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Explanatory notes

Special observations



Special observations

The BARGEHIRE 94 Charter Party follows the traditional pattern adopted by BIMCO in the development of modem charter parties and other contract forms for various trades, i.e. the box layout system with separate Part I and Part II. All items to be agreed for the particular charter and to be filled in by typewriter have been arranged in boxes in Part I. The boxes contain a brief description of the particular item and a reference to the relevant clauses in the printed body of the charter (Part II). Some of the boxes to be completed in Part I may call for special observations; however, in view of the fact that the details to be written into the boxes should be considered in light of the provisions in the corresponding clauses in Part II, it has been considered appropriate to make these observations together with the comments on the standard clauses in Part II. The main idea of the division of the charter into two parts is to leave the printed text of Part II unaltered. In this context it may be useful to emphasise that a standard contract constitutes an integrated whole and that any changes to some of the printed clauses may destroy the over-all balance of the contract as such, a fact which should not be forgotten when attempting to amend standard clauses in Part II.

The following is a brief description of the standard clauses contained in Part II giving some background explanation to the clauses in order to assist owners and other interested parties in the practical use of the charter party.

Clause l - Definitions

In line with other recent BIMCO standard documents, BARGEHIRE 94 contains a set of definitions.

Clause 2 - Period of Charter Party

Sub-clause (b) provides the Charterers with the right to extend the charter party by up to one-third of the agreed charter period or 45 days, whichever is the lesser. This option must be declared at least 10 days before expected redelivery and in such case the Charterers shall give 10 days' notice of final redelivery.

Clause 3 - Delivery

The port or place of delivery agreed shall be stated in Box 14. Pursuant to this Clause the Owners undertake to deliver the barge described in Boxes 5 to 12 of Part I. It is of major importance for the Charterers' use of the barge, in particular within the offshore industry, that the details of the barge provided by the Owners are accurate. Reference is made to the observations made under Clause 5 (Substitution). This Clause also provides for the condition in which the barge shall be delivered and, finally, that the delivery to the Charterers shall constitute a full performance by the Owners of their obligations under this Clause.

Clause 4 - Mobilisation and/or Demobilisation

According to this Clause, fees for mobilisation and/or demobilisation, if any, shall be stated in Box 16. In this Box details on the currency and method of payment as well as when and where the fee is payable should also be filled in.

Clause 5 - Substitution

It has been found useful to include a substitution provision giving the Owners a right to substitute the barge described in Part I with an equivalent barge suitable for the purpose of the charter in question. The substituting barge shall be of an equivalent size and quality and, evidently, such substitution must not result in any delay and costs for the Charterers. If the Owners wish to exercise this option they shall notify the Charterers thereof no later than 15 days prior to the delivery date. It is intended, and hence provided, that such a substitution shall have no effect on the terms and conditions under the charter, inasmuch as any additional costs associated with preparation of the substituting barge shall be for the Owners' account. In order to strike the right balance in this Clause and because the Charterers most likely will have to change the technical calculations etc. prepared by them, it has been stipulated that the Charterers shall inform the Owners about the approximate level of these additional costs no later than five working days after the Owners have advised them of their intention to substitute the barge. This will also enable the Owners to reconsider the financial implications of the substitution.

Clause 6 - Time for Delivery

It is common practice in the industry for barge bareboat charters to be entered into a long time before the charter period is expected to run and the actual dates known. The parties, therefore, typically agree on an initial charter period (a so-called "delivery window" referred to in sub-clause 6(a) and to be stated in Box 17) with an option for the Charterers to subsequently specify their firm requirements. In order to match the Charterers' requirements for a wide initial period with the Owners' need to ensure that their barge is efficiently utilised, sub-clause 6(b) referred to in Box 18 provides a built-in mechanism for narrowing down the period within which the barge is eventually to be placed at the Charterers' disposal.

