TO CHARTERERS: SPECIFY METHOD FOR COMPUTING TIME
Peter D. Clark



Under most timecharters, the shipowner charters  the vessel to
the charterer for a stated period of time. The charterer then will
pay hire (rent) for the use of the vessel for that period of time.

However, many charters fail to specify the method for calculating
time. This oversight can lead to unnecessary disputes when the
vessel is redelivered to the shipowner at the conclusion of the
charter.

By way of background, in the timecharter trade, the shipowner
retains control over the vessel and is responsble for operational
expenses (crew wages, provisions, stores, insurance,
maintenance and repairs). The charterer pays for bunkers (fuel)
as well as port and stevedore charges. The charterer then will
charge third-parties freight charges for transporting their cargoes.

In order to maximize profits, charterers will attempt to charter
vessels at low hire rates; obtain high freight revenues from
third-party cargo interests; carry maximum cargoes by utilizing
vessel cubicable space or deadweight carrying capacities; direct
vessels to proceed with utmost dispatch, while maintaining
economical fuel consumption, and maximize the number of cargo
carrying voyages during charter periods.

However, a vessel owner's primary concern is to keep its ships
constantly chartered in order to guarantee a continuous flow of
hire payments. Vessels must, of course, be maintained, as
timecharters contain provisions that suspend hire payments
during vessel breakdowns.

When parties negotiate charters, the time period usually will be
proceeded by the word "about." This gives the charterer
reasonable leeway to redeliver the vessel at the conclusion of the
charter. This is necessary because it is impossible to predict the
precise date that the last voyage will conclude. However, hire
payments accrue from the moment the vessel is delivered to the
charterer until it is redelivered to the shipowner.

After redelivery, parties will compute the period of hire time. This
may pose a problem if the vessel is delivered at a port in one time
zone and redelivered in another. Certain questions may arise
such as whether the time period shold be calculated by reference
to local dates and times at the delivery and redelivery ports, or by
reference to the actual elapsed time based upon Greenwich
Mean Time.

The recent New York arbitration of the PACGLORY (SMA Award
2737) illustrates the point.

The PACGLORY case concerned whether the computation of
time was to be made by reference to "local time" or "elapsed
time." The charter stated "time to count from the date and hour
the vessel has been placed at charterer's dipossal."

The sole arbitrator noted that a number of cases on the point had
been decided in New York arbitrations, not always with the same
results. (E.g., one arbitrator (SMA Award 743) has noted that if a
vessel trades between islands straddling the international
dateline, application of the local time concept would result in one
day's additional hire for delivery west of the date line and no hire
for delivery east of it.)

Generally, however, the industry perception has been that New
York arbitrators favor the local time concept whereas London
arbitrators lean toward the elapsed time interpretation.

The arbitrator then noted the delivery and redelivery certificates
for the PACGLORY reflected certificates for the PACGLORY
reflected local times. Therefore, thse times were applied to
resolve the dispute.

The arbitrator stated that specificity should be used in this area.
"Considering that the dispute on local time vs. elapsed time have
been around for decades, it is not unreasonable to argue that the
industry should have learned from past experiences."

The case illustrates that this type of dispute can be prevented
simply by specifying the method of computing time in charter
parties. This sound advise should be heeded by all those
engaged in the business of timechartering vessels.

End