What is the difference between voyage charter and time charter

SPA is designed for insuring single voyages, and SPA is a term policy normally written to cover for a year. For example, both forms exclude:. Liability arising out of cargo of a kind prohibited by the charter party. This exclusion applies not only to damage to the cargo itself but also to any other loss arising out of the cargo, such as bodily injury of crew members. The most important source of information is the charter party, which stipulates the liabilities assumed by the charterer.

These inspections describe any damage existing when a vessel goes on hire and when it goes off hire. Such inspections serve to separate preexisting damage from damage sustained during the period of time to be covered.

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To provide a dynamic, deep-dive learning experience of what a Time Charter is about, we have created a Elements of Time Charter course offered through Veson University , which is the first of the three part series out of the Hire Management Basics course.

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Briefly put, a time charter involves leasing a vessel for a fixed period, on a per-day rate, where the charterer is free to use the vessel. The owner only looks after maintenance-related cost. Clauses are inserted to protect the charterer from having to pay for hours that were spent due to events that could not have been foreseen. Voyage and time charters are very different, in their intended use and service conditions. Knowing when to choose each type of charter can go a long way in meeting expectations of the charterer and shipowner.

A voyage charter is preferred in cases where the charterer only needs the vessel for specific voyages that may arise for different reasons. This could be the case when there is an occasional cargo to transfer. An occasional cargo commonly springs up during sudden surges in demand, when the supply services are down. Thus, companies that may deal in other commodities may enter the cargo industry for that period of time, in order to make a profit.

This can also happen when the charterer has already pressed into service their own fleet of vessels, which forces them to hire a ship from a third party so that they may undertake a single voyage. Voyage chartering can be tricky for inexperienced charterers, since the matter of the crew and equipment must be handled correctly.

Most owners make arrangements to look after these requirements, but it is mostly based on goodwill. Having a shipbroker negotiate the terms can be very helpful in ensuring that the occasional charterer is not inconvenienced by having a ship without a crew to man it. A time charter is more commonly used by more experienced chartering firms when there is a long-term requirement for a vessel.

Instead of having to specify the ports and routes undertaken by the vessel in the charter agreement, the charterer simply hires the boat for a fixed period of time and takes complete control over the vessel in all but name.

As they are free to sail to any destination with any group of crew and officers, it is beneficial to companies that already deal in shipping. For instance, if a ship is decommissioned or is sent in for repairs, the company needs to be able to procure a vessel for the duration of that period.

Instead of having to book a ship every time they wish to undertake a voyage, they use time charters. Thus, for the duration of the agreement, they will have possession of the vessel and are free to use it, within the purview of the law.

This is especially useful since such a charterer will often already have a crew ready to take over the hired vessel. Another major factor that sways the decision to pick either a voyage or time charter is the finances of the shipping industry.

Voyage chartering is considered to be a volatile market since there is no assurance of leasing a boat on completion of an existing contract. Since it is only applicable for a single voyage, the overall volatility of the voyage charter is high. However, charterers prefer voyage charters for the reason that they can always get a more competent rate from other ship owners. In other words, the owners are at the mercy of the chartering sector.

So, most ship owners prefer time charters, as it guarantees financial returns for a fixed period of time, at a fixed rate. This offers some protection against rapid fluctuation of the chartering rates. Under time charter party contracts, shipowner remains responsible for the technical operation of the vessel, but commercial control of the vessel is handled by the charterer.

Under time charter party contracts, shipowner must cover all costs associated with crewing, maintenance of the vessel and insurance, but vessel fuel consumption and port charges will be compensated by the charterer.

Voyage Charter Parties:.