50+ SAMPLE Charter Agreement

What Is a Charter Agreement?

Before we get familiarized with the agreement document, we need to know what chartering is all about. What is this term all about? Well, in shipping terminology, chartering refers to a sort of operation in which a shipowner rents out the use of their vessel to a charterer. In other words, a charterer may own goods and hire a shipbroker to find a vessel that will carry the cargo to a certain place for a set price, known as the freight rate. Chartering can also entail a party without a cargo hiring a vessel for a fixed duration from the owner and then trading the ship to transport cargoes at a profit over the rental fee.

Depending on a number of factors, such as the type of vessel being rented out, and the type of cargo to be delivered (if one is involved), an agreement will have to be put into place between the parties involved. One such agreement is known as the charter agreement. A charter agreement is a legal document that defines a commercial relationship with another individual or business. This arrangement is often made when one party wishes to charter a means of transportation or service from another party for a set period of time. These documents can be used for a variety of objectives, including the sale of products and services, cargo delivery, and the formation of new joint ventures, among others. This agreement is required because it specifies the obligations of the parties that are involved before, during, and after the agreement takes effect, as well as protecting the parties’ interests during the duration of the agreement should any issues develop.

What’s In a Charter Agreement?

Here are the key terms and clauses that should be present when a charter agreement is being drafted:

Title. This is the first important part of the legal document and should describe what the document is all about. In this case, the title of the document is “Charter Agreement”.Parties Involved. This key component comes after the title and promptly identifies the details of the parties involved along with their roles and a brief overview of their responsibilities once the agreement takes effect. In a charter agreement, the parties involved are the company/individual who wishes to charter the vessel for their desired purpose (known in this agreement as the charterer) and the company/individual who owns the said vessel that is to be chartered (known in this agreement as the shipowner).Vessel Description. This part of the charter agreement comes after identifying the parties involved and gives a brief description of the vessel that is to be chartered as part of the agreement. Typically, the description of the vessel includes details such as the name of the vessel, where it is registered and the flag it flies, the registration number, the call sign of the vessel, the company it is entered with, and the classification of the said vessel.Charter Term. This part of the charter agreement comes after the vessel description and should describe the date on which the agreement will take effect and the date when the agreement will end. This part also states in wording that the agreement may be extended upon request by either party provided that mutual consent has been reached and that the requesting party has sent a written notice to the other one prior to the conclusion of the initial term.Delivery/Redelivery Date and Place. This part of the charter agreement states in wording that the vessel owner shall be deemed to have delivered the vessel to the charterer before a specific date. This part also states in wording that the charterer must redeliver the vessel to the owner at the conclusion of the charter term at a safe berth in a safe port, again, at a predefined location if the vessel is not purchased at any stage during the initial term, or during the extension terms if they are exercised.  It further specifies that the charterer must give written notification to the owner of the anticipated redelivery port before the conclusion of the charter term.Area of Use. Written after the delivery/redelivery date and place, this part of the charter agreement describes in detail the areas in which the vessel being chartered may be used. In most cases, the chartered vessel may be used worldwide as long as the charterer agrees that the vessel will not be delivered to or operated in any place that the vessel’s flag states or any of the vessel’s insurers forbid.Charter Hire. This key component is written next after the permitted area of use section. This states in writing that the charterer of the vessel shall pay the owner a predetermined hire amount which serves as a payment for chartering the vessel. This also states the period in which the charter hire is due to be paid and the method in which the payment is to be made.Insurance. This part is brief in writing and shall state in detail the complete and agreed minimum total loss value of the vessel being chartered should it get lost or damaged during the charter term.Special Provisions. This key component of the charter agreement consists of more subcomponents, all of which serve as the special provisions that may be agreed upon by the parties involved. The provisions may include the effective time of the charter term, the provisions defining wear and tear of the vessel being used, the terms for vehicle loss or damage, the basis of the charter, and the charterer’s undertakings, such as not changing the flag or classification of the charted vessel without the owner’s consent, not making any structural alterations to the vessel without prior consent, and a purchase option of the vessel that is being chartered. This key component may also include a provision for early termination by the owner without any liability.Surveys and Inspections. After the special provisions clause, this part is written next. This section of the agreement stipulates that the parties concerned will jointly designate an independent surveyor to determine and record in writing the state of the vessel being chartered, as well as an inventory of the vessel’s principal parts and equipment, at the time of redelivery. This clause also specifies that each party is responsible for one-half of the surveyor’s fees. This section further stipulates that the charterer must make the vessel accessible for survey or inspection by the owner’s nominated surveyor or inspector, who will be paid by the owner, on reasonable notice from the owner.Maintenance. This part of the charter agreement states in writing that throughout the agreement, the charterer of the vessel shall perform maintenance operations of the vessel in order to keep it in good condition, submit the vessel to a continuous survey and any other surveys, keep the classification of the chartered vessel up to date, and replace any parts or equipment that have been damaged or worn beyond worthy use.Charterer’s Equipment. This section of the charter agreement stipulates that the charterer may install extra equipment aboard the vessel for use in conjunction with the charterer’s activities as long as the vessel is not damaged and no structural changes are made without the owner’s prior written authorization. It also stipulates that the charterer is responsible for all fitting, installation, removal, and restoration costs and risks.Signature Block. This serves as the last important part of the charter agreement. This block contains the key details of the parties involved in the agreement, such as their names, their position in the company, and their role in the agreement. This block also contains the signatures of the parties involved along with the key people who will also need to sign the document. Once the signatures have been put in place, the agreement then takes effect on the specified date.

