This document provides an overview of Five Stars Chartering Pvt. Ltd., a commercial management and ship broking company that has operated since 2006. It discusses current economic factors impacting the shipping industry, factors influencing shipping investments, typical shipping functions including market knowledge, marketing, negotiating, documentation, and delivery. It also outlines common chartering mistakes and provides explanations of key legal aspects of chartering such as different types of vessel owners, safe port provisions, bills of lading contracts, demurrage and detention calculations, force majeure clauses, and errors in charter parties.

1. FIVE STARS
CHARTERING PVT. LTD.
Charter Parties & Legal Aspects of
Chartering and Avoiding Pitfalls
A CLEVER GENERAL NEVER
GOES TO THE BATTLE IF HE
KNOWS THAT HE IS
NOT GOING TO WIN IT….
A CLEVER GENERAL ONLY
GOES TO THE BATTLE IF HE
KNOWS THAT HE IS
DEFINITELYGOING TO
WIN IT….

2. 2
FIVE STARS CHARTERING PVT. LTD.
Started operations in 2006 and is a commercial management/ship broking company for third party
business. Besides Five Stars Bulk Carriers Ltd. also moves about 5 million tonnes of 3rd party cargo.
We act as third party brokers, consultants and commercial managers.
Have outperformed the market every single year since 2006.
Since 2010 outperformed Panamax market more than 30% as compared to the index.
FIVE STARSFIVE STARS

3. CURRENT ECONOMIC FACTORS
• OLYMPICS IN CHINA.
• GLOBAL INCREASE IN OIL, COAL, STEEL AND CEMENT
CONSUMPTION.
• THESE COMMODITIES CANNOT BE CONTAINERISED.
• SHIP YARDS CAN KEEP PACE WITH INCREASED DEMAND
GROWTH.
• IN 2012 MANY TANKERS & BULKERS WERE ORDERED
HENCE INCREASED SUPPLY OF SUCH TYPES OF VESSELS
IN THE CURRENT MARKET. HENCE SUPPRESSED CHARTER
RATES FOR SUCH VESSELS.
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4. FACTORS INFLUENCING SHIPPING
INVESTMENT
1. SHIPS ARE IN DEMAND FOR THE CARGO THEY CARRY AND
NOT FOR THEMSELVES. HENCE TRADING PATTERN SHOULD
GREATLY INFLUENCE PURCHASE DECISIONS
2. SHIP OWNERS MAKE MONEY THROUGH ASSET PLAY AND
TRADING
3. SHIPPING IS SUBJECT TO VOLATILITY, HENCE SHIP OWNERS
SHOULD HEDGE THEIR RISK THROUGH ONE OF THE
FOLLOWING MECHANISMS.
• LONG TERM PERIOD CHARTERS
• HEDGING THROUGH THE FUTURES AND OPTIONS
MARKET
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5. SHIPPING FUNCTIONS
• a) Market knowledge
• b) Marketing
• c) Negotiating
• d) Contract and documentation,
• e) Delivery.
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6. MARKET KNOWLEDGE
• Every week a large number of ship FIXTURES reported.
• State of the market, prices may be rising, falling or FLAT
• The shipping department is expected to keep track of activity and to
report it to their clients.
• The shipping department may HAVE A TARGET LEVEL TO FIX ship
or cargo
• Principals will certainly be watching trends closely and will
expect his broker to be fully upto date on activity in all the main
sectors.
• The broker must advise his principal about competition however remote.
Information is King.
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7. NEGOTIATING – CLIENTS INTEREST
• The profit margin is not the end of the world a commercial
manager must not lose interest of the client just for the sake
of fixing.
• The charter rate is not the only factor – charter party
terms/clauses also cost or earn money.
• If the client is desperate the pitfalls of entering a risky
business/clause must be well explained to the client and not
just hidden in reams of charter party terminology.
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8. NEGOTIATING – CONCLUSION
• In conclusion on this subject, the broker should ensure that all the
major terms of a fixture are fully covered at the negotiation stage.
Once a negotiation has been concluded, the owners’ broker will
prepare a recapitulation of the agreement that has been reached. This
agreement should translate into a contract form without any major
discussion. If the telex recapitulation of the fixture is
insufficient to be drafted into a contract (by the charterers broker) then
the owners and the charterers will simply find themselves negotiating
again. It is very often too easy to skip over a fairly minor point during a
negotiation only to find that it raises its head once again when the
contract is being drafted. It is fundamental to the broker's role that he
ensures that a telex agreement is what it is meant to be an accurate and
detailed recapitulation of the agreement reached.
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9. DOCUMENTATION – PROCRASTINATION IS
THE THIEF OF TIME……
THIS HAS BEEN DEALT IN DETAIL IN VARIOUS POST FIXTURE SESSIONS.
BUT WHAT WE WOULD ADVISE STRONGLY IS:
• ALWAYS HAVE READY OFFER FORMAT EITHER GENERIC OR
CLIENT SPECIFIC PREPARED WELL IN ADVANCE. THIS ENSURES NO
MISTAKES
• PREPARE C/P IMMEDIATELY ON FIXING IF REQUIRED
• ON FIXING WHETHER REQUIRED OR NOT ENSURE VSLS
CERTIFICATES/OWNERS & CHARTERERS CONTACT DETAILS ARE
EXCHANGED. INCL YOUR COLLEAGUES CONTACT DETAILS.
• DON’T FORGET TO PASS ON PROFORMA LETTER OF INDEMNITY AS
PER OWNERS PNI CLUB WORDINGS TO CHARTERERS
• FILE IS PREPARED WITH EVERYONES CONTACT DETAILS INCL AOH
NO.’S ESP OF LOAD/DISPORT AGENTS/CHARTS/OWNRS/BROKERS.
• ADVISE LAYCAN ON FIXING AND AS PER CP TERMS TO CHARTERER
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10. COMMON CHARTERING MISTAKES
EXPLAINED…
1. OWNER, DESPONENT OWNER, BENEFECIAL OWNER, SHIP MANAGER
2. SAFE PORT, SAFE ANCHORAGE, SAFE BERTH.
3. SEAWORTHINESS EXPRESS WARRANTY
4. HAGUE VISBY RULES AND THEIR IMPLICATION
5. CHARTERER’S DAMAGE CLAIMS
6. STEVEDORE DAMAGE CLAIMS
7. DOCUMENTATION TIME TO COUNT
8. ONCE ON DEMURRAGE ALWAYS ON DEMURRAGE
9. TANKER APPROVALS
10. LETTER OF INDEMNITY
11. LINER DELAY IN DOCUMENTATION
12. CONTAINERS LIMITATION OF LIABILITY
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11. COMMON CHARTERING MISTAKES
EXPLAINED…
13. CARGO AND TRADING EXCLUSIONS
14. PORT CLOSURES AND FORCE MAJEURES
15. ERRORS IN CHARTERPARTIES
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12. WHAT IS THE LEGAL DIFFRENCE
BETWEEN VARIOUS TYPES OF OWNERS
OWNER, DESPONENT OWNER, BENEFECIAL OWNER, SHIP MANAGER
•EACH DIFFERENT TYPE OF OWNER HAS DIFFERENT FUNCTIONS
•MANAGERS RESPONSIBILITY IS IN ACTUAL FACT HIGHER THAN THE
OWNERS
•DESPONENT OWNER CANNOT SHY AWAY FROM HIS RESPONSIBILITY
•BENEFICIAL OWNERS AND FLAG OF CONVENIENCE
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13. WHY IS 1/2 SA + SB IMPORTANT ?
SAFE PORT, SAFE ANCHORAGE, SAFE BERTH.
•TECHNICAL DIFFERENCE BETWEEN BERTH CP AND PORT CP
•IMPORTANCE OF PROPER TENRING OF NOR AT EACH POINT
•WHAT HAPPENS IF THE NOR IS NOT TENDERED PROPERLY
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14. WHERE IS SEAWORTHINESS MENTIONED
IN THE CP?
SEAWORTHINESS AN EXPRESS WARRANTY
1.SEAWORTHINESS WARRANTY IS IMPLIED IN COMMON LAW
2.VESSEL NEEDS TO BE SEAWORTHY. BUT ONLY AT THE
COMMENCEMENT OF THE VOYAGE
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15. WHAT IS A BILL OF LADING CONTRACT ?
HAGUE VISBY RULES AND THEIR IMPLICATIONS
•WHY HAGUE VISBY RULES OR HAMBURG RULES ETC.
•HOW DO THESE RULES LEGALLY IMPLICATE THE CARRIER, OWNER AND
HOLDER
FIVE STARS

