Decisions which comes with several choices or options, usually have advantages and

disadvantages for each option. It is left up to the choosers discretion to determine which option
will allow him to realize the greatest amount of benefit given his aim and resources. In shipping,
two common ways of chartering a ships service which will be discussed in this project. The
differences between Time chartering and voyage chartering will be assessed to decipher the
general notion that ship owners prefer a voyage charter over a time charter.
In contracts of the carriage of goods by sea, in a charter party specifically, there are two
main parties which engage in business; the ship-owner and the charterer. The Charterer hires
from the Ship-owner the use of the ship for a specific voyage (port to port), or a specific duration
of time in consideration of payment of money called freight. In any business, proprietors always
look to maximize profits while taking the more risk-free option. With this understanding,
assessing the properties of these two contractual arrangements will allow for the decoding of the
preference of the ship owners.
In time chartering, the charterer hires the vessel for use for an agreed duration of time.
The owner must ensure that the vessel is fully functional according to the charterers
requirements and also appoint a crew which answers to the charterer and not the owner. The
charterer then directs wherever the ship goes, whatever cargo the ship collects and wherever
cargo is dispatched to the respective ports. Of course, he has guidelines as to how to conduct his
voyages according to limitations within the charter party, and is also further advised by the
captain. For this contractual agreement, the charterer is responsible for all the expenses of the
ship throughout the duration of the agreement. These expenses include fuel, port charges and
everything else in between. The owner is only responsible for feeding the personnel. The ship
owner is paid a daily or monthly rate for the use of his vessel and has no further expenses.

A voyage charter on the other hand is an agreement for the charterer to have cargo
transshipped between or among declared ports. This is said to be the most common form of
chartering according to SCHIELS. With this venture, the owner of the vessel charges the
charterer freight on a per-tonne scale or based on a lump sum basis. The charterer agrees to
provide the cargo for loading within an agreed range of dates. Once the cargo has been delivered
at the port or ports of destination, the ship is free for further employment at the owners
discretion. Sometimes, however, the arrangement is for a series of consecutive voyages,
generally for similar cargoes over the same route. The freight rate is expressed in terms of so
much per ton of cargo delivered. For a voyage charter, the ship owner bears all the expenses of
the voyages. This includes fuel, water, canal dues, port dues, loading and discharging expenses
etc. All these expenses should be recovered from the freight charges paid to the ship owner from
the charterer and as such, before giving a quote, a ship owner will require the charterer to
provide certain information so the ship owner may be able to effectively tabulate a reasonable
freight rate.
Both of these type of ship owners depend on a broker to find goods for them to carry.
These middle men in the shipping industry are equipped with a vast wealth of knowledge of the
international transshipment industry. When a charterer needs a vessel, the brokerage house is the
first stop. These brokers are well educated on marine laws and customs, general ship knowledge,
among other necessary knowledge. These brokerages work with agents who are responsible for
duties such as ensuring a berth for the incoming ship, arranging for the pilot and the tugs if
necessary, drawing up the documents for the customs and harbour services, assisting the master
in making the necessary contacts with the local authorities and the harbour authorities, arranging
for the necessary ship fresh water / provisions, arranging for the necessary doctor for the crew

any medical assistance, arranging for storage bunkers if these are needed arranging for the
necessary repairs, conveying instructions to and from the ship owner, organizing the supply,
transport and the handling of the goods, among other duties.
Exploring these two methods of contractual transshipment, we see where both of them
have benefits and disadvantages to the ship owner. In a time charter, all the voyage expenses are
left up to the charterer. This protects the ship owner from a lot of risks. One such risk lies within
laytime in the shipping industry. Lay time is the time taken in port to load and unload a vessel. It
I also sometimes called lay days. If the cargo takes longer than the allowed time to load or
discharge, the shipper or charterer must pay a penalty to the ship owner to compensate for
delaying the ship. The penalty is called demurrage and is usually specified in the charter party.
When the cargo is loaded faster than the allowed lay time, that is to the advantage of the ship
owner, who must then pay dispatch (or dispatch) money. This is deductible from the shipper or
charterer's payables. The rate is specified in the C/P and is usually half the demurrage rate. In the
time charter agreement, in the event of demurrage, all these charges will be left up to the
charterer to take care of which can be pretty costly. The ship-owner need not worry about these
charges because the only payment he is concerned with is his daily or monthly freightment fee
from the charterer. If it were a voyage charter, all this demurrage would cut into the ship owners
profit and if enough, could allow him to lose money instead of gaining. In summary, the profit to
the ship-owner is very unpredictable as the voyages expenses are not set on fixed variables of
possible scenarios. For the time voyage however, the ship owner charges a fixed rate with no
deductions for voyage related expenses so this method is much safer for the owner.