What is a charter party?

A grain exporter in New Orleans needs to move a full cargo of corn to Japan. It does not own a ship. So it agrees with the owner of a bulk carrier to hire the vessel for that one voyage. That written agreement is a charter party. It sets the freight, the loading dates, how many days the exporter gets to load, and what it pays per day if loading runs late. Miss those terms, and a few slow days at the berth can turn into a large bill.

A charter party is the contract under which a shipowner lets a ship, or space on it, to a charterer. This guide covers charter parties in United States (US) practice, with the Federal Arbitration Act (FAA), the Carriage of Goods by Sea Act (COGSA), and standard industry forms as reference points. It is general information, not legal advice.

Charter party: purpose and uses

A charter party decides who supplies the ship, who directs it, and who pays for what. US federal law treats it as a maritime contract. For arbitration purposes, the FAA's definition of "maritime transactions" starts with charter parties [1]. The US Supreme Court has also used the term this way. In admiralty, it said, contracts to charter a vessel are termed charter parties [3].

You will see the word written as "charter party," "charterparty," or just "charter." These all name the same contract. There are three main types.

Type	What the charterer gets	How the owner is paid	Common standard form
Voyage charter	The ship's services for one or more voyages	Freight for the cargo carried	The general-purpose voyage form (GENCON) [4]
Time charter	The ship's services for a period of time	Hire for the time the ship is in service	New York Produce Exchange Form (NYPE) [4]
Bareboat charter	Possession and full control of the ship	Hire for the lease period	BARECON [4]

Voyage charters suit cargo owners with one shipment to move. The international shipping association (BIMCO) describes its GENCON form as "a general purpose agreement for the services of a ship in exchange for freight" [4]. It calls GENCON the most widely used voyage charter party in the dry bulk sector [4].

Time charters suit operators who need a ship for months or years. They decide where the ship goes, within agreed limits. BIMCO calls NYPE the most widely used standard time charter party in the dry cargo sector [4].

Bareboat charters, also called demise charters, work more like a lease. BIMCO describes BARECON as an agreement where the charterer obtains possession and full control of the ship, along with legal and financial responsibility for it [4]. The charterer generally pays operating costs such as fuel, crew, maintenance, repairs, and insurance [4].

Most fixtures start from one of these printed forms. The parties then add typed "rider" clauses that change the form. The free charter party review tool flags riders that materially change the underlying form [7]. A charter party is different from a bill of lading, which is the cargo document issued when goods are shipped. COGSA keeps the two apart, as the clauses section explains.

Charter party: parties

Every charter party has at least two parties. Others often sit around the deal.

• Shipowner. The registered owner supplies the ship. Under a voyage or time charter, the owner also supplies the crew and runs the ship.
• Charterer. The charterer hires the ship or its services. Under a bareboat charter, the charterer takes over the ship itself [4].
• Disponent owner. A time charterer can let the same ship to someone else. It then acts as owner toward that sub-charterer. In the Supreme Court case on the tanker Athos I, the owner chartered the ship to a tanker operator for a period. The operator then sub-chartered it to a refiner for one voyage [3].
• Shipbroker. Brokers usually negotiate the fixture for each side. The final terms often travel as a recap message rather than a signed draft. BIMCO notes that fixtures are often concluded this way [5].
• Master. The ship's captain carries out the charter at sea and in port.
• Shippers and receivers. They load and take delivery of the cargo. They may hold a bill of lading, not the charter party.

That last point matters. Under COGSA, a bill of lading issued under a charter party becomes a "contract of carriage" once it governs the relationship between the carrier and the holder [2]. COGSA defines "carrier" to include an owner or a charterer who enters into a contract of carriage with a shipper [2]. So a cargo holder can have rights against a carrier that the charter party alone would not show.

Each party's duties follow from the type. A time charterer pays hire and gives employment orders. The owner keeps the ship efficient and crewed. A voyage charterer provides cargo and berths within the agreed time. For the general building blocks, see the clause glossary entry.

Charter party: key clauses

Standard forms run to dozens of clauses. These are the ones that drive most of the money and risk.

Vessel description. Name, flag, size, cargo capacity, and, for time charters, speed and fuel consumption. Speed and consumption terms are common warranties. The review tool checks what happens on breach [7].

Laycan. Short for laydays and cancelling. It is the window in which the ship must arrive and be ready. The charter says what happens if the ship misses the cancelling date. Often the charterer may then cancel.

