NYPE 93 Charter Party Quiz Please carefully read the NYPE 93 charter party and respond to the following 25 questions. Please be certain that you mention the charter party clause for which your response was derived.   Model answers are found at the end. 1.        Can you name three circumstances under which the charterer is expressly given the right to withhold or deduct hire from the next hire payment? 2.        What are the clauses that need to be included in all bills of lading issued under the charter (to third party shippers)? 3.        How are salvage awards earned by the ship to be divided between the shipowner and the time charterer? 4.        What is a “supercargo” and who pays for his / her expenses? 5.        Who pays for fumigation expenses under the charter party? 6.        Is there a right to sublet the vessel? If so, does this change the relationship between the shipowner and time charterer? 7.        What may the charterer do under the terms of the charter party if the Master of the vessel is deemed unsatisfactory? 8.        Can you name 10 circumstances under the charter party in which the charterer can place the vessel off hire? 9.        How does the charter party deal with the possibility of disputes between the owner and charterer? 10.        What is stevedore standby time and who pays for it under the c/p? 11.        Under what body of rules will a general average be adjusted. 12.        The shipbrokers earn a percentage of _____ under the charter party. 13.        What is an address commission and how is it payable under the terms of the charter party? 14.        What is the purpose of the Clause Paramount in the charter party? 15.        What happens if the hire payment is late? 16.        What happens in the event of  an unexpected requisition of the vessel by the flag state of the vessel? What about a total loss of the vessel (actual or constructive)? 17.        What must the condition of the vessel be when the time charterer redelivers the vessel back to the shipowner at the end of the charter party’s duration? 18.        What is a consequence of the vessel not being able to perform at her warranted speed and / or fuel oil consumption warranties? 19.        What are the insurances on the vessel that is referred to in Clause 1 of the C/p? 20.        What does the  C/p State with respect to responsibility for third party cargo claims? 21.        What can the shipowner lien on in the event there is a non-payment of hire? 22.        What do you think the words “customary assistance” means in the charter party? 23.        Is the charterer allowed to demand that the Master take the shortest route possible (least number of miles) between ports? Why or why not? 24.        The charter party requires the Master to sign bills of lading “as presented’. Do you think that this obligates the Master to sign “all” bills of lading, or are their circumstances when a bill of lading can be rejected? Please read my article on my web site regarding same. 25.        From a shipowner’s perspective, how might you modify (or otherwise enhance) the protection afforded by the “Bunkers on Delivery and Redelivery” clause found in the charter? __________________________________ 1.        Yes, for example, cash advances made by charterer to the master for vessel’s ordinary disbursements (clause 11), speed reduction due defect or breakdown of vsl (clause 17) and time lost due breakdown of cargo handling gear (clause 28) to the extent charterer actually loses time.  There are others. 2.        Clause 31 requires that all bills of lading issued under the c/p contain a Clause Paramount that incorporates the protections of the Hague Rules / Hague as amended by Visby / or COGSA, a  Both to Blame Collision Clause, a New Jason Clause, US Trade / Drug Claues, and War Clauses. Why? Because the bill of lading issued by the time charterer to a third party shipper will bind the vessel vis a vis that third party shipper. Thus, the shipowner wants to make sure that certain clauses are included in the bill of lading that will protect the shipowner against claims that may be made by the third party shipper against the vessel. Owner is giving the charterer the right to subcontract the vessel’s services out to third parties. The shipowner wants to have some control over the content of that bill of lading which indeed affects the vessel.  Of most importance is the Clause Paramount This will provide the shipowner with the many protections afforded by the Hague Rules /Hague as amended by Visby/ or US COGSA. The New Jason Clause will protect owners right to seek general average vis a vis the third party shipper, if for example, the need for the g.a sacrifice or expenditure was a crew error in navigation. 3.        