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SUPPLYTIME: An Essential Charter Party Instrument

OSV

By Erik Kravets 2015-02-05 16:19:11

Op-Ed by Erik Kravets

BIMCO's SUPPLYTIME 2005 is a basic building block of offshore services and is used for ships as varied as crew transfer vessels, tugs and modern offshore service vessels (OSVs). The versatility of the contract is, however, in a way a product of its complexity. Perhaps to "break up" the market, BIMCO has recently released more specifically tailored contracts like WINDTIME for crew transfer vessels, PROJECTCON for heavy lift cargo and an updated TOWHIRE 2008.

However, those contracts definitely take a back seat to SUPPLYTIME in terms of their industry reach and the scope and frequency of their practical application. So to get a clear view of SUPPLYTIME, the range of inquiry must go, first, from the multitude of boxes on the face to, second, APPENDIX A for a detailed assessment of the ship's capabilities and statistics to, third, APPENDIX B for the various insurances to be obtained by charterer and owner and then, finally, to the 38 clauses in the rear that govern the material legal aspects.

Not an easy charter party, in other words, to handle in practice.

On the whole, it is fair to say that SUPPLYTIME provides for a reasonable balance of the interests of the owner and charterer. However, given the nature of offshore services, the liability regime will necessarily be shifted slightly in favor of the owner since the charter rate he is presented with for the use of his ship and crew is generally disproportionately small compared to the value of the project (and hence to the potential scope of liability) in which he is involved.

My goal here is to provide a brief overview of the structure of the charter party.

The Famous “Boxes”

So let's begin with the face of the contract, the famous "boxes." It's important to recall that, in the past, such charter parties were written in long-form. That is to say, there were no boxes. Instead, there were blank sections of contract clauses, which had to be filled in with the relevant information. Today, boxes and references (e.g., "...as stated in Box 17...") provide the same functionality but a different aesthetic.

What's important to understand is that the boxes essentially fill in contract clauses. The information placed in the box is later used by the clause that references it, so it's best to think of the boxes as making changes to the operative text of the charter party.

In practice, I've seen "N/A" or "TBA" inserted into these boxes when SUPPLYTIME contracts are negotiated. This is generally an unfortunate choice as "N/A" will, in general, negate the clause (i.e., make it inoperative) while "TBA" has the potential to generate disclosure obligations. Neither of the parties generally wants this result. Rather, they are trying to slog their way through the contract as quickly as possible, typically due to time pressures, but feel uncomfortable leaving certain clauses blank. And this discomfort is perhaps a good thing since it indicates that the parties are - at least in principle - aware that what they are doing harbors a considerable risk of arriving at a suboptimal legal result.

APPENDIX A

APPENDIX A is another section of the charter party where I often find mistakes. Or worse, I often find that APPENDIX A is not even filled out. While in principle I have no objection to data sheets about the chartered vessel being drawn upon to act in place of APPENDIX A, it is important to remember that the text of the charter party treats APPENDIX A as the operative section containing information about the nature and attributes of the vessel. 

Thus the parties ought to make certain that they have validly and unambiguously incorporated the ship’s data sheet into the charter party instead of leaving open questions by, for example, allowing APPENDIX A to continue to exist parallel to the ship’s data sheet and failing to specify which has priority.

I also sometimes encounter acts of shocking legal violence directed at BIMCO charter parties in general, and SUPPLYTIME is no exception. One sort of arrangement I have found is massive numbers of rider clauses appended to the charter party, which deal with points that were often already discussed. These are sometimes struck from the face, sometimes not. I think these rider clauses are used because they are more clearly set out than the charter party and its references to boxes, which actually demands a high level of legal skill to fill out correctly. 

So rider clauses and striking the BIMCO standard language provide a way to generate a text which feels more intuitive and tailored. Working with the BIMCO charter party and making the necessary adjustments takes more effort. But it can also provide more security. When possible, I always encourage that less text be struck and that we try to work within the language of the BIMCO form to ensure that the goals of the parties are adequately addressed.

Another risk that needs to be taken into consideration is that making adjustments and modifications to the BIMCO standard forms, even if done innocently, can lead to problems down the road. Courts do not look favorably upon parties that do not make such modifications clear. So appending rider clauses and deleting the main text, rather than striking it through, can run the risk of fraud. I have seen forms which look essentially like they are from BIMCO, but upon careful comparison with the original BIMCO form it is obvious that some boxes and language on the face of the contract are missing entirely and that the form has been manipulated.

APPENDIX B

APPENDIX B is also an essential part of SUPPLYTIME, especially given the knock-for-knock rule. Essentially, knock for knock is a "shorthand" way to assign insurance risk. APPENDIX B then provides the parties a platform for apportioning this risk and specifying which policies need to be purchased.

As I have been arguing, it is essential that the form be filled out and that rider clauses not be used without unambiguously striking through the language in APPENDIX B that the rider clauses are designed to replace. Great caution must be exercised since otherwise it is possible to create a self-contradicting or unclear contract, which is an open gate to litigation.

In the hope that this has provided some guidance, I refer to the wisdom of the Legend of Zelda. – MarEx 

Erik Kravets is a maritime lawyer based in Cuxhaven, Germany.

Editor’s Note: The opinions expressed herein are the author’s and not necessarily those of The Maritime Executive.  

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.