Freight or hire. Voyage charters pay freight on the cargo. Time charters pay hire for the time the ship is in service.

Laytime. The time allowed to load and discharge. BIMCO publishes Laytime Definitions for Charter Parties 2013. They define laytime as the period agreed between the parties during which the owner will make and keep the vessel available for loading or discharging without payment additional to the freight [5]. These definitions apply only when the charter party expressly incorporates them [5]. Laytime is often counted in "weather working days." Under the 2013 definitions, that phrase excludes time when weather interrupts cargo work, calculated by a ratio [5].

Notice of readiness (NOR). This is the notice that the ship has arrived at the port or berth and is ready to load or discharge [5]. When laytime starts depends on the charter's own terms, which usually link it to NOR. The 2013 definitions also cover a busy berth. Under a "whether in berth or not" clause, if the designated berth is not available on arrival, the ship may tender NOR from any usual waiting place at the port [5].

Demurrage and despatch. Demurrage is an agreed amount payable to the owner for delay once laytime has expired, where the owner is not responsible for the delay [5]. Under the 2013 definitions, the laytime exceptions do not apply to demurrage unless the charter party specifically says so [5]. Despatch is the reverse. It is an agreed amount the owner pays if loading or discharging finishes before laytime expires [5].

Off-hire. Under a time charter, hire normally runs from delivery to redelivery. The off-hire clause is the main exception. Steamship Mutual, a shipping mutual club, summarizes the English law position. Under English law, a time charterer must pay hire continuously unless a clear clause lets it withhold hire [6]. English courts read off-hire clauses strictly against the charterer [6]. Subject to the charter's terms, English law generally entitles owners to withdraw the ship if hire is not paid as the charter requires [6]. Check which law your charter selects before relying on that position.

Safe port and safe berth. The charterer usually must send the ship only to safe ports and berths. In 2020, the US Supreme Court ruled on such a clause in a voyage sub-charter (CITGO Asphalt Refining Co. v. Frescati Shipping Co.). It held that the clause's plain language established a warranty of safety [3]. That meant liability for an unsafe berth regardless of the charterer's diligence in choosing it [3]. The Court added that parties are free to contract for limits on liability. That clause contained none [3].

Bills of lading. COGSA says its provisions do not apply to charter parties [2]. But bills of lading issued for a ship under a charter party must comply with COGSA [2]. COGSA covers bills of lading for carriage by sea to or from US ports in foreign trade [2].

Law and arbitration. Most forms name a governing law and an arbitration seat. Under the FAA, a written arbitration provision in a maritime transaction is valid, irrevocable, and enforceable [1]. The exceptions are grounds that exist at law or in equity to revoke any contract, or as chapter 4 of the FAA provides [1]. Record the seat and rules for each charter. Add sanctions, war risk, and ice clauses where they apply. Our guide to the compliance clause covers the general idea.

Dates and lifecycle events

A charter party is short-lived but date-heavy. Most disputes turn on what happened at a specific hour. Map the lifecycle before the ship moves.

1. Fixture. The parties agree the main terms, often by recap. Note the date and which form and riders apply.
2. Laycan. Diarise the earliest arrival date and the cancelling date.
3. Arrival and NOR. Record when NOR was tendered and accepted. Note any notice time before laytime starts.
4. Laytime running. Log every interruption, such as weather, holidays, and shifting between berths. The charter's exceptions decide what counts.
5. Demurrage or despatch. If laytime runs out, demurrage starts at the agreed rate. If loading finishes early, check the despatch terms.
6. Delivery and redelivery. Under time and bareboat charters, record the delivery and redelivery dates, places, and fuel on board.
7. Hire payments. Time charter hire is often paid in advance in instalments. Steamship Mutual notes that, under English law, charterers cannot deduct hire in advance for expected off-hire [6].
8. Claims. Many charters set their own time limits for demurrage and other claims. Read them and diarise them. Cargo loss or damage claims under bills of lading covered by COGSA have a one-year suit limit. It runs from delivery of the goods, or the date they should have been delivered [2].

Some charter parties renew in practice, through extension options on a time charter. Track the option declaration date as carefully as the end date. The contract lifecycle entry explains the general stages, and the guide to contract dates and auto-renewals shows how end dates and notice periods work in Contracko.

Risks and common mistakes

Charter parties fail in predictable ways. Most of these come from reading the form but not the riders.