Equal benefit after deduction of owners and charterers expenses and crew share (Clause 24). Pls note that salvage awards are always 100% for the shipowner unless a clause in the c/p entitles the charterer to share. Under a voyage charter party, no such sharing exists. It is all for the shipowner even though the voyage charterer may have suffered a loss of time, or even cargo damage, due the salvage efforts. I was involved in a lawsuit in which not only the voyage charterer could not share in the award, but its cargo damage was not recoverable from the shipowner because the cargo damage occurred during efforts to save life and property at sea, which is an “excepted” cause under the Hague Rules / COGSA. Voyage charterer lost on all counts, no sharing in salvage award, and no cargo claim versus owner. 4.        Clause 14 says that the supercargo is for charterer’s account. He / she rides the ship to protect charterers interest. They do not have much to do while at sea. When I sailed on the ships, the supercargo routinely hung out in the wheelhouse and engaged me in continuous conversation. I had to throw him out or overboard. He was making me crazy. Usually no supercargo is onboard unless the cargo is very sensitive, or there are other special reasons. I was recently involved in a case involving the discharge and contamination of a chemical cargo. Questions arose in that case as to the role of the supercargo. It is always best for charterer to have a clause that states that supercargo is there only in an “advisory capacity” only.   5.        You need to read clause 7 carefully. It distinguishes between fumigation due crew illness / owner’s account / and due cargo / charterer’s account. It also talks about other causes. Pls take a look. 6.        Yes, a sublet is allowed, but the charterer still remains responsible to head owner. A sublet is not an assignment. Nor is there a novation of the original contract. In addition, the charterer does not disappear and is not replaced. Instead, you have the (1) head owner, the (2) time charterer (now as disponent owner) and a (3) sub charterer (on a time or voyage basis). You simply have a chain of contracts. Please see clause 18 7.        Clause 8 allows for complaints to be made and owners must investigate. However, no obligation on owner to replace master. This can cause difficulties when the Master causes problems for charterer. 8.        Take a look at Clause 17, as well as 34, and others. The key here is that the vessel remains on hire unless the charterer can point to a specific provision in the c/p that allows for placing the vsl off hire. The burden is on the charterer.   9.        Usually by arbitration in NY before 3 persons (Clause 45). The decision of any two is binding. The language “made rule of court,” means that the arbitration award can be converted into a judgement by a court with all the powers of enforcement that a judgement has. There is also a London provision. More about that at the end of the course. I have had the privilege of serving on arbitration panels. It is very interesting work. 10.         This is guaranteed money that stevedores are paid even if they do not work. For example, the stevedores may have been ordered for a certain day but cannot work the vsl because the gear broke down. Shipowners will pay the charges to the stevedores (assuming time charterers are not at fault). Pls note that this is only true if the clause is found in the c/p. Please note that not all charter parties make this stevedore standby charge for owner’s account. For example, this was one modification to the old NYPE 46 form. That charter party did not have such a provision. It was often included at insistence of time charterers in riders to NYPE 46, and is now in revised NYPE. 11.        The York Antwerp Rules which I urge you to read one day. You do not have to memorize them. Just know that these are rules accepted more or less world wide as to how general average is to be adjusted. This clause incorporates the rules into the c/p. 12.        The shipbrokers earn a percentage of _____ under the charter party. They earn a percentage payable by the vessel and owners on hire earned and paid under the charter and also upon any continuation or extension of the charter. The rate is negotiable. See clause 43. 13.        This is found in 44 but sometimes is  deleted. It is not really a commission but a form of rebate payable owner to charterer. Historically it was meant to pay for charterer’s expenses in arranging for transport such as a freight forwarder’s fee. 14.        Once again, you must understand the significance of a Clause Paramount. The shipowner / carrier is no longer responsible on an absolute basis for the seaworthiness of the vsl. The standard is now due diligence. In addition, if the carrier meets the due diligence threshold, the carrier has 17 statutory defenses to cargo liability including the coveted error in navigation and error management defense.  In sum, the Clause Paramount gives the shipowner / carrier the many generous protections against cargo loss or damage liability found under the Hague Rules, Hague as amended by Visby, or US COGSA. 15.         