Time is money. This adage is old and true, and never more so than in case of ships ferrying cargoes. A shipowner, in most cases, would be paying a mortgage on the ship, plus crewing and maintenance costs. This means, he has to keep the ship running at its maximum ability all ( or almost all) the time. In case of a time charter, the ship owner does not have to worry about it, as the ship will be earning a fixed rate per day pro rata ,of course excepting the off hire periods (discussed later). In case the vessel is on a voyage charter or COA ( contract of affreightment), then the Owners agrees to allow use of the ship for a specific period for loading/unloading. So what happens when this "specified" period s exceeded? This is where the concept of liquidated damages i.e agreed damages comes in the form of demurrage. So, Charterers agree to pay damages at X pdpr (per day pro rata) for the time in excess of this specified amount. While the calculations are simple based on the charter party agreed, the actual negotation is made complicated due to the "grey areas" in the charter party.
The natural question is whether Charterers get any credit for the time not used. This is a concept called "despatch" and is commonly found in bulker charter parties. However, this concept is not common in the tanker trade.While I will discuss this at length later, this is not my focus at the moment.
Hopefully the above article will give a beginner's insight into the working of demurrage in the context of the charter party.
The natural question is whether Charterers get any credit for the time not used. This is a concept called "despatch" and is commonly found in bulker charter parties. However, this concept is not common in the tanker trade.While I will discuss this at length later, this is not my focus at the moment.
Hopefully the above article will give a beginner's insight into the working of demurrage in the context of the charter party.
No comments:
Post a Comment