Time charters

First, if the vessel is employed under a time charter, the assured may not receive hire for the periods during which the vessel does not, wholly or partly, provide the agreed services as per the relevant time charter. Following certain circumstances specified in the charter, the vessel will be considered off-hire and no hire shall be payable to the assured during such off-hire periods. The off-hire clause thereby operates as an exemption to the charterer’s primary obligation to pay hire continuously throughout the charter period. Thus the burden is on the charterer to show that the off hire clause operates in the relevant circumstances.[12]

The calculation of the off-hire periods is usually fairly well described in the charter. There are several circumstances which may render the vessel off-hire but which do not fall within the scope of Cl. 16-1. On the other hand, if the assured is “wholly or partially deprived of income as a consequence of damage to the ship which is recoverable under the conditions of the Plan”, this will almost always result in the vessel becoming off-hire under the most frequently used time charters. While an off-hire calculation under a charter will be of interest to a loss of hire insurer, the two calculations are not necessarily co-extensive; see also 5.2.2below.

Typically, off-hire clauses are described as ‘net loss of time’ or ‘period’ clauses depending upon whether they provide for the vessel to be off-hire during the time actually lost or for the whole of a defined period. Also, within that broad division, off-hire clauses differ from charter form to charter form both as regards what is an off-hire event and the period during which the vessel will be off-hire. Set out below are the off-hire clauses from some of the main charter forms and a brief description of how those provisions are applied. The below is based upon English law and therefore another reason as to why an off-hire calculation will be interesting to but not binding upon an insurer under the Plan.


NYPE

The NYPE 1946 and NYPE 1993 differ regarding both the off-hire events that will trigger the vessel being off-hire and also as regards the period during which the vessel  off-hire. The NYPE 1946 provides:

“…in the event of the loss of time…..or by any other cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost..”

NYPE 1993 contains “similar” before “cause” and also provides that overtime, if any, shall not be payable. Reference can be made to the clauses for the differing hire events and which are not material to the present discussion.

Both are referred to as ‘net loss of time’ clauses though, if it is the full working of the vessel that is affected, rather than partial, the vessel will be off-hire for the same period as if the clause were a ‘period’ clause. The NYPE off-hire clauses are consistent with section 392, subparagraph 1, of the Norwegian Maritime Act (1994) in providing a logical and reasonable calculation of the time lost. There are essentially three separate components to the vessel being off-hire and the obligation to pay hire ceasing:

  1. the full working of the vessel must be prevented by an off-hire cause;
  2. there must be an interruption or delay in the service immediately required; and
  3. as soon as full working is resumed, the vessel goes back on hire.

The vessel is thus off-hire for the net loss of time. The effect of, for example, one crane out of four being ineffective is that a complicated analysis needs to be carried out to calculate the actual loss of time. This would need to take into account, for example, whether all four cranes were needed at all times, which holds were being worked and whether the damaged crane worked those holds or not etc. The courts approach may be seen from the judgment of Lord Halsbury, L.C. in Hogarth v. Miller [1891] A.C. 48 (HL) in which he stated:

“…an off-hire clause in the terms of [clause 15] is concerned with the service immediately required of the vessel, and not with ‘the chartered service’ as a whole or the entire maritime adventure or adventures which may be undertaken in the course of the chartered service. The clause concentrates on the period during that which the full working of the vessel is prevented…”

The NYPE 1993 off-hire clause also provides:

“Should the Vessel deviate or put back during a voyage, contrary to the orders or directions of the Charterers, for any reason other than accident to the cargo or where permitted in lines 257 to 258 hereunder, the hire is to be suspended from the time of her deviating or putting back until she is again in the same or equidistant position from the destination and the voyage resumed therefrom.”

To this extent therefor the NYPE 1993 differs from the NYPE 1946 in providing that the vessel will be off-hire for the entire period of deviation.


Baltime 1939

The Baltime 1939 form also contains a net loss of time off-hire provision:

“In the event of….either hindering or preventing the working of the vessel and continuing for more than twenty-four consecutive hours, no hire shall be paid in respect of any time lost thereby during the period in which the Vessel is unable to perform the service immediately required.”

By stating that no hire is to be paid during the period the vessel is unable to perform the service immediately required makes it clear that, as soon as full efficiency is resumed, the vessel will go back on  hire.

Previous versions of the Baltime charter contained period off hire clauses.


Shelltime

The Shelltime 3 is an example of a period clause and provides:

“In the event of loss of time (whether arising from….hire shall cease to be due or payable from the commencement of such loss of time until the vessel is again ready and in an efficient state to resume her service in a position not less favourable to Charterers than that at which the deviation commenced.”

The clause is thus making it clear that hire will not be payable during a period defined by commencement of the loss of time and concluding with the vessel again being in an efficient state, irrespective of whether or not she was in a position to carry out the service immediately required. The vessel will be off-hire as long as any off-hire event persists regardless of whether the charterer or inded whether the vessel is in a position to resume the service required. In Smailes v. Evans [1917] 2 K.B. 54, the off-hire clause provided “in the event of loss of time from damage preventing the working of the vessel for more that twenty-four running hours, the payment of hire shall cease until she is again in an efficient state to resume her service”. The vessel grounded on the northern coast of Newfoundland. The vessel discharged part of her cargo in the vicinity and proceeded to St. John for repairs. Repairs were completed on 18 October, after which the vessel reloaded her cargo and, on 30 October, recommenced her voyage. The court found that the vessel resumed her service on 18 October, from which date hire again became payable.

However, it would appear that, as with the earlier Baltime clauses, those who used the Shelltime 4 preferred the fairness of a net loss of time clause, as the Shelltime 4 states after listing those events which will result in a loss of time:

“….provided, however, that any service given or distance made good by the vessel whilst off-hire shall be taken into account in assessing the amount to be deducted from hire”



[12]The Mareva A.S. [1977] 1 Lloyd’s Rep. 368