The Grace Period Clause found in the c/p is often referred to as an anti technicality clause and gives the charterers the right to cure the non-payment without suffering the loss of the vessel. This is a must clause for charterer. Do not lose a good vessel that you have locked in at a reasonable rate because someone in your office or the bank forgot to pay the hire on time. 16.        Clause 34 puts the vsl off hire and any hire paid by the government goes to the shipowner. Charterer is out of the picture. Pls note that the rule is, however, that without such a clause, time charterer must still pay hire to the owner even though the government has requisitioned the vessel and is also paying hire to owner. There are law cases in which this actually happened. A clause like this is just another example of a clause that had to be created because of court decisions that seemed unfair or to strict. Without a clause like this the charterer can really get burned. Pls note that an actual loss (sinking) or a constructive total loss (CTL), which in essence means that the vsl is not worth repairing, results in an end of the c/p. See clause 20. In addition hire paid but not earned must be refunded. 17.        Clause 10 talks about “redelivery in like good order and condition, ordinary wear and tear excepted”. This has of course caused disputes. The vsl need not be in the same condition. But what is ordinary wear and tear? It really depends upon the trade that the charter party contemplated. Wear and tear will be different for an ore carrier then a passenger ship. 18.        Deduction form the next hire payment of an  amount equal to the time lost due the breach of speed warranty, and the cost of the  over consumption of fuel. 19.        They are hull and machinery insurance, which protects shipowner against loss of or damage to vessel, salvage awards payable, general average payable, collision / running down liability, and sue and labor expenses. In addition, Owners will carry Protection and Indemnity (P and I) which is protection against all kinds of other third party liabilities such as pollution,  crew injury, cargo claims, etc. etc. etc. 20.        They are shared in accordance with clause 27 via the Interclub Agreement. However, we will talk about the Inter Club Agreement later on, which provides a more detailed allocation of these inevitable claims. 21.        If charterer has cargo on board, it can lien on charterer’s cargo. It can also lien on sub freight and sub hire payable by a third party to the time charter.. Please see clause 23. 22.        The question here is what does the charterer get in exchange for payment of hire? What can charterer insist that the owner make the crew do / perform. Customary assistance is work that the crew would do if the vessel were not under charter.  It is ordinary ship’s work. It is best to have a rider clause that describes in detail what the shipowner must order the crew to do in exchange for the simple hire payment (for example lashing? cleaning? etc.) Things outside the list should be an additional payment by charterer to shipowner, or direct to crew as additional crew compensation. 23.        No, because the Master is in charge of the vessel navigation. Charterer can make recommendations concerning routes taken. Charterer may even provide a third party routing service. Nevertheless, the Master must act reasonably. However, it is generally the Master’s call. A recent case however allowed the time charterer to recover from the owners the time / hire spent in taking the rhumb line as opposed to a great circle between ports. The charterer’s routing service said that the great circle would be safe. The Master did not even make the effort to review the findings of the service. He simply took the rhumb line. This was unreasonable from the arbitration panel’s point of view. The master has to act reasonably. If he/she does, and still wants to take the longer route, that’s okay. But there is a duty to be a reasonable person. That case involved the vessel White Manta. 24.         No, certain bills, for example fraudulent ones, can clearly be rejected. For example, a bill that misdesribes the cargo. That’s a fraud. The charterer may be trying to rip off an innocent buyer or its insurer. In addition, a bill requiring a call at a port outside the c/p’s trading limits/ warranty can also be rejected. Again, more about this later. However, sometimes questions arise as to the validity of a b/l that the charterer wants the Master to sign, or wants to sign on behalf of the Master. I’ll talk later on about a case I was involved in concerning the MV Pacbaron/ delay at Bangkok. 25.         First, agree on price of bunkers at delivery and redelivery of the vessel to avoid disputes. Also, make the charterer promise to provide bunkers of a certain quality / specification, and provide a method for accurate testing. Please see article on my web site about bunkers. Hope these questions were fun and interesting. Regards, JW