Contracts of Affreightment
The Carriage of Goods by Sea Act (the Act) defines the contract of carriage as a contract covered by a Bill of Lading or any similar document of title, in so far as such document relates to the carriage of goods by sea, that regulates the relations between a carrier and a holder of the same. Said contracts of carriage are what are internationally referred to as contracts of affreightment.
Contracts of affreightment are drawn placing heavy reliance on the Act as it stipulates the terms that must be met by the parties for the same to be valid and enforceable. The Act is invoked if the goods are in connexion with the carriage of goods by sea in ships carrying goods from any port in Kenya.
The Act states that after receiving the goods into his/her charge, the carrier, master or agent carrier, shall, on demand of the shipper, issue to him/her a bill of lading showing among other things;
a) the leading marks necessary for identification of the goods;
b) either the number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper; and
c) the apparent order and condition of the goods.
It further states that such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods. It is from this role of prima facie evidence of receipt that the Bill of Lading can also be used as evidence of a contract of carriage.
However, it is important to note the Bill of Lading, may be deemed to be a contract in itself. In situations where there happens to be a charter party, the bill of lading between the carrier and a shipper is assumed to be the contract on the basis of which the cargo is carried. It is accepted that when the bill of lading is passed to a cosignee(Cosignee is the party entitled to receive goods) by the shipper, whether a charterer or not, the contract between the carrier and the endorsee is contained in the bill of lading making it a contract on its own.
Types of Bills of Lading
a) Order Bill of Lading-Issued to consignee where said consignee orders goods to be delivered to another party;
b) Bearer Bill of Lading-Where the holder of the Bill of Lading is the owner of the goods where no consignee has been mentioned;
c) Clean Bill of Lading-Issued by the carrier attesting to the good condition of the goods;
d) Soiled Bill of Lading-Issued by the carrier attesting to the damaged condition of the goods; and
e) Straight Bill of Lading-Issued to a specific person and is non-transferrable to another person.
In as much contracts of affreightment are more popular in the carriage of goods by sea realm, they are a sub-set of what is referred to as a charter-party.
A charter party is the contract between the owner of a vessel and the charterer for the use of a vessel. The charterer takes over the vessel for either a certain amount of time (a time charter) or for a certain point-to-point voyage (a voyage charter), giving rise to these two main types of charter agreement.
There is a type of time charter called the demise or bareboat charter. This is a charter in which the charterer takes responsibility for the crewing and maintenance of the ship during the time of the charter, assuming the legal responsibilities of the owner and is known as a despondent owner.
a) Time Charter Party
This is a charter party where the vessel is hired for a specific amount of time. The owner still manages the vessel but the charterer gives orders for the employment of the vessel, and may sub-charter the vessel on a time charter or voyage charter basis.
In consideration for the services, âhireâ is paid to the ship-owner. Hire is payable as determined in the contract between the parties.
The ship-owner is responsible for providing a seaworthy ship with valid classification, and a master and crew, so that the ship can be sailed safely to its final destination.
The charterer, on the other hand, is responsible for loading, stowing, and discharging cargo safely. The charterer is also responsible for giving the master effective orders and instructions with regard to when and where the cargo should be shipped. Further, the charterer is responsible for providing fuel for the vessel.
b) Voyage Charter Party
This is a charter party for the carriage of a full cargo, not for a period of time, but at a stipulated rate per ton, for one voyage only, between named ports in a given area.
In a voyage charter, the charterer hires the vessel for a single voyage, and the vessel’s owner provides the master, crew, bunkers and supplies.
The amount of money paid to a ship-owner or shipping line for the carriage of cargo is called a freight. Depending on the type of contract, the custom of the ports involved, the freight may include the cost of loading and/or discharging the cargo or may simply cover the ocean carriage. Such charter is usually employed for bulk cargo.
In a voyage charter party, the charterer assumes no responsibility for the operation of the vessel but generally pays stevedoring expenses in and out. (Stevedoring refers to the act of loading or offloading cargo to and/or from a ship) A statement to that effect ought to be included in the charter party.
The owner of the vessel is particularly concerned with voyage charter parties because of the lay time, dispatch and demurrage clauses and the necessity of tendering the Notice of Readiness to load or discharge.
Lay days, Dispatch and Demurrage
When the vessel on a voyage charter is in port, the expenses of the ship-owner continue. At the same time, loading or discharging is controlled by the charterer, who if not held to a definite number of days to complete this work, can make the stay in port long and expensive for the ship-owner. For this reason, the charter party will specify a definite number of days for loading or discharging cargo; or it may specify a certain number of tons per day to be loaded or discharged. The days are called lay days (or lay time) and are stipulated in the charter party as working days, weather working days, running days and excepted days. If the charterer loads or discharges his cargo in less time than the number of lay days allowed, dispatch money is earned for that day or part of the day saved.
However, if the charterer takes longer to load and/or discharge the cargo than the number of lay days allowed, demurrage depending on the days or part of day extra taken must be paid.
As such, the vesselâs log book is vital in determining the timelines spent by said vessel at each stage.
These clauses must therefore be made clear in every charter party. Unless otherwise provided in the charter party, demurrage starts from the time loading discharging should have been completed. All days are counted, whether or not cargo is worked, including Sundays, holidays and days not worked due to bad weather or other reasons. Once a vessel is on demurrage, it runs consecutively unless otherwise provided in the charter party.
Furthermore, if liner terms (The Full Liner Terms are the terms and conditions for the transport of goods by sea. They express what is and what is not included in the freight rate) have been agreed, it is the ship-owner who takes responsibility for the loading, stowage and discharge of cargo.
However, if FIOS terms (FIOS is an abbreviation for Free In, Out and Stowed, which means the rate of freight. FIOS covers only the transportation fee, without the inclusion of loading, unloading and stowing the cargo onboard a vessel.) have been agreed, it is the charterer who takes responsibility for the loading, stowage and discharge of cargo.
There is no doubt that contracts of affreightments come with complexities and as such parties involved must be intentional with the terms that will determine their relationship keeping in mind the provisions of the Carriage of Goods Act as deviation from the act in favour of contractual freedom shall render the contract a nullity.