How to Create a Charter Agreement

Here are the steps to be followed when a charter agreement is to be created:

1. Identify the Parties and their Roles

The first step in creating the charter agreement is to identify the parties involved along with their respective roles and responsibilities in the agreement. In a charter agreement, the parties involved are the person or entity who will be chartering the vessel, known as the charterer, and the owner of the vessel that is to be acquired by the charterers, known as the owner. Some of the responsibilities of the charterer include taking care of the chartered vessel, using it in accordance with the provisions that are to be stated in the agreement, and not making any changes to the vessel without consent from the owner. Some of the responsibilities of the owner include ensuring that the vessel is in good condition prior to delivery and making sure that all the documentation is updated and accurate prior to delivery.

2. Writing the Main Provisions

After identifying the parties involved in the agreement along with their respective roles and responsibilities, it’s time to write down the main provisions that make up the charter agreement. Some of the main provisions of the charter agreement include the vessel description, the charter term, the area of use, and the terms for maintenance. The vessel description includes details such as the name of the vessel, where it is registered and the flag it flies, the registration number, the call sign of the vessel, the company it is entered with, and the classification of the said vessel. The charter term describes the date on which the agreement will take effect and the date when the agreement will end, the area of use should describe in detail the areas in which the vessel being chartered may be used, and the terms for maintenance state the responsibilities of the charterer during the maintenance of the vessel being chartered.

3. Writing the Secondary Provisions

After writing the main provisions of the charter agreement, proceed to write the secondary provisions that make up the charter agreement. These are also known as the boilerplate clauses. Some of the boilerplate clauses of the charter agreement include the liability and indemnity, the termination terms, the governing law, and the confidentiality clause. The liability and indemnity clause states that the charterer assumes all risk of liability of operating the vessel and shall indemnify the owner from all loss and damages from operating the vessel. The termination terms specify the situations in which a termination may be necessary, the governing law states that the charter agreement shall be governed by the place in which the agreement was written, and the confidentiality clause states that all information about the parties involved shall be treated as confidential and shall not be disclosed without consent.

4. Final Steps

The final steps in creating this agreement would be to verify and check if the document is free of any form of errors and inconsistencies. A great practice in this step is to have someone qualified (such as a lawyer) look over the agreement. Once the agreement has been verified clear of errors, the parties can then proceed to sign the document so that it can take effect.

FAQs

When is this document usually needed?

The most common scenario that requires a charter agreement is when an entity such as an individual, company, or organization needs a specific product or cargo to be delivered from one area to another in a given period. Having this agreement in place allows the charterer to safely and securely transport the cargo as specified by the client while making sure that the terms and conditions are followed and the interests of the charterer and the vessel owner are protected at all times.

What is a voyage charter?

The hire of a vessel and crew for a journey between a load port and a discharge port is known as a voyage charter. The charterer compensates the vessel owners on a per-ton or lump-sum basis in this type of charter. The port charges (excluding stevedoring), fuel costs, and personnel costs are all paid by the owner. Freight is the fee for the use of the vessel under this type of charter.

What is a bareboat charter?

A bareboat charter, sometimes known as a demise charter, is a vessel rental agreement in which no administration or technological upkeep is involved. The charterer takes possession of the vessel and assumes all legal and financial obligations for it. The charterer is responsible for all operational costs, including fuel, personnel, port expenditures, and hull insurance, under this form of charter.

Whenever an entity requires something that cannot be fulfilled through simple means, such as getting multiple pieces of cargo delivered to a specific location within a given period of time, a charter agreement may have to be drafted. This document ensures that all the duties and responsibilities of the parties involved in the agreement are fulfilled while protecting all their interests in case something goes wrong. This article has plenty of sample templates to help you have a further understanding as to what this document is all about as well as to serve as guides to help you in writing one should you have the need to do so.