An example would be that in April, 1995, the Owners and the Charterers agree on an initial delivery period ("window") from I February 1997, to 30 April 1997 (90 days). These dates should be stated in Box 17 and they constitute the period within which the barge will eventually be placed at the Charterers' disposal. When negotiating the charter terms, Box 18 will also have to be filled in with the delivery period notification schedule, as follows:

Example: The contracting parties may agree that 360 days (i.e. the number of days' notice) prior to 1 February, 1997 (the first date of the initial delivery period specified in Box 17) the Charterers shall narrow down the delivery period to 60 days. The number of days' notice to be stated in Box 18 is then "360 days", and the delivery period also to be stated in this box is "60 days". The second paragraph of sub-clause 6(b) provides that the declared delivery period shall always be within the previous declared delivery period and the number of days' notice shall always be counted from the first day in the declared delivery period. In this example, therefore, and in order to comply with this provision, the Charterers, on 1 February, 1996, narrow down the delivery period to I March to 30 April, 1997. Continuing the example, the parties may also have filled in "180 days" (notice period) and "30 days" (delivery period), respectively, in the next line of the notification schedule in Box 18. This would mean that 180 days prior to 1 March, 1997 (the first day of the previous declared delivery period) the Charterers shall narrow down further the delivery period to 30 days. The Charterers may then declare that the new delivery period is 1 April, 1997 to 30 April, 1997. If, in the next line of the notification schedule, "90 days" and "15 days" have been specified, the Charterers shall, 90 days prior to 1 April, 1997, narrow down the delivery period to 15 days, for instance 15 April to 30 April, 1997. In this example, the last number of days which have been filled in as notice in this Box is "45". The Charterers shall therefore notify the Owners of the exact delivery date 45 days prior to 15 April, 1997.

Clause 7 - Cancelling

Non-delivery of a barge by the Owners, or even a small delay, may have serious consequences for the Charterers, not least when they are engaged in large construction projects in the offshore industry. However, it appears to be common practice in the barge industry to contractually limit the Owners' liability towards the Charterers in the event of non-fulfilment of their obligations to deliver the barge resulting in claims made against the Charterers by third parties.

Therefore, and contrary to what is normally found in BIMCO standard documents, this Clause limits the Owners' liability in the event they do not deliver the barge as agreed.

A distinction has been made between claims for damages caused by late delivery of the barge and, those caused by non-delivery resulting in subsequent cancellation of the charter. Accordingly, sub-clause 7(a) provides that late delivery shall entitle the Charterers to a daily compensation (Box 19) or a maximum lump sum amount (Box 20), as agreed, whichever is the lesser, whereas sub-clause 7(b) provides that in the event of non-delivery of the barge and the charter is cancelled, the Owners shall pay compensation to the Charterers as agreed in Box 20.

Sub-clause 7(c) states that, unless the late delivery is caused by gross negligence or wilful default by the Owners, the compensation referred to in this Clause shall be the Charterers' sole financial remedy for damages arising out of the late delivery. The exception of gross negligence and wilful misconduct has been introduced in order to avoid that the Owners may feel it beneficial to them to pay the penalty and not deliver the Barge through gross negligence or wilful misconduct. On the basis of Clause 7 it should thus be fairly simple to assess the amount of damages to which the Charterers shall be entitled on the grounds of late delivery or non-delivery. It should be noted that the assessment of compensation for claims for late or non-delivery is to be made without regard to any other claims the Charterers may have under the Charter Party.

Sub-clause 7(d) includes the so-called "Interpellation Clause" found in a number of BIMCO standard documents, the idea of which is that the barge shall not have to proceed on a long voyage towards the place of delivery not knowing whether or not the Charterers are going to accept the barge.

Reference is made to the observations made under Clause 20 (Redelivery) regarding late redelivery by the Charterers.

Clause 8 - Trading Limits

According to this Clause, the Charterers undertake not to employ the barge under terms which are not in conformity with the terms of insurance without first having obtained the consent to such employment from the insurers. Even though it is the Charterers who take out the insurance if Clause 16(ii) applies, there may be situations where the Owners have a legitimate interest in being informed about the employment of the barge. Hence, it has been stipulated 4 in sub-clause (a) that the Charterers shall keep the Owners advised of the intended employment of the barge.

