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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.
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.
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.
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.
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.
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.
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.
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).
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.
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.
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.
Copyright in BARGEHIRE 94 is held by BIMCO.
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