PRACTICAL CHARTERING

Lecture 8 Laytime (Part 1)

1. Calculating Laytime:
As noted in last weeks lecture, the financial risk of delay during the sea voyage in voyage chartering
normally rests with the owners. However, the risk of delay during a vessels periods in port for
loading and discharging cargo (laytime) can be shared in different ways between the owners and
the charterers. Indeed, a great many of the problems and disputes that arise out of voyage charter
agreements are connected with the calculation of laytime, the majority of which could probably
have been avoided if the laytime clauses had been worded with more precision. Unfortunately, the
printed clauses in the standard charterparty forms are also somewhat hazy in their wording, as a
result of which the well-known printed forms must often be amended in order to obtain a clear
picture of how laytime should be calculated.

The fundamental idea of calculating laytime is that the charterers, without extra payment to the
owners, have a certain amount of permitted time to spend on the loading and / or discharging of the
vessel. If this time is exceeded they must pay compensation demurrage at a rate also agreed
beforehand to the owners for their loss of time. Sometimes it is also agreed that the owners will
compensate the charterers if the ship is loaded and/or discharged before the agreed time expires, in
which case the compensation paid is called dispatch.

Key questions that can help in the calculation of laytime include the following:

At what point will time start to count? Will laytime start if the berth is
inaccessible (or will it be suspended if it has already started)? Until when
does time run?
How is congestion in the port treated?
How is time lost due to adverse weather, storms or swells to be treated on
and off the berth?
Does all time used for the charterers purposes count for laytime and
demurrage?
How is delay after the disconnection of hoses to be handled when tanker
operation is involved?
In transshipment at sea are any delays excluded other than those due to
owners or vessel fault?
What is the effect of non-compliance with any of the owners obligations?
Some forms provide that consequential loss of time if the vessel is ordered
off the berth, etc. is for the owners account.
How is shifting time in a port to be treated? Who pays for delays on port
authority orders?
What events give rise to half-rate demurrage? Are they, for example,
limited to those occurring without fault on either side? Are these exceptions
clauses applicable with respect to laytime and demurrage provisions?
2. Arrived Ship
As the risk of delay during the sea voyage rests with the owners, while the risk of delay when the
vessel is in port is shared between the owners and charterers, it is important to be able to establish
when the sea voyage is at an end and when the rules applying to the ships stay in port come into
effect.

The vessel must reach the agreed destination before she can be considered as an arrived ship.
Consequently the more precisely the destination is described the more time is needed before the
vessel has arrived. Therefore, it is more advantageous from the owners perspective to have the
destination described in general terms (e.g. said vessel shall proceed to X town) rather than in
more precise terms (e.g. said vessel shall proceed to berth 2 at the free port of X town). The first
example describes a port charterparty, while the second describes a berth charterparty.
However, it is important to note that it is sometimes difficult to get laytime running under a port
charterparty because it is not always clear what is required for the vessel to be considered as
arrived.

The best way for the owners to protect themselves is to insert a special waiting for berth clause or
to have the words whether in berth/port or not (w.i.b.p.o.no.) inserted into the laytime clause to
make it clear that the time can count when the vessel is in the customary or indicated waiting place.
Such clauses also allow time to count when the ship is not an arrived ship with relation to the
destination as described in the charter-party.

3. Notices, Notice Time and Readiness

The master usually gives notice of readiness when the vessel has arrived, and the charterers are
quite often entitled to notice time (free time, grace time) before laytime starts to run. The original
intent of notice time was to provide the charterers (or the shipper or receiver) with a certain
amount of time to arrange for loading or discharging after they had been made aware of the ships
arrival and readiness (a need which has been all but eradicated with todays communication
technologies). Nevertheless, it is still provided under most printed voyage charter-party forms.
For example, the Gencon 1994 form (clause 6) deals with notice time as follows:

(c) Commencement of laytime (loading and discharging)

Laytime for loading and discharging shall commence at 13:00 hours, if notice of
readiness is given up to and including 12:00 hours, and at 06:00 hours next working day
if notice is given during office hours after 12:00 hours. Notice of readiness at loading
port to be given to the Shippers named in Box 17 or if not named to the Charters or their
agent named in Box 18. Notice of readiness at the discharging port to be given to the
Receivers or, if not known, to the Charterers or their agents named in Box 19.

Although the system providing for notice time is obsolete today, such a clause may be useful in cases
where a ship arrives during a holiday period or during the night, when the charterers have no
practical chance of being able to commence loading or discharging operations. Given the risk in
such cases that the ship will be idle from the time of arrival until the commencement of ordinary
working hours in the relevant port, the parties may agree to insert a clause in the charterparty
stipulating that the risk shall rest with the owners (e.g. Laytime to commence at the beginning of
next ordinary working shift after the vessels arrival.). Of course, it is also possible to assign this
risk to the charterers or to have the risk shared between the two parties by stipulating that only half
such time shall count as laytime.