Clause 9 - Excluded Cargoes

This Clause specifically excludes the loading or carriage of nuclear fuels and radioactive material or waste, whereas the carriage of stone or similar cargo requires the Owners' consent due to the additional wear and tear or excessive risk of damage such cargo may pose to the barge.

Clause 10 - Surveys

This Clause deals with the usual on-hire survey and off-hire survey to be carried out by a mutually acceptable qualified marine surveyor and, moreover, the allocation of costs and time connected thereto.

Clause 11 - Inventories and Consumable Oil and Stores

This Clause provides for the drawing up of inventories and the taking over of consumable oil and stores at delivery and redelivery.

Clause 12 - Inspection

This Clause gives the Owners a right to inspect or survey the barge throughout the charter period, and it also provides for an equitable allocation of costs in connection herewith. The last paragraph provides an obligation for the Charterers to inform the Owners of incidents occurring to the barge.

Clause 13 - Maintenance and Operation

One of the significant consequences of bareboat chartering is that during the entire charter period the barge is under complete control and at the absolute disposal of the Charterers. Thus, it follows from sub-clause (a) of this Clause that the responsibility for maintenance and operation and all costs and expenses arising therefrom shall rest with the Charterers. Unless the contractual parties have agreed under sub-clause 16(i)(k) that the Owners shall keep the barge with unexpired classification, sub-clause 13(a) provides that it is the Charterers who shall maintain the barge's class as indicated in Box 10. It is important that the date of the last special survey is indicated in Box 11. A breach of the obligation to maintain and repair the barge may entitle the Owners to withdraw the barge if the Charterers fail to effect repairs, etc., within a reasonable time.

Sub-clause 13(a) also takes into consideration that unforeseen requirements for structural changes or new costly equipment may arise under a long-term charter, especially as a result of new international regulations, and the question therefore is which of the contractual parties should bear this potentially heavy burden. On the one hand, it would not be reasonable to place such burdens on the Owners without providing for renegotiation of the hire. On the other hand, such new requirements may place an excessive burden on the Charterers, for instance, if compliance is required shortly before redelivery. The equitable approach adopted provides that if the changes which have become necessary, cost more than 5 per cent of the barge's marine insurance value the charter shall become renegotiated. In case the parties fail to reach agreement, the matter shall be referred to arbitration according to Clause 30 (Law and Arbitration).

Considering that the Charterers are the ones who are in control of the barge and its trading pattern it has been felt that it should be the Charterers' obligation to comply with all requirements and to establish and provide evidence of financial security or responsibility in respect of oil or other pollution damage as is or may be required by international or national legislation. Notwithstanding the optional provisions in Clause 16 (Insurance, Repairs and Classification), in the bareboat chartering of barges it is normal practice that the Owners take out P & I insurance even for long term charter arrangements. This does pose a practical problem inasmuch as it is not common to split the P & I risks so that the Charterers take out the insurance for oil pollution risks whereas the Owners take out cover for cargo and personal injury. An attempt has been made to solve the problem by allowing the Charterers to benefit from the Owners' P & I Club policy which is possible considering that it is usual for the Charterers to be named as Co-assured on the Owners' policy. If, therefore, subclause 16(i) is applicable, i.e. the barge shall be kept insured by the Owners, the Charterers shall have the benefit of the Owners' P & I insurance with regard to providing evidence of financial responsibility for oil pollution and other pollution risks subject, however, to the applicable terms and conditions agreed under the Owners' P & I entry. Any additional premium which may result from the barge's trading pattern shall be for the Charterers' account.

Sub-clauses 13(b) to 13(f) describes in some detail the rights and obligations of the Charterers regarding maintenance and operation under a bareboat charter such as the BARGEHIRE 94. Notably, sub-clause 13(c) gives the Charterers a right to paint the barge in their own colours, install and display their insignia and fly their own house flag, provided that costs incurred in this connection, and by re-painting and re-instalment, shall be borne by the Charterers and, finally, that time used thereby shall count as time on hire.

