important to consider this in the context of negotiations. Attention must, of course, be on the days required for “approximate” or “definite” notices, but it should not be forgotten that it is also important to focus on where the ship is redelivered. Which notice must include the declaration of the place of redelivery? And is the port or area referred to, for example, “intended” or “final”? Legitimate or illegitimate last orders Under time charter, it may sometimes be a discussion topic if the charterers have issued legitimate voyage orders for the last voyage before redelivery. For the voyage orders to be legitimate it must be expected that the charterers will be able to redeliver the ship by the end of the agreed time charter period. Generally, it is not enough that the voyage orders are legitimate at the time they are given, they must also be legitimate when the voyage is undertaken. The charterers will naturally wish to have as much flexibility over the actual duration of the charter period as possible, but it will require specific terms to deviate from the above. It should be noted that some standard charter parties (for example, SHELLTIME) contain words that in some situations may change the above position. Owners should carefully check the terms relating to the last voyage under the charter party, as it is important to have terms which makes it possible to estimate the expected time – and place – the vessel will be ready for the next charter. Some charter parties may contain a specific “last voyage” clause entitling the charterers to order the ship on a last voyage, even if the contractual period will be exceeded. As with all other terms presented, one should always evaluate the need for negotiation – in this case for example to ensure that only legitimate last voyage orders can be issued. It is not uncommon for parties to agree that off-hire periods may be added to the period of hire. This, however, can add to the uncertainty with regards to the actual date of redelivery depending on when such an option must be declared. If the parties to a time charter contract agree to a new charter party in direct continuation of an existing one, it may be important to determine when the new period starts. It is not unusual for contracts to be extended in this way, and the market may have increased or decreased considerably between the two fixtures. Whether or not the charterers can carry out another voyage at a – perhaps – much lower rate before any new rate of hire kicks in, can be worth a considerable amount of money. Similarly, as with “last voyage” clauses, it is recommended that parties ensure to spell out when the new rate and period will start. It may seem quite simple to both at the time of fixing but, when it comes to the actual time for calculation, clear clauses should prevent disputes. It follows that, when period contracts that include options for extension initially are agreed, it should also expressly set out when the new period and rate of hire begins. It should also detail whether such an extension is relevant in terms of, for example, adding off-hire periods to the period of hire, if that has been agreed. In the next Bulletin: Know your business partner Connect with BIMCO Support and Advice guides BIMCO members on contractual issues and disputes. Every year, the team answers more than 3,000 questions related to commercial and contractual topics, including company information. It also helps in the collection of several million dollars per year through the free BIMCO intervention service. In every issue, Support and Advice shares some of the guidance it frequently gives to BIMCO members. Relevantlinks(forBIMCO): Redeliverynotices members Relevantlinks(forBIMCO): Legitimateversusillegitimatelastvoyageorders members Illegitimate voyage orders - SHELLTIME 4 Clauses adding off-hire periods to period of hire and “last voyage” clauses Facebook Twitter Linkedin YouTube