Readiness includes both physical readiness and legal readiness. Physical readiness means that the
vessel will be clean and ready to take the intended cargo on board or to discharge the cargo that is
already on board. Legal readiness means that the ship will have completed all the formalities
(customs clearance etc.) necessary for the commencement of loading or discharging. However, the
vessel does not necessarily have to be physically and legally ready in all respects in order to be able
to give a valid notice of readiness. The charterers may have to accept that the notice time has
started to run even though some preparations on board remain to be done (for instance, the
uncovering of hatches and rigging) or some formalities remain to be dealt with (for instance, free
pratique as required by the health authorities).

The notice of readiness should be delivered as soon as the ship is ready to commence loading or
discharging. This also means that if the vessel is ordered to wait outside the berth or port, notice
should be delivered. If the charter-party states that the notice must be given within office hours, a
notice given after office hours will be not valid and will not come into force until the next period of
office hours. As office hours are generally understood to mean ordinary office hours in the relevant
port, the charterers cannot postpone the notice time (and thereby the counting of the laytime) by
simply closing their office!

Once the notice time has started to run, it runs, unless otherwise expressly agreed, notwithstanding
any exceptions in the laytime clause. The notice time can thus normally be counted during a Sunday
or holiday even though these days are excluded from laytime under the laytime clause. In many
cases the relevant clause will take this problem into consideration. When loading or discharging
commences before the notice time expires, the owners are, according to English law, not entitled to
count time unless this is agreed in the charter-party (through, for example a clause stating that
Time actually used before commencement of laytime shall count.).

The word lay in the expression lay/can is a short form of laytime not to commence before.
This does not prevent the master from giving a valid notice of readiness before the layday, and
notice time can also run before the layday. Thus if the notice of readiness is given and the notice
time expires before the layday, the counting of laytime normally starts at midnight on the layday.

According to English law the notice of readiness must be given at the first loading port even if this is
not expressly stated in the charter-party. A notice of readiness must only be given at subsequent
loading ports and in the discharging ports only if such has been expressly agreed.

Please refer to reading 1 on the main menu for Lecture 8 for a detailed article on various aspects of the
notice of readiness.

4. Time Allowed
The time allowed for loading and discharging is usually fixed in the charter-party, either by a
number of days or hours or by a rate per day. However, as an alternative to fixing the time allowed,
the parties sometimes choose to use f.a.c. (fast as can) clauses in the charterparty, which stipulate
that vessel to be loaded or discharged as fast as vessel can receive and deliver or similar. Such
clauses often result in problems and disputes when the parties try to determine their precise
meaning in a particular case.
Fixed time: The length of time allowed can be agreed as a fixed number of days (e.g.
Five running days allowed for loading). Another method is to state a daily rate or a rate per day
and hatch e.g. loading at a rate of 500 metric tons per day or loading at rate of 125 metric tons
per day and hatch). Various phrases can be used in connection with rate per day and hatch.
Workable hatch and available hatch indicate that only the hatches actually used shall count and
the total time allowed is usually calculated by dividing the quantity in the largest hatch with the
daily rate per workable or available hatch. This method is less favourable to the owners than the
method when only the word hatch, not connected with the words available or workable, is
used. In the latter case, the total time allowed is calculated by dividing the total quantity loaded on
board a vessel with the product of the number of hatches and the daily rate. In the tanker trades,
laytime is often counted until the disconnection of hoses, or until the deliver of the necessary
documents.

Time not fixed: Clauses such as Liner terms with customary quick dispatch or as fast as the
vessel can receive (deliver) are not beneficial to the owners, as it is invariably difficult to prove that
the charterers have loaded or discharged the ship so slowly that the owners are entitled to
demurrage. From the owners perspective, it is important that the f.a.c. clause be connected with
the capability of the vessel, as in the second of the two cited clauses. If the f.a.c. clause, is not
connected with the capability of the vessel (as in the first clause), the owners have very little chance
of obtaining compensation for delays that are beyond the charterers control (e.g. lack of wagons or
traffic problems ashore). Some charter-parties also contain far-reaching force majeure clauses.