Clause 14 - Ballast Engineer

This Clause is specific to a barge charter party in as much as it provides for a fully qualified ballast engineer to be used if the barge is to be ballasted, submerged and/or surfaced by the Charterers. The provision should be seen against the background that, under a barge bareboat charter, the Owners have no influence on, nor are they responsible for, the management and the operation of the barge. Therefore, the purpose of this Clause is to ensure that, during such specialised operations which may pose a certain danger to the barge, a qualified ballast engineer is used. The Charterers may not always possess sufficient expertise and experience to conduct the operations mentioned and, above all, the ballast engineer would typically be familiar with that particular barge. Hence the provision that, if requested by the Charterers, the Owners may provide a ballast engineer at the expense of the Charterers.

It is important to note that the ballast engineer is under the supervision of the Charterers and shall be deemed to be a servant of the Charterers. This means that the Charterers shall indemnify and hold the Owners harmless from and against all liabilities arising from the ballast operations.

Clause 15 - Hire

In line with common practice within bareboat chartering, and as a practical measure, it has been decided that the charter hire should be fixed at a lump sum rate per day and that the charter hire falls due and shall be paid monthly in advance on the first day of each month. These points are covered in sub-clauses 15(a) and 15(b) whereas subclause 15(c) sets out how fractional hire should be calculated if the first and last month's hire is less than a full month.

An unconditional obligation to pay hire as and when due must, of course, be linked to a right for the Owners to withdraw the barge if the Charterers are in default of payment.

However, it has been felt that a certain grace period should be granted to the Charterers if, for a bona tide reason, they happen to be behind with payment. Accordingly, 4 sub-clause 15(e) provides for a grace period of 96 running hours. It goes without saying that this grace period is intended to be applied in exceptional situations only and it does not. therefore, provide the Charterers with a permanent contractual grace period which could be invoked in respect of each monthly payment. Moreover, an attempt has been made to make it clear that any default by the Charterers in the payment of hire beyond the grace period shall amount to repudiation of the Charter Party which shall entitle the Owners to withdraw the barge and to claim damages for costs and losses incurred as a consequence of such default.

It has been felt reasonable to allow interest in case of late payments whether the delay is caused by the Charterers' own fault or negligence or by unforseen circumstances. Sub-clause 15(f) leaves it to the contracting parties to negotiate the interest rate to apply and to fill in Box 25, accordingly. If, however, Box 25 has not been filled in, the LIBOR interest rate for the currency stated in Box 25 increased by 2 per cent shall apply. This latter approach has been chosen in order to avoid possible dispute as to the current market rate.

Clause 16 - Insurance, Repairs and Classification

Sub-clause 16(i) In the bareboat chartering of barges, and contrary to what is usually the case as regards bareboat chartering of vessels, it is practice that the Owners arrange and keep the barge insured for marine, war, and protection and indemnity risks. However, it is possible and usual for the barge bareboat Charterers to be Co-assured on the Owners' insurance policies and sub-clause 16(i)(a) accordingly provides for this.

Of course, proper insurance of the barge is considered paramount, and sub-clause 16(i)(b) therefore provides that in the event that any act or negligence by the Charterers vitiates any of the insurances, the Charterers shall pay to the Owners all losses and indemnify the Owners against all claims which would otherwise have been covered by such insurances. Even though the Owners according to this sub-clause shall keep the barge insured, it follows from the basic concept of bareboat chartering that it is the Charterers' responsibility to effect all insured repairs, the Charterers being secured re-imbursement through the Owners' insurers as set out in sub-clause 16(i)(c). In line herewith, it follows from sub-clause 16(i)(d) that the Charterers remain responsible for payment of repairs not covered by the Owners' insurance and/ or exceeding possible franchise or deductibles and that, according to subclause 16(i)(e), all time used for such repairs shall count as time on hire.

In some cases, either of the parties may wish to place additional insurance to cover their interest in the venture. For instance, the Charterers may have an interest in covering themselves against loss of time occasioned by excessive and time-consuming repairs on account of hull damage. Hence sub-clause 16(i)(f). There may, however, be certain problems as to the right of placing such additional insurance, for instance, according to national legislation or because the insurers of the vessel may either refuse or put a certain limit on such additional insurance cover. Whilst subclause 16(i)(f) does not cover the wide range of possibilities and difficulties which may be envisaged, it does remind the parties of the problem and, moreover, prescribes the amount of such additional insurance to be stated in Box 31 and Box 32, respectively.

