GRAINCON

Overview

GRAINCON is a standard grain voyage charter party. It is accompanied by its own bill of lading, the GRAINCONBILL 2016. The latest edition of this contract is GRAINCON, issued in 2003.

Copyright in GRAINCON is held by BIMCO.

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Explanatory notes

The following is a brief set of notes describing some of the thinking and underlying principles behind the standard provisions. The descriptions are given to provide assistance to owners, brokers and others interested in the practical use of this charter party.

 


 

Preamble

The Preamble is straightforward and sets out who the parties to the contract are as well as containing a simple vessel description. Throughout the charter party all measurements use the metric system, including vessel’s deadweight, grain cubic capacity and cargo quantity.

When completing the preamble the owners must indicate when entering their name whether they are the owners or disponent owners of the vessel. The term “disponent owner” is taken to also mean chartered or time chartered owners.

Clause 1 (Loading Port(s))

The vessel must proceed to the loading port with “due despatch”. This term has been used as it offers greater legal certainty over ambiguous phrases such as “convenient speed” often found in older forms.

Lines 15-16 offer users the alternative of stipulating either a range of load ports or named ports. If the ports are named in the charter then the responsibility for establishing that they are “safe ports” for the vessel rests with the owners. Where a range of ports are stated it is the charterers’ responsibility to give owners a “safe port” warranty.

To reflect trade practice the provision contains an option to choose quantity of cargo to be loaded in addition to a full or part cargo to be loaded.

Furthermore, a provision has been incorporated allowing for loading at anchorage. While this is rarely done in practice, in some circumstances it could provide a useful emergency backstop for the charterers. A “safely aground” provision which is customary in, e.g., the South American trades has not been incorporated as it was considered an item which should be negotiated separately between the parties on a case-by-case basis.

Clause 2 (Notice and Loading Port Orders)

The clause stipulates that the charterers must provide the owners with loading port orders. To avoid the risk of litigation a provision has been added stipulating that in the event of failure on the part of the charterers to give such instructions, any time lost and additional bunkers consumed shall be for their account.

The last sentence aims at disclaiming any warranty for the vessel’s “readiness” to the effect that “In all instances the Vessel’s expected date of readiness to load is based on all going well, unforeseen circumstances always excepted”.

Clause 3 (Vessel Inspection)

Vessel inspections in the grain trade are particularly stringent to ensure that the vessel’s cargo compartments are clean, dry and odour free. Clause 3 stipulates that the vessel must be certified by “the relevant Port, State or National Authority and/or Grain Inspection Bureau”. In the event that the vessel fails the inspection and if laytime has already commenced then laytime will be suspended from the time the vessel is found not to be ready until she passes the inspection. Costs of all inspections are for the owners’ account.

Furthermore, the clause makes reference to the special situation under sub-clause 18(b) whereby the master can tender notice of readiness while waiting for berth outside port limits, i.e., before obtaining a certificate of the vessel’s readiness to load.

Clause 4 (Laydays/Cancelling)

Sub-clauses (a) and (b) of this clause are straightforward and requires the parties to enter the time and date before which laytime cannot commence and the cancelling date. It is worth noting that the vessel must arrive and tender a valid notice of readiness before 16.00 hrs. on the stated cancelling date.

Sub-clause (c) is an “interpellation provision” and deserves special attention. The purpose of the interpellation provisions is that the vessel should not have to proceed on a long ballast voyage towards the loading port not knowing whether or not the charterers will accept the vessel once it arrives. The interpellation provisions in sub-clause (c) strikes a balance between the parties in this difficult situation in as much as the owners may avoid setting out on a long ballast voyage to no avail, whereas the charterers are, at the same time, to declare whether or not they wish to cancel the charter party. However, during discussions with grain traders it became apparent that there was an element of reluctance to have an interpellation provision in a standard grain charter. Consequently, by way of a compromise, sub-clause (c) applies a mechanism where-by the wording of the provision does not apply unless expressly indicated by the parties. Although the provision does not apply by default, it is felt that the inclusion of the wording will assist the parties during negotiations to give due consideration to its possible application.

Clause 5 (Destination)

According to this clause the vessel shall proceed to the port(s) ordered by the charterers and the charterers shall ensure that the berth and/or anchorage to which they direct the vessel is safe.

Furthermore, the clause sets out the procedure for the giving and the receiving of discharging port orders for the first or sole discharging port.

If the charterers fail to give discharging port orders for the first or sole discharging port within 48 hours of the master’s request, any time lost and additional bunkers used will be for the charterers’ account. This is in line with the provisions under Clause 2.

