What is a charter party? Key clauses explained

Charter party in one paragraph

The charter party (often written C/P or CP) records who the parties are, which ship, what cargo or period, where and when, the price, and how time, delay and disputes are handled. It is normally built from a standard form, with the agreed main terms and additional clauses (rider clauses) layered on top.

Standard forms you will meet

The clauses to read first

• Vessel description: size, capacity, gear and, on time charter, speed and consumption
• Cargo: description, quantity, tolerance and whose option the tolerance is
• Laycan: the earliest date laytime can count and the cancelling date
• Load and discharge ports or berths, and whether it is a port or berth charter
• Laytime terms: rates, SHINC or SHEX, and when laytime starts
• Notice of readiness: where and when it can be tendered
• Demurrage and despatch rates
• Freight or hire, when it is earned and when it is payable
• Commissions: address commission and brokerage
• Law and arbitration: often English law and London arbitration
• Risk clauses: war risks, sanctions, ice, strikes and similar BIMCO clauses

How the charter party relates to the fixture recap

Negotiation happens on main terms. Once subjects are lifted, the broker issues a fixture recap that lists every agreed term and names the standard form and the previous charter party it is based on. The full charter party is then drawn up from the recap. If the two ever differ, the recap usually shows what was actually agreed, which is why a clean, complete recap matters so much.

Charter party bills of lading

On a voyage charter the master or agent issues bills of lading for the cargo. A 'charter party bill of lading' incorporates the charter party terms by reference. This matters to banks and cargo receivers, because the terms that govern the carriage are in a document they may never see.