Contracts of affreightment for tramp vessels are usually embodied in an instrument called charter party, which is made up after a verbal agreement (fixture) between vessel owners and charterers, such agreement usually being arrived at through a broker. Different forms of charter parties are utilized for voyage, time and bareboat (demise), charters. Most charters in the grain trade are made on a. voyage basis, using Baltimore Berth Grain Charter Party (Form C); certain clauses from other charter party forms may also be used, e.g., Centrocon Strike Clause. While contractual conditions vary widely, standard language is used to describe the basic undertakings of the parties. A voyage charter party contains such information as: date of charter, name of vessel owner and charterer, vessel name (or description, if "to be nominated"), classification, port(s) of loading and discharge, tonnage and loading tolerance, commodity(ies) to be carried, freight rate(s), conditions of payment of freight, laydays/cancelling date, information concerning calculation of laytime (commencement of laytime, whether loading and/or discharge time to count during laydays, rainy weather, etc.), demurrage rate, despatch rate, brokerage commission, address commission, etc.
Net cost of freight is affected by various Charter Party conditions:
1) Freight Rate: There may be several rates de
pending on type of commodity carried, number of ports
used in loading and/or discharge, etc.
2) Loading and discharge expenses: Charters may be
written with the freight rate to include loading and
discharging expenses; in this case these costs are for vessel owner's account, and the charter is said to be subject to gross or berth terms. If loading and discharge expenses are not included in the freight rate,
they are borne by charterers and the charter is said => to be net or free-in-and-out (FIO); loading expenses include stowage and trimming. Other alternatives exist, such as charterers paying for loading expenses and vessel owner for discharge expenses. In each case, the freight rate will reflect the expenses to be absorbed by vessel owners. It is generally possible to ascertain loading and discharge expenses beforehand.
3) Laytime: This is the basic time permitted in the charter for loading and discharge of the vessel. Under the Baltimore Berth Grain Charter Party (Form C), laytime ("time") commences counting at 7 a.m. on the business day following vessel's tender of Notice of Readiness to load,
provided such notice was submitted not later than 4 p.m. on a regular work day or 12 noon on a Saturday or on the canceling date. Laytime is expressed either as a period of days for loading and period of days for discharge, or one period of days for both operations (reversible laydays), or in tons per day. For exportations
of grain from the Great Lakes, charters usually state laytime as a period of days for loading, and rate in tons per day, at discharge. Since vessel owners incur expenses not compensated for by income while their vessel is immobilized and not being worked, a system of penalties and rewards (demurrage and despatch) is used to obtain from charterers the fastest rate of loading and discharging. Obviously, it is to charterers' advantage to be allowed as much time for these operations as possible; thus, charterers will prefer laytime to be calculated basis "weather working days" rather than "working days", since inability to work the vessel in rainy weather will not result in penalty to them.
4) Demurrage/despatch: charter party states a rate in
dollars per day (or fraction) payable for demurrage by charterers to vessel owners in the event loading and/or discharge are not completed within laytime. Conversely, despatch money (running at half the rate of demurrage), is
payable by owners to charters for completion of operations prior to expiration of laydays. The laytime and demurrage/despatch rates have an important bearing on the net cost of freight. It is sometimes difficult to predict the pace at which operations will occur and the result of a venture may be ascertainable only upon completion of discharge.
5) Address Commission: This is in effect merely a reduction in the cost of freight.