Reversible time: Unless otherwise agreed, the calculations for demurrage / despatch are drawn up
separately for loading and discharging. If more than one loading port or discharging port is
involved, one single calculation is made for the loading ports combined and another calculation is
made for the discharging ports combined. If the parties do decide to combine the calculations, a
charterparty clause using wording such as Time allowed for loading and discharging, eight days
altogether or time allowed, eight days all purposes can be used. Sometimes the words
reversible or average are used, as in Three days for loading and five for discharging, loading and
discharging times to be reversible or three days for loading, five for discharging. Charterers have
the right to average loading and discharging times. In the first case (reversible time) the times are
added to a total time for loading and discharging. What is left from the total time after the loading
will be allowed time for discharging. If all the time is used for loading, the vessel is on demurrage
on arrival at the discharging port and the time will then count immediately (in such cases, a notice
of readiness, although not necessary, should be delivered in order to avoid disputes). In the second
example (average) the loading and discharging calculations are drawn up separately. Thereafter,
the demurrage and despatch times are added or set off (averaged) against each other and finally the
demurrage or despatch amount is calculated on the result.

The result will often be the same whether the reversible time system or the average system is used.
As, however, the rule once on demurrage, always on demurrage (see subsequent pages of lecture
notes)) may cause considerable financial difference between the two systems, it is important to be
aware of the difference. The clauses are often constructed as optional in the charterers choice, as in
Laytime for loading and laytime for discharging to be reversible in charterers option. In such
cases the owners will always lose, as the charterers will calculate both separately for loading and
discharging and also with the reversible times system and thereafter use the system which gives the
best outcome.
5. Time Counting and Exceptions
Laytime will actually begin counting when all the prerequisites for it to start running have been met.
The principal rule is that once laytime has started to run, it runs seven days per week, 24 hours per
day, notwithstanding hindrances to or disruptions of loading or discharging. Although loading and
discharging in some ports take place 24 hours per day seven days a week, it is more common for the
vessel to be loaded or discharged only in one or two shifts during the weekdays with interruption
during nights and holidays. Loading and discharging may also be interrupted if cargo is not
available, if the receiver cannot take delivery as fast as the ship can deliver, if the weather is too bad,
if the loading or discharging equipment breaks down, if strikes or work slowdowns occur, etc.

According to English law, these and other disturbances will interrupt the time counting only if this is
expressly agreed in the charter-party (the most common of such exception clauses being related to
holidays and inclement weather). When the parties agree that time will not count during Sundays
and holidays, the expression Sundays and holidays excluded (SHEX) will normally be used.
Conversely, when Sundays and holidays will count, the expression Sundays and holidays included
(SHINC) is sometimes used. Variations of these expressions are used in countries where Sundays
are not the weekly day of rest. For instance SHEX and SHINC will be FHEX and FHINC in those
Arabian countries where Friday is the weekly day of rest. It is also common that a so-called
Saturday clause is linked to the SHEX clause. In a Saturday clause, time on Saturday and
sometimes also on Friday and Monday is excepted from time counting. The expression unless used,
but only time actually used to count is often used in conjunction with SHEX. The effect is that, if
loading or discharging, for instance, takes place from 08:00to 12:00 and from 13:00 hours until
17:00 hours on a Sunday, these eight hours shall count as laytime. With respect to weather
hindrances, the expressions weather permitting (w.p.) or weather working (w.w.) are used.

Exception clauses are usually linked only to the loading or the discharging work and not to the
transportation of the cargo to or from the vessel. Unless otherwise expressly agreed, the charterers
have a strict liability to furnish the ship with cargo and to remove the cargo from the ship after
discharging. Many other wordings are used in the exception clauses, and those cited above are only
some of the most common.

Many voyage charter-party forms, including the Gencon, have a separate clause dealing with
situations in which the vessel is waiting for a berth. For example, the Gencon 1994 form (part of
clause 6) states the following:

If the loading/discharging berth is not available on the Vessels arrival at or off the
port of loading/discharging, the Vessel shall be entitled to give notice of readiness
within ordinary office hours on arrival there, whether in free pratique or not,
whether customs cleared or not.

Laytime or time on demurrage shall then count as if she were in berth and in all
respects ready for loading/discharging provided that the Master warrants that she
is in fact ready in all respects.

Time used in moving from the place of waiting to the loading/discharging berth
shall not count as laytime.
This clause is important for the owners as it solves many of the problems that arise when the vessel
cannot get to her berth immediately. Also, fault on the vessels or owners side hindering the
loading or the discharging interrupts the time counting.

Next weeks lecture: demurrage, dispatch, timesheets and laytime calculations

Sources for this lecture:

Shipbroking and Chartering Practice, 6th edition; Lars Gorton, Patrick Hillenius,
Rolf Ihre, Arne Sandevarn; LLP, London (p.234-242)

Laytime, 2nd edition; Michael Brynmor Summerskill; London, Stevens & Sons
Limited

Laytime & Demurrage, 4th edition; John Schofield; London, LLP Professional
Publishing