The timing is right and one of your vessels is idle, so you contract her and a crew for a U.S. Navy survey project. It’s a 14-day charter at a very good rate. Sure you’re making money, but what is your potential liability?
All too often vessel owners informally charter their vessels without fully understanding the potential for serious liability. Worse still, the charter is often undertaken without a written agreement that defines the owner’s and charterer’s obligations. When a personal injury or property damage claim arises, as they inevitably do, friendly business dealings can turn sour and litigation ensues.
In the context of the old adage about good fences making good neighbors, the written charter agreement is the “fence.” The charter agreement draws a line between the liabilities and responsibilities of the contracting parties and, in doing so, affords a measure of protection. Without a charter agreement, the parties have no clear basis for allocating the risks. In addition, its absence may result in the inability to effectively assert various defenses and/or claims unique to maritime law.
Aside from liability, a charter agreement is beneficial in other ways as well. For instance, a vessel owner can include language ensuring that goods, services and other necessaries procured by the charterer do not give rise to a lien on the vessel. Likewise, a charterer may want to specify under what circumstances payment of hire is suspended, such as when the vessel breaks down.
The amount of insurance each party agrees to carry, warranties as to the vessel’s performance capabilities, and the forum and manner in which disputes will be resolved are just some of the many issues typically addressed in a charter agreement.
Some charter agreements are long and unwieldy looking documents, but they don’t have to be.
An admiralty attorney worth his salt should be able to provide you with a bare bones document which, when the seas turn and the waters shoal, will prove invaluable.
Whether you are an owner or a charterer, being able to tender your proposed charter agreement is a great way to facilitate a negotiation while, at the same time, showing you have a savvy knowledge of commercial marine practices.