Clause 6 (Rotation of Ports)

This clause provides an option whereby the owners and the charterers are able to select which party will decide the rotation of loading and discharging ports respectively. Should there be more than two ports of discharge however, then the rotation must be geographic and the parties are required to state the direction, e.g., North to South or East to West.

Clause 7 (Bills of Lading)

This clause provides that the bill of lading to be used for shipments under the GRAINCON Charter is to be the GRAINCONBILL Bill of Lading. The clause also provides that bills of lading are always to be presented and signed in accordance with Mate’s Receipts and that the owners’ agents can sign bills of lading provided that the owners have issued a written authority for them to do so, and given a copy to the charterers.

Clause 8 (Freight)

This clause is based on freight provisions commonly used in other standard grain forms. It should be noted that freight is to be paid in United States Dollars per metric tons. In keeping with similar freight provisions in other grain charter parties Clause 8 provides a number of options for the charterers to order the vessel to load or discharge at alternative ports against a stated freight rate. Provision is also given to escalate the freight rate for additional loading and/or discharging ports.

Clause 9 (Freight Payment)

Acknowledging the fact that freight can either be fully paid on release of signed bills of lading or paid in part within a certain number of days after signing bills of lading, this clause allows the parties to fill in their preferred option, deleting the alternative.

Clause 10 (Cost of Loading and Discharging)

Reflecting common practice this clause prescribes that the cost of loading and discharging the vessel is to be for the charterers’ account. The only exception is for the cost of trimming over and above spout trimming, which the owners must pay.

Clause 11 (Stevedores at Loading Port(s) and Discharging Port(s))

This clause makes it clear that stevedores including crane drivers and winch men are to be appointed and paid for by the charterers. It is for the parties to decide whether the stevedores are to be the servants of the owners or the charterers. In all cases however, the stevedores are to work under the supervision of the master.

Clause 12 (Cargo Space)

The clause sets out in clear terms that cargo must be loaded in unobstructed holds unless, for the purposes of trim and stability, the owners require cargo to be loaded in wing tanks. It should be noted that any additional cost of stowing in wing tanks in excess of spout trimming is to be for the owners’ account and time used for this purpose will not count as laytime or time on demurrage.

Clause 13 (Overtime)

This clause stipulates which party is responsible for payment of overtime expenses in certain circumstances. The principle is that overtime expenses is to be paid for by the party which has ordered the overtime. Wherever time has been ordered by parties other than the owners and the charterers, such as port authorities or terminal operators the expenses are to be equally shared between the owners and the charterers. Sub-clause (b) deals with time counting during overtime and follows the principle that time will count for overtime ordered by the owners; will not count for overtime ordered by the charterers and; if ordered by another party, such as the port authorities, half time will count.

Clause 14 (Separations)

The parties are offered the choice between two options with respect to separations. The first option stipulates that the risk, expense and time will be for the charterers’ account. Furthermore, the charterers are required to indemnify the owners against the loss of or damage to the cargo resulting from the commingling, admixing or contamination of such cargo caused by the use of cargo separations ordered by the charterers.

The second option prescribes that separations ordered by the owners will be for their risk and account and that any claims due to the commingling, admixing or contamination of the cargo will be the owners’ responsibility.

Clause 15 (Securing)

This clause allocates cost and time for the party responsible for securing the cargo.

Clause 16 (Fumigation)

This is more or less a standard clause which stipulates that fumigation will be for the charterers’ risk and expense. If local authorities so require, the crew shall be accommodated ashore while fumigation takes place, such accommodation to be paid for by the charterers.

Clause 17 (Opening/Closing Hatches)

In case the crew is not permitted by local regulations to open and close hatches, the charterers are to assume responsibility for the task by arranging and paying for shore labour to open and close hatches.

Clause 18 (Time Counting)

This clause regulates time counting in relation to (a) notice of readiness; (b) waiting for berth outside port limits; (c) commencement of laytime and, finally; (d) time counting in subsequent ports.

In sub-clause (a) a new feature has been introduced to make the form more international. Acknowledging that in some parts of the world Saturdays and Sundays have different consequences as regards working hours the term “or local equivalent” has been added in connection with Saturdays and Sundays. The same phraseology is used in the WORLDFOOD 99 Charter Party.

In sub-clauses (a) and (b) the term “waiting place” has been used to broaden the scope of application of the physical area from which notice of readiness can be served, when no berth is vacant at the time of tendering notice. Furthermore, sub-clause (b) refers back to the inspection provision of Clause 3 (Vessel Inspection).