In line with generally accepted legal principles sub-clauses 16(i)(g) to 16(i)(i) allocate the responsibilities of the Charterers and the Owners in the event the barge becomes an actual, constructive, compromised or agreed total loss.

It is, of course, important to determine and agree in the contract the value of the vessel for the purpose of insurance coverage and such sum as may be agreed between the parties should be stated in Box 30 according to sub-clause 16(i)(j).

Regarding sub-clause 16(i)(k), it has been considered reasonable that when this applies, the Owners shall also keep the barge with unexpired classification in force during the entire charter period (reference is made to the comments made under Clause 13 sub-clause (a)).

In particular, in case of short-term charters it has not been felt appropriate that renewal of class should always fall upon the Charterers.

Sub-clause 16(ii)
It should be stressed that sub-clause 16(ii) is optional and is only to apply if expressly agreed and stated in Box 29, in the event of which sub-clause (l6)(i) shall be considered deleted.

Notwithstanding the observations made under sub-clause 16(i), it has been felt useful to also cover the possibility, which may arise from time to time, in particular regarding long-term barge bareboat charter parties, that the Charterers are responsible for arranging and paying insurance against marine, yar, and protection and indemnity risks. Hence, the main difference between sub-clause 16(i) and 16(ii) is that if the latter applies, the responsibilities just mentioned rest solely with the Charterers. If so, the Charterers at the request of the Owners shall apply to their insurers to include the Owners' nominated principals as co-assured.

According to sub-clauses 16(ii)(c) and 16(ii)(d) the responsibility to effect repairs, including repairs not covered by the insurance, for instance, due to franchise or deductibles applicable under the terms of the insurances, also rests with the Charterers. Consequently, there is no question of the barge becoming off hire, for instance, for time used for repairs and according to sub-clause 16(ii)(e) the time on hire thus runs unabated in such events.

As in sub-clause 16(i), the possibility of placing additional insurance by both parties is also envisaged in sub-clause 16(ii)(t) to the extent such additional insurance is permissible as already explained in regard to sub-clause 16(i) above. Similarily, subclauses 16(ii)(g) to 16(ii)(i) duly reflect the contents of sub-clause 16(i).

Clause 17 - Charterers' Responsibilities

Bareboat chartering, by definition, implies that the Charterers, practically and legally, take over the whole position of the Owners with one important exception, i.e. the ownership, which throughout the charter period remains with the registered Owners. Bearing this in mind there should, in principle, be no doubt that the barge Charterers are responsible for damage suffered by third parties caused by the barge, damage to or by the cargo, and any liabilities arising out of the barge becoming a wreck or obstruction to navigation.

However, for the sake of clarification it has been felt useful to provide for the responsibilities of the Charterers in the above instances, hence this Clause.

Clause 18 - Force Majeure

This Clause contains the usual provisions as regards mutual exemption.

Clause 19 - Consequential Loss

This Clause contains the usual provisions relating to consequential loss.

Clause 20 - Redelivery

According to the first paragraph of this Clause the port or place of redelivery agreed shall be indicated in Box 15. In order to minimise the risk of disputes it has been clearly stressed in which condition the Charterers must redeliver the barge.

The provisions of the second paragraph of this Clause shall be seen in the light of the fact that it is the Charterers who are in control of the barge and the project in question. In addition, the Charterers have a right to extend the charter period according to Clause 2 sub-clause (b) or to shorten it according to Clause 21 (Early Redelivery). Consequently, the Charterers, when negotiating the terms of the charter, should have sufficient options to avoid late redelivery which may burden the Owners heavily, in particular if the next fixture follows immediately after. However, realising the importance of striking a fair balance between the Owners' and the Charterers' rights and obligations, it was decided to make the provisions concerning redelivery reflect the provisions regarding delivery (Clause 7 - Cancelling), however with a slightly different mechanism. Thus, this paragraph provides that late redelivery shall entitle the Owners to the agreed charter rate or to the market rate for the period in question, whichever is the higher, increased by the lump sum penalty (to be stated in Box 20) also applicable at late delivery.

