If you are chartering a vessel for the first time, the types of charter party can look like a maze of acronyms. A charter party is the contract between a shipowner and a charterer for the use of a ship or its cargo space. The type you choose decides who runs the vessel, who pays for what, and who carries which risks.
This guide compares the main arrangements at a high level. It will not replace legal advice or the wording of a signed contract. It should help you describe what you need when you speak to a broker or shipping team.
What is a charter party?
A charter party is a written agreement for hiring a vessel, either whole or in part. The name comes from the Latin carta partita, a document split between the two parties. Wikipedia’s article on the charterparty gives the background and the main categories.
Most agreements are built on a standard ship charter party form that the parties then amend. The shipping association BIMCO publishes many such forms, and you can browse them at BIMCO. Parties usually choose a form that suits the trade and then add or change clauses to fit the deal. That is why charter party forms matter. The form is the starting point, and the extra clauses often decide how the deal works in practice.
The three questions that separate each charter party type
Before looking at individual arrangements, three questions explain most of the differences:
- Who manages and crews the ship? The owner, or the charterer?
- How is the charterer paying? A price for carrying cargo (freight), or a rate for the time the ship is hired (hire)?
- Who pays the voyage costs? These include fuel and port charges, and they can fall on either side depending on the type.
Keep these in mind as you read the comparison below.
Voyage charter
In a voyage charter, the shipowner agrees to carry a cargo from one port (or range of ports) to another. The owner keeps control of the ship, employs the master and crew, and normally bears the running and voyage costs. The charterer usually pays freight, often based on the quantity of cargo carried.
This arrangement suits one-off or occasional shipments. Because the owner’s ship is only occupied for the voyage, the contract has to deal with the time spent loading and discharging. Voyage charters therefore usually include terms on laytime (the time allowed for cargo operations) and demurrage (a payment if that time is exceeded). If you are describing a voyage charter enquiry, the useful details are the cargo, the quantity, the loading and discharge ports, and the expected dates.
Time charter
In a time charter, the charterer hires the ship for an agreed period and pays hire, usually at a daily rate. The owner still manages the vessel technically and supplies the master and crew. The charterer decides where the ship trades within the limits set in the contract and generally takes on the commercial side of operating it.
Because the charterer directs the ship’s employment, the contract spells out the following:
- the trading limits
- the delivery and redelivery of the vessel
- the vessel’s description and performance
- who pays for fuel and port costs
These are the points that often vary between agreements, so read them closely. A variation known as a trip time charter applies time-charter terms to a single voyage or defined trip. If you are describing this arrangement, you would say how long you need the ship and where it will trade.
Bareboat (demise) charter
In a bareboat charter, also called a demise charter, the charterer takes over the ship almost completely. The charterer typically appoints the crew, handles maintenance, insures the vessel to the agreed standard, and operates it as if it were their own for the charter period. The owner provides the ship and receives hire.
This arrangement is closer to a long-term lease than to a transport service. It tends to suit parties who want operational control and are prepared to take on the responsibilities that go with it. The details of insurance, maintenance and the vessel’s condition on return are especially important in this type of contract.
Contract of affreightment
A contract of affreightment (COA) is different from the types above because it is not tied to one named ship. Instead, the owner agrees to carry a stated quantity of cargo over a period, often in several shipments, using suitable vessels of the owner’s choice. It is useful when you have regular cargo to move but do not need to hire a particular vessel for the whole time.
Comparing the arrangements side by side
The table below shows the general pattern. Individual contracts can change any of these points, so treat it as a guide only.
| Voyage | Time | Bareboat | COA | |
|---|---|---|---|---|
| Basis | One voyage | Period of time | Period of time | Quantity over time |
| Payment | Freight | Hire | Hire | Freight |
| Crew and management | Owner | Owner (technical) | Charterer | Owner |
| Who directs the ship | Owner, to the agreed route | Charterer, within limits | Charterer | Owner, to meet the contract |
| Typical fit | Single shipments | Flexible trading | Long-term control | Regular cargo flows |
How to choose between the types of charter party
There is no single best option. The right arrangement depends on the answers to practical questions:
- Do you have a specific cargo, or do you need a ship? A defined cargo points toward a voyage charter or COA. Needing a ship for your own trading points toward a time or bareboat charter.
- How much control do you want? More control means more responsibility. A bareboat charterer carries more than a voyage charterer.
- How long is the need? One shipment, a series of shipments, or an open period each suggest a different structure.
- What can you manage in-house? If you do not have operational and technical capability, a bareboat arrangement may not be sensible.
A broker or maritime adviser can test these answers against the market and the form that fits.
What to prepare before you make an enquiry
You do not need to know the contract terminology to start a conversation. It helps to be able to say:
- What you want to move, or what kind of vessel you need
- The ports or trading area
- The timing, whether specific dates or a period
- Whether you want to manage the ship yourself or have the owner do so
- Any forms or past contracts you have used before
With those points, the right type of charter party is usually clear fairly quickly. If you would like to discuss an enquiry, you can get in touch with our team.
Sources
- Charterparty – Wikipedia
- BIMCO
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