Sub-clause (c) has been drafted to protect the owners from a potential “Happy Day” scenario whereby the vessel is loaded or discharged by the charterers despite the notice of readiness being invalid, the result being laytime not counting. The provision reads: “Regardless of whether a valid notice of readiness has been tendered laytime or time on demurrage shall begin at 0800 on the next day not excepted from laytime following the commencement of loading or discharging of the cargo”. The effect of this wording is that laytime or time on demurrage will start counting at some point after loading or discharging has commenced irrespective of whether a valid notice of readiness has been tendered. The clause offers a balanced approach because laytime or time on demurrage will only start to count if and when the charterers actually begin to work the vessel, despite the absence of a valid notice of readiness.

Clause 19 (Laytime)

This clause offers two alternative methods of calculating laytime; either (a) total laytime or (b) separate laytime. As always users should remember to delete the obsolete alternative.

Sub-clause (b) is divided into two paragraphs dealing with loading rate and discharging rate, respectively. The loading rate provision provides an option for allowing loading either to be calculated based on an agreed average rate of tons per day or within an agreed number of working days.

Furthermore, wording has been inserted in each sub-clause to take into account time used for loading/discharging during SHEX hours.

Sub-clause (c) deals with the counting of laytime on Saturdays or their local equivalent. In sub-clause (d) provision is made for delays to the vessel waiting for a berth due to weather conditions.

Finally, consistent with the changes made to Clause 18, the term “or the local equivalent” has been appended to all references to Saturdays and Sundays in this clause.

Clause 20 (Demurrage/Despatch)

This clause is straightforward and provides for space to be filled in with the demurrage rate and stipulates that the despatch rate will be half the agreed demurrage rate.

Clause 21 (Shifting)

Sub-clause (a) sets out how shifting expenses and time shall be divided in different situations.

Sub-clause (b) stipulates that shifting expenses out of and back to the same berth shall be for the charterers’ account in those circumstances where shifting has been ordered by the charterers or, for instance, by the port authorities. The penultimate sentence of sub-clause (b) clarifies that shifting expenses incurred as a result of any act, neglect, default or omissions on part of the vessel will be borne by the owners.

Clause 22 (Gear and Lights)

The clause contains the provision “Unless caused by stevedores’ negligence” which has been inserted to ascertain that the owners will not absorb time lost in those circumstances where a breakdown of the vessel’s gear has been caused by stevedores acting as servants of the charterers. During the drafting sessions it was discussed whether the cargo gear on board the vessel should be fully described in this paragraph. However, it was concluded that disputes over such issues are usually fairly small and generally quickly and easily settled. Therefore, the paragraph simply stipulates to pro rata the total number of cranes/winches available on board. The third paragraph adds wording to the effect of making the owners responsible for the cost of hiring any shore equipment necessitated by breakdown of the vessel’s own gear.

Clause 23 (Seaworthy Condition)

This clause requires the charterers to meet any expenses involved in ensuring that the vessel is left in a seaworthy condition when moving between berths, anchorages and/or ports for loading or discharging. All time used in putting the vessel into a seaworthy condition is to count as laytime or time on demurrage.

Clause 24 (Draft/Lighterage)

This clause requires the owners to warrant that the vessel’s deepest draft in either salt, brackish or fresh waters will not exceed an agreed depth (a) on completion of loading and (b) at first or sole discharging port.

While the final paragraph may seem superfluous it was felt that the provision served as a helpful guide to some charterers who are not aware of the consequences of naming the loading or discharging port in the charter party.

Clause 25 (Port Costs and/or Taxes)

To reflect common practice in the trade it was decided to incorporate this clause which is found in many modern standard charter parties. However, users should take note of the fact that taxes levied on the freight are for the owners’ account.

Clause 26 (Certificates)

The objective of this clause is to highlight specific certification requirements of the vessel. Any time lost on account of non-compliance with the requirements of this clause will not count as laytime or time on demurrage.

Clause 27 (Agents)

This clause provides an option for the parties to agree who should nominate agents at loading/discharging ports. However, in all circumstances the owners are to appoint the nominated agents and are to pay all customary applicable agency fees.

Clause 28 (Strikes, Stoppages, etc.)

It is important to note that this clause is not the BIMCO Standard Strike Clause. Naturally, BIMCO would have preferred the incorporation of the Standard Strike Clause for the sake of consistency between BIMCO standard charter party forms, however, during the drafting sessions it became apparent that the grain trade felt strongly against the wording of the standard clause. Consequently, it has been decided to draft the clause on the basis of the strike clause found in NORGRAIN 89 with only a few moderations made to streamline the clause. Based on initial industry feedback, it is the impression that this clause is acceptable to the owners as well, as it appears that the owners are in a position to insure themselves against the consequences of this clause.

