16. Nature and Effect of Charter Party.—
This may be formal or informal, written or verbal, as the parties choose, but careful business men will prefer to have it executed with the same care and detail as is usually given to contracts of so important a nature. The operations under a charter always involve large responsibilities and liabilities upon some one, primarily upon the ship but ultimately upon the parties to the agreement. The adjustment of these by appropriate language necessitates a carefully drawn document and while many printed forms are in general use in various ports they should only be employed when both parties thoroughly understand the import of their provisions. The effect of the agreement may be to create a contract of carriage on the part of the owner or to completely divest him of any control over his ship. Where he merely rents or lets the carrying capacity, in whole or part, but retains possession, command and navigation through his own master and crew, he is the carrier and the charter is a contract of affreightment. Where he transfers the temporary ownership by relinquishing these things to the charterer, so that the latter hires the officers and crew and operates the ship, he is not in the position of a carrier and is freed from obligations on her account, though the ship herself remains responsible.
Charters are of various kinds. A charter party which turns over the full control and operation of the ship to the charterer is called a demise of the ship. This may be for a fixed term, or for a particular voyage. In commercial practice, however, charters for a fixed term, that is to say time charters, seldom amount to a demise of the ship, but are usually mere contracts of affreightment. A charter party for a particular voyage is called a voyage charter. In usage such a charter may amount to a demise or may not, depending on whether or not the full control and operation of the ship is surrendered to the charterer. A charter which amounts to a demise is sometimes termed a bare boat charter. Under a charter which amounts to a demise, the owner will require payment of the charter money or freight in such installments as are agreed, the maintenance of his ship in good, seaworthy condition, protection against maritime liens and the prompt payment of all her expenses, and her return to him in like condition as when taken at the termination of the contract. The charterer will require undisturbed possession of the ship so long as he is not in default and agrees, that in event of default, the owner may cancel and resume possession. Provision should also be made for insurance and stipulated value in event of damage or total loss.