UK: Commencement of laytime: common pitfalls and errors

Determining when laytime commences is essential for both owners and charterers. Both need to be aware when laytime starts so that any demurrage claim can be accurately evaluated. It is therefore important that both owners and charterers are able to effectively analyse the terms of the charterparty which deal with the conditions which need to be satisfied before the laytime clock starts running.

In this article, we will review the main conditions that are generally required to be satisfied and indicate some of the common pitfalls and errors which can arise. As the first article in this series discusses, there can be a number of terms which will deal with laytime and demurrage issues throughout the entirety of the charterparty. The importance of carefully reviewing the charterparty when a laytime and demurrage issue arises cannot be overstated.

In general there are three main conditions which need to be met under most charterparties before laytime can commence. These concern the arrival and readiness of the vessel and the tender of the Notice of Readiness ("NOR"). We will consider these in turn.

Arrival

Subject to the express terms of the charterparty, once the vessel has arrived at the agreed destination, it will be an 'arrived ship' for the purposes of calculating when the laytime should start to run. The agreed destination will vary depending on whether the charterparty is a port or a berth charterparty and whether there are additional clauses such as the WIPON ("Whether in Port or Not") or WIBON ("Whether in Berth or Not") amendments which alter the physical place that the vessel needs to reach.

Some tanker charterparties, particularly clause 9 of the ASBATANKVOY form of Charter, will contain an additional promise from the Charterers that the place nominated will be "reachable on arrival". While breach of that promise will not alter the commencement of laytime, it may provide Owners with a claim for detention for any delay to the vessel prior to it reaching the arrival destination.

For commercial reasons it is often in owners' interests to get the laytime clock started as early as possible after reaching destination. Once laytime is running the charterers are under pressure to get the vessel loaded or discharged within the laytime or face a demurrage claim.

In practice, issues can arise where at a port charterparty destination there is no berth available immediately for the vessel. In such cases, the Master may consider the end of sea passage as denoting arrival but in fact the particular configuration or practice of the port may mean that this is incorrect. In 'The Johanna Oldendorff' the House of Lords held that in such cases a ship can only be said to have arrived when it is at the 'immediate and effective disposition of the charterer'. As we discuss below, in relation to the NOR, the issue is an important one as a premature statement concerning arrival can invalidate the NOR and postpone the time at which laytime can commence.

Readiness

The second requirement for the commencement of laytime is that the vessel must be ready to load or discharge the cargo when the agreed destination is reached and the notice of readiness is given.

Readiness can be defined as the vessel being available for use by the charterers and covers the readiness of the holds, equipment and legal documents.

  1. readiness of the holds – a vessel's holds must be clean and dry and without smell and in every way fitted to carry the cargo loaded. If not, then the vessel will not be ready to receive the cargo and laytime will not commence until such time as it is ready.
  2. readiness of the equipment – any equipment which is relevant to loading or discharging must be ready e.g. cranes, hatches, pumps etc. Although it is sufficient that the relevant equipment can be ready when actually required.
  3. Documentary readiness – all necessary papers must be in order so that the vessel can proceed immediately to the loading/discharging place and start work. Before a vessel can start work there are a number of documentary procedures which are owners responsibility including customs clearance, crew clearance and checks on stability. Different ports will often apply different regulations.

As a rule of thumb (and subject to the terms of the particular charterparty) customs clearance and health clearance for the crew will not generally be needed to be granted before this requirement is satisfied, provided that it is a "mere formality" and the Master has no reason to suspect that either will not be given by the port authorities.

A number of standard form tanker charterparties will, however, expressly provide that laytime will not commence unless customs and/or health clearances are obtained within 6 hours of the giving of the NOR. Such a clause will direct that the Master must take an additional step (such as note protest) before laytime can commence. If the Master is unaware of such a requirement and fails to carry out the terms of the charter then there could be a dramatic reduction in any eventual demurrage claim.

Notice of Readiness

A Notice of Readiness ("NOR") is a statement made by the ship to the charterers or their agents that it has arrived at the agreed destination and is ready to load/discharge the cargo.

Charterparties almost always contain express provisions concerning the NOR, which will in general provide for the NOR to be tendered in writing at each load and discharge port to the charterers or their nominated agents.

If the NOR is tendered but the Vessel is either not arrived or not ready (or in some instances both) then the notice will be invalid. The difficulty here arises because the final trigger for the commencement of laytime in most charterparties is the tender of a valid notice of readiness. Without this, arguably laytime may not commence until the vessel begins to perform cargo operations. This could result in a considerable amount of waiting time being at the owners risk rather than at the charterers.

If there is any doubt about the validity of the first NOR, it is sensible for a Master to serve multiple NOR's without prejudice to the validity of the first NOR.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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