Clause 29 (Ice)

BIMCO published a revised General Ice Clause for Voyage Charter Parties in 2002 to reflect recent legal and commercial developments. The updated version is now incorporated as standard practice into all new and revised BIMCO voyage charter parties.

The amendments have been made because the existing ice clause was found to be deficient in a number of ways, in particular that the vessel should not be required to follow ice breakers or to force ice. It was also felt that provisions were needed to protect the owners against the risk of ice being experienced on the approach voyage.

The preamble to Clause 29 permits the vessel to follow icebreakers when reasonably required, subject to the owners’ approval and taking into account it’s size, construction and class. There is no obligation for the vessel to force ice.

In sub-clause 29(a)(i), if ice impedes the vessel from arriving at the loading port, the charterers are given three options: (1) nominate an alternative safe and accessible port; (2) agree to reckon laytime as if the port were accessible or; (3) declare that they cancel the charter party. The option must be declared to the owners within 48 running hours, which is the period deemed reasonable to allow the charterers sufficient time to make arrangements either for the cargo to be transferred to or a substitute cargo made available from an alternative port of loading.

Where there is a risk that the vessel may be frozen in at the load port after part of the cargo has been loaded, sub-clause 29(a)(ii) requires the master/owners to notify the charterers that the vessel is leaving for the nearest safe place to await the charterers’ nomination of an alternative safe port. If the charterers fail to nominate a port within the stipulated time the vessel may leave and complete with cargo at another port.

Sub-clause 29(b) provides parallel provisions for the port of discharge.

For further description of the BIMCO General Ice Clause, please see BIMCO Bulletin No. 6/2002, page 25.

Clause 30 (Extra Insurance)

The clause gives the parties the possibility of agreeing a specific maximum amount, but failing such agreement, the extra insurance is limited to the lowest extra premium which would be charged in the London insurance market. Furthermore, the final sentence of the clause makes it a requirement for the charterers to provide evidence of payment of extra insurance premium to the owners to support a deduction from freight.

Clause 31 (P&I Bunker Clause)

This is a standard clause endorsed by the P&I clubs.

Clause 32 (Deviation)

The provisions of this clause are consistent with Article 4 of the Hague-Visby Rules in relation to justifiable deviation.

Clause 33 (Lien and Cesser)

The lien provisions are taken from GENCON 1994 Clause 8 and give the owners a lien on the cargo and other amounts due under the charter party including general average contributions. The second paragraph of the clause states that the charterers’ liability will cease on cargo being shipped provided that they have discharged all their responsibilities under the charter party.

Clause 34 (General Clause Paramount)

This clause takes its wording from BIMCO’s Standard General Clause Paramount, which was issued in October 1997, and which make the Hague Rules or the Hague-Visby Rules as the case may be, also applicable to the charter party. Applying the Hague or Hague-Visby Rules in the charter party means that as far as the owners’ responsibilities and immunities are concerned they, shall be the same under the charter party and the bill of lading.

The General Clause Paramount has been revised on the basis of recognising the Hague-Visby Rules as the principle liability regime covering the particular contract of carriage. The Paramount Clause has the following main components:

  • The Hague-Visby Rules as enacted in the country of shipment shall apply to the contract of carriage. If no such enactment is in place the corresponding legislation of the country of destination shall apply.
  • However, in those trades where the Hague-Visby Rules are not applicable mandatorily or otherwise, the Hague Rules (when compulsorily applicable in the country of shipment or destination) shall apply.
  • In all other trades, i.e. where neither the Hague-Visby Rules nor the Hague Rules apply compulsorily, the terms of the Hague-Visby Rules shall apply.
  • The SDR Protocol 1979 which replaces the old limitation amount of 10,000 gold francs per package or unit, or 30 gold francs per kilo as provided in the Hague-Visby Rules by 666.67 SDR per package or 2 SDR per kilo shall apply to the contract of carriage to the extent possible.

Thus, the first sentence of Clause 34 refers to the Hague-Visby Rules as the governing liability regime providing a clear choice of law as regards which jurisdiction’s Hague-Visby Rules shall apply in trades between two Hague-Visby Rules countries. The wording, irrespective of whether such legislation may only regulate outbound shipments at the very end of this paragraph, is meant to make sure that, in a voyage from a non-Hague-Visby Rules state to a jurisdiction which only applies the Hague-Visby Rules to outward shipments, such Rules will still apply.