As is the case for the Owners at delivery, it has been found appropriate to avoid situations where the Charterers may find it advantageous not to redeliver the barge in time, however, at the same time ensuring that other claims, i.e. claims not arising out of late redelivery of the barge, are maintained. Accordingly, it has been specified that the compensation provided for in this Clause shall be the Owners' sole financial remedy for damages arising out of late redelivery, unless the late redelivery is caused by the Charterers' negligence or wilful misconduct.

Clause 21 - Early Redelivery

This Clause is self-explanatory.

Clause 22 - Non-Lien and Indemnity

The purpose of this Clause is to prevent the Charterers from financing their operation by offering suppliers a maritime lien on the barge. However, based on experience, notably in the Unites States, this Clause may not prove effective if the supplier does not actually know that the charter contained such a provision. Hence the suggestion to affix a notice to the barge in a conspicuous place.

Clause 23 - Lien

This is the usual lien clause granting the Owners and the Charterers a lien for their respective claims against each other.

Clause 24 - General Average

This is the usual General Average provision found in a number of BIMCO standard documents.

Clause 25 - Assignment and Sub-Demise

The first paragraph of this Clause gives the Charterers a right to subdemise or assign the barge provided that proper consent, which shall not be unreasonably withheld, has been obtained from the Owners in writing.

The second paragraph of this Clause intends to cover contractually the Owners' sale of the barge either prior to delivery or during the performance of the charter, and the effect of such sale of the barge on the charter party commitments. English case law indicates that if the Owners attempt to assign and transfer their obligations without the Charterers' consent, the Owners will usually be considered in repudiatory breach of contract. Thus, this sub-paragraph gives the Owners a right to sell the barge provided the Charterers' consent, which shall not be unreasonably withheld, has been obtained.

Moreover, some jurisdictions may hold the Owners liable if the buyers fail to perform the obligations which have been transferred to them by the Owners in an attempt to avoid becoming in repudiatory breach of contract. Against this background, this paragraph also provides that as from the time the assignment has become effective the Owners shall be relieved from all obligations and liabilities under the charter, provided that the Charterers have been properly informed.

Clause 26 - Bank Guarantee

This Clause, which is self-explanatory, is an optional clause and therefore only applicable if Box 28 is filled in.

Clause 27 - Requisition/Acquisition

This Clause purports that in case the barge is requisitioned for hire, the charter remains in full force for the entire charter period agreed, and any requisition hire or compensation received or receivable by the Owners shall be payable to the Charterers. In case of compulsory requisition or acquisition for title the charter is terminated as of the date of such compulsory requisition/acquisition.

Clause 28 - War

The multitude of war situations with which the world has been confronted during recent years has shown that some war clauses, notably in old charter parties, have serious shortcomings and do not explicitly cover all the various situations which may arise nowadays as a result of war or warlike operations. It has therefore been found appropriate to include an up-to-date and explicit war clause based on the BIMCO Standard CONWARTIME 1993 War Risks Clause, however suitably adapted to the characteristics of barge bareboat chartering.

Clause 29 - Commission

This Clause pays due regard to the interests of the brokers who have been instrumental in making the fixture, providing an indemnity to the brokers in the event of the full hire and/or mobilisation/demobilisation fee not being paid due to breach of charter and similarly in the event of the charter being cancelled.

Clause 30 - Law and Arbitration

In a standard charter party intended for use on a worldwide basis, it has not been considered reasonable to let the charter party be governed by one law system only or to fix only one venue of arbitration which may restrict the use of the charter party in practice. It has therefore b e h found reasonable to include the BIMCO Standard Law and Arbitration Clause as Clause 30 of this charter. The Clause provides for optional law systems and venues of arbitration by leaving it to the contractual parties to make their own choice in each individual case and to fill in Box 35 accordingly. As follows from sub-clause 30(d), if Box 35 is not filled in, sub-clause (a) of this Clause (i.e. English law and arbitration in London) will automatically apply.

Copyright in BARGEHIRE 94 is held by BIMCO.

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