• Relying on the printed form. Riders often override the standard clauses. Read the whole fixture as one document.
• Assuming laytime terms mean the same everywhere. BIMCO's 2013 definitions apply only when the charter incorporates them [5]. Without that, the words depend on the governing law and the rest of the contract.
• Treating demurrage like laytime. Under the 2013 definitions, laytime exceptions do not carry over to demurrage unless the charter says so [5]. Under those definitions, a rainy day can stop laytime yet still count on demurrage.
• Missing the safe berth risk. Under US law, after the 2020 Supreme Court decision, an unqualified safe-berth clause can be a warranty of safety [3]. If you want a due diligence standard, the clause must say so [3].
• Withholding hire on a hunch. Under English law, off-hire clauses are construed strictly, and owners may withdraw for unpaid hire [6]. Check the clause wording before you deduct.
• Losing track of claim deadlines. Contractual time limits for demurrage claims can be short. COGSA's one-year limit for cargo loss or damage claims under bills of lading is separate [2].
• Mismatched charters in a chain. A sub-charter can carry different terms from the head charter. The middle party can end up liable on one and unprotected on the other.

These are contract risks first. Our contract risk management entry sets out a general approach. For a faster first read of a specific charter, the charter party review tool checks freight and hire, laytime, demurrage, off-hire, speed and consumption warranties, redelivery, and arbitration terms [7].

Contract-management checklist

Use this list for each fixture. It works for owners, charterers, and operators in the middle of a chain.

Capture at fixture

• Vessel name and the charter type: voyage, time, or bareboat
• Standard form and edition, plus every rider and addendum
• Parties, brokers, and whether this is a head charter or a sub-charter
• Freight or hire rate, payment dates, and bank details
• Laytime terms, demurrage and despatch rates, and whether the 2013 definitions are incorporated
• Safe port and safe berth wording, and any due diligence language
• Governing law, arbitration seat, and rules
• Claim time limits written into the charter

Diarise

• Laycan opening and cancelling dates
• NOR tender times and laytime start
• Hire instalment due dates
• Delivery, redelivery, and option declaration dates
• Each claim deadline, with lead time to prepare documents

Review on a cadence

• Each running time charter, monthly: hire paid, off-hire periods, and performance claims
• Each completed voyage: laytime statement and demurrage claim within the charter's limit
• Each year: standard forms in use against the latest editions, such as GENCON 2022, NYPE 2015, and BARECON 2017 [4]

A shared register helps here. A contract repository keeps each fixture and its riders together. Contracko's contract data extraction pulls dates, parties, values, notice periods, and custom fields from uploaded contracts [7]. Expiration reminders track renewal dates, end dates, notice dates, and custom events such as obligations or milestones [7]. For more habits that keep records current, see these contract management best practices. When you want every charter in one place, start a free trial.

Sources

[1] US Code, 9 U.S.C. §§ 1 and 2 (Federal Arbitration Act: charter parties as maritime transactions; enforceability of written arbitration provisions), 2023 edition. govinfo.gov/content/pkg/USCODE-2023-title9/html/USCODE-2023-title9-chap1-sec1.htm, govinfo.gov/content/pkg/USCODE-2023-title9/html/USCODE-2023-title9-chap1-sec2.htm

[2] US Code, Carriage of Goods by Sea Act (definitions, one-year suit limit, and non-application to charter parties), note to 46 U.S.C. § 30701, 2023 edition. govinfo.gov/content/pkg/USCODE-2023-title46/html/USCODE-2023-title46-subtitleIII-chap307-sec30701.htm

[3] Supreme Court of the United States, CITGO Asphalt Refining Co. v. Frescati Shipping Co., No. 18-565 (2020) (safe-berth clause as a warranty of safety). supremecourt.gov/opinions/19pdf/18-565_3d93.pdf

[4] BIMCO. Contract pages for GENCON 2022, NYPE 2015, and BARECON 2017. bimco.org/contractual-affairs/bimco-contracts/contracts

[5] BIMCO, Laytime Definitions for Charter Parties 2013 (laytime, notice of readiness, demurrage, and despatch). bimco.org/contractual-affairs/bimco-contracts/contracts/laytime-definitions-for-charter-parties-2013

[6] Steamship Mutual. Off-hire FAQs (English law position on hire, off-hire, and withdrawal). steamshipmutual.com/publications/articles/hire-faqs

[7] Contracko. Charter party review tool and feature pages for data extraction and expiration reminders. contracko.com/tools/charter-party-review, contracko.com/features

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