The second paragraph includes a fall back provision in line with 3) above effectively providing that in the trades where the Hague-Visby Rules are neither applicable in the country of shipment nor in the country of destination the terms of the Hague-Visby Rules apply. The only exception to this general rule is, however, where the Hague Rules are compulsorily applicable in either the country of shipment or destination, in which case the Hague Rules prevail. Accordingly, due respect has been paid to those states still signatories to the Hague Rules. In the event of clean Hague Rules trades the choice of law provision provides which jurisdiction’s Hague Rules shall apply.

The third paragraph takes care of another of the key components as mentioned under 4) which is that the SDR Protocol 1979 shall also apply in those trades where they are not mandatorily applicable. It is to be realised, however, that those states that are signatories to the Hague-Visby Rules but not the SDR Protocol 1979 may, irrespective of what is provided in this clause, apply the old limitation rules.

The final paragraph expressly exonerates the carrier from all liability for loss or damage to the cargo before loading and after discharge and to deck cargo and live animals. It is realised that this provision may not be upheld in all jurisdictions applying the Hague- or Hague-Visby Rules. Thus, for instance, it will be considered invalid under the Scandinavian maritime codes that contain rules compulsorily applicable when the cargo is in the custody of the carrier in the port, i.e. outside the “tackle-to-tackle” period and for deck cargo and live animals.

Clause 35 (Mutual Exceptions)

This clause bars the parties against raising claims at each other in respect of a number of specific events which cannot be avoided or guarded against.

Clause 36 (Both-to-Blame Collision Clause)

This is a standard clause and although it rarely comes into operation it forms part of almost any standard charter party.

Clause 37 (General Average/New Jason Clause)

This clause differs from the BIMCO Standard General Average Clause. As will be seen, while General Average shall be adjusted in accordance with York-Antwerp Rules 1994 and subsequent amendments, the General Average will take place at a place to be agreed between the parties and there is no default provision. The second part of the clause is identical with the standard New Jason Clause.

Clause 38 (War Risks)

The multitude of different war situations with which the world has been confronted during recent years has shown that some war clauses, notably those found in older charter parties have serious short-comings and do not explicitly cover all the various situations which may arise nowadays as a result of war or warlike operations. The lack of a proper war clause may, therefore, have serious consequences for both parties in case of sudden outbreak of war or when warlike situations may arise.

The GRAINCON charter party incorporates BIMCO’s Standard War Risks Clause for Voyage Chartering - VOYWAR 1993. This clause is found in a number of modern charter parties published by BIMCO during recent years and has time and again stood the test whenever a war situation has arisen, making it necessary to take a quick decision. The clause contemplates the possible action by terrorists and action or intervention by supranational bodies. It also offers a definition of war and warlike operations.

Clause 39 (Address Commission)

This clause is of the normal pattern and provides the charterers with a right to an address commission on freight, deadfreight and demurrage irrespective of whether the vessel is lost or not.

Clause 40 (Brokerage)

This clause is also of the normal pattern with the addition of wording taken from GEN-CON Cl. 15 to protect the broker in case of non-execution of the charter party.

Clause 41 (Notices)

In an attempt to consolidate and rationalise the many references to notices often found in standard charter parties, BIMCO has developed a standard Notices Clause. Sub-clause 41(a) provides that all notices given by either party in compliance with the charter party should be in writing.

Sub-clause 41(b) defines what “in writing” means and provides a non-exclusive list of acceptable effective means of sending notices, such as telex, fax, e-mail and registered or recorded mail.

Clause 42 (Dispute Resolution Clause)

This clause is the latest edition of BIMCO’s standard suite of dispute resolution provisions. The provision incorporates a mediation clause which is designed to function in conjunction with the chosen arbitration option, whether that is English law, London arbitration, U.S. law, New York arbitration, or law and arbitration as agreed. Mediation is a technique that is recognised as offering savings in costs and time over traditional methods of dispute resolution for certain types of disputes. BIMCO’s mediation clause is only triggered once arbitration proceedings have commenced and then runs in parallel with those proceedings, if the parties so choose. This has been done to ensure that one party cannot invoke mediation as a delaying technique.

GRAINCONBILL Bill of Lading

The GRAINCONBILL Bill of Lading is intended for use in connection with any cargo carried under a GRAINCON charter party. By means of a specific reference in the incorporation clause in the Bill of Lading, the War Risks Clause and Dispute Resolution Clause, which form part of GRAINCON, also apply for the purpose of the Bill of Lading. 

(Printed in BIMCO Bulletin No. 3, 2004)

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