Charter Party Types: Voyage, Time & Bareboat Charters Explained

1. What Is a Charter Party?

A charter party (C/P) is a written contract between the shipowner and the charterer governing the use of a ship. The word comes from the Latin carta partita — a document split in two, one half for each party.

Charter parties typically cover:

• The vessel: Name, flag, DWT, speed, consumption
• The cargo: Type, quantity, stowage factor
• The voyage/period: Load and discharge ports, laycan dates or charter duration
• Freight or hire rate: What the charterer pays, when, and how
• Laytime and demurrage: Allowed port time and penalties for delays
• Exceptions: War, strikes, ice, force majeure

Standard charter party forms (proformas) are used as a base: GENCON for general cargo voyage charters, BALTIME or NYPE for time charters, BARECON for bareboat charters. These are published by BIMCO (Baltic and International Maritime Council).

2. Voyage Charter

In a voyage charter, the shipowner agrees to carry a specific cargo from one or more loading ports to one or more discharging ports, for a freight payment calculated on the cargo quantity (per tonne, per barrel, or lump sum).

Who Pays What

Freight Terms (Loading/Discharging Costs)

Laycan

The laycan (laydays cancelling) is the window of dates during which the vessel must arrive ready at the loading port. If the vessel arrives before the layday opening date, the charterer is not obliged to accept it yet. If the vessel cannot arrive by the cancelling date, the charterer has the right to cancel the charter party.

Worked Example: Voyage Charter Economics

Scenario: Panamax bulk carrier, 70,000 MT iron ore, Tubarao (Brazil) to Qingdao (China)

• Freight rate: $18.50/MT (FIOS basis)
• Cargo quantity: 68,500 MT (bill of lading quantity)
• Freight earned: 68,500 × $18.50 = $1,267,250
• Estimated voyage costs (fuel, port): $680,000
• Net voyage income: $1,267,250 − $680,000 = $587,250

3. Time Charter

In a time charter, the charterer hires the vessel for a specified period — weeks, months, or years. The charterer pays daily hire and controls where the ship trades, but the owner remains responsible for the crew and maintenance.

Who Pays What (Time Charter)

Off-Hire

When the vessel is not available for the charterer's service due to the owner's fault (breakdown, dry-docking, crew problems), the charterer may suspend daily hire payments. This is called off-hire. The off-hire clock stops from the moment the vessel becomes unavailable and restarts when full service resumes.

Speed and Consumption Warranties

Time charters typically contain warranties like "about 14.0 knots on about 32 MT/day VLSFO in good weather conditions". If the vessel consistently underperforms, the charterer can claim damages. Masters must maintain accurate deck logs to substantiate actual speed and consumption.

Worked Example: Time Charter Economics

Scenario: Supramax bulk carrier, 12-month time charter

• Daily hire rate: $14,500/day
• Hire per 30 days: 30 × $14,500 = $435,000
• Owner pays monthly: crew ($85,000), maintenance ($30,000), insurance ($20,000) ≈ $135,000
• Net to owner per month: $435,000 − $135,000 = $300,000
• Charterer pays additionally: bunkers (typically $200,000–$400,000/month depending on trading)

4. Bareboat (Demise) Charter

A bareboat charter (also called a demise charter) transfers near-complete operational control to the charterer. The vessel is delivered essentially empty — no crew, no management. The bareboat charterer becomes the disponent owner for the charter period.

Key Features

• The charterer crews, manages, insures, and operates the vessel at their own expense
• The registered owner receives a fixed hire (much lower than time charter — no operating costs are covered)
• The bareboat charterer can sub-charter the vessel on voyage or time charter terms
• Often used for ship financing (sale and leaseback), flag-of-convenience arrangements, or long-term fleet expansion
• Typically includes a purchase option at the end of the charter period

Bareboat vs. Time Charter: Key Distinction

5. Contract of Affreightment (COA)

A Contract of Affreightment (COA) is not a charter for a specific vessel, but an agreement for the shipowner to carry a series of cargo shipments over a defined period at agreed freight rates.

How COA Differs from Voyage Charter

• A voyage charter covers one specific voyage on a named vessel
• A COA covers multiple shipments over a period; the shipowner nominates a suitable vessel for each cargo lifting
• Freight rate is fixed at COA signing, protecting the charterer from market fluctuations
• Cargo quantity and lifting schedule is agreed in advance (e.g., "4 × 60,000 MT per year")

Who Uses COAs?

COAs are common in:

• Steel mills importing iron ore or coal
• Power plants importing coal
• Grain traders with regular export programs
• Fertilizer manufacturers needing regular bulk shipments

6. Side-by-Side Comparison

7. Key Charter Party Clauses Every Officer Should Know

Safe Port / Safe Berth Warranty

The charterer typically warrants that named ports and berths are "safe" — i.e., the vessel can safely reach, use, and leave. If the master is ordered to an unsafe port, they may refuse or reserve their rights. This clause has significant implications: the master must assess port safety and notify owners/charterers if concerned.

Cesser Clause

Found in voyage charters — the charterer's liability ceases once cargo is on board and freight, dead freight, and demurrage have been paid. After this, the shipowner looks to the cargo/shipper (through the bill of lading) for discharging port demurrage. Masters should understand this can limit who they can claim against at the discharge port.

Lien Clause

Gives the shipowner the right to hold the cargo as security for unpaid freight or demurrage. The master may exercise a lien on cargo if the charterer fails to pay. This is an important commercial tool but must be exercised carefully — wrongful exercise of lien can itself be a breach of contract.

Exceptions / Force Majeure

Charter parties typically except liability for events beyond the parties' control: perils of the sea, acts of God, strikes, war, ice, government restraints. If an exception applies, neither party is in breach. The master's log and protest letters are critical evidence when claiming exceptions.

Arbitration Clause

Most charter parties specify the governing law and arbitration venue for disputes: London arbitration (English law) is most common, followed by New York and Singapore. Masters should preserve all documents — SOF, NOR, protest letters, deck logs — as they may be needed in arbitration.

Frequently Asked Questions

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