16. WHAT HAPPENS IF THE CARRIER DOES
NOT DISCHARGE THE CARGO?
CHARTERER’S DAMAGE CLAIMS
•CAN CHARTERER’S CLAIM FOR DELAYED DELIVERY
•CAN CHARTERER’S CLAIM BE UNLIMITED
FIVE STARS

17. CAN STEVEDORE DAMAGE CLAIMS
AFFECT LAYTIME CALCULATION?
STEVEDORE DAMAGE CLAIMS
•WHO IS RESPONSIBLE
•WHAT IS TO BE CORRECTED
•DOES FREE TIME STOP COUNTING IN SUCH CASES
•CAN STEVEDORE DAMAGE LEAD TO CARGO CLAIMS AND VESSEL
DAMAGE CLAIMS
FIVE STARS

18. WHEN DOES TIME STOP COUNTING
DOCUMENTATION TIME TO COUNT
•WHEN DOES LAYTIME CEASE
•DOES DOCUMENTATION DELAYS COUNT AS LAYTIME IF AN EXPRESS
CLAUSE IS THERE, OR NOT THERE?
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19. WHAT DOES ONCE ON DEMURRAGE
ALWAYS ON DEMURRAGE MEAN?
ONCE ON DEMURRAGE ALWAYS ON DEMURRAGE
•DOES THAT MEAN THAT THERE CAN BE NO EXPRESS CLAUSE
•IF SO HOW SHOULD THE CLAUSE BE WORDED
FIVE STARS

20. IS IT SAFE TO GUARANTEE THAT THE
VESSEL WILL HAVE A PARTICULAR
APPROVAL?
TANKER APPROVALS
•WHAT TYPE OF APPROVALS CAN BE AGREED UPON
•WHY APPROVALS MUST NOT BE GUARANTEED
FIVE STARS

21. WHAT HAPPENS IF AFTER BEING
INDEMNIFIED, THERE IS A CLAIM FROM
SHIPPERS ?
LETTERS OF INDEMNITY
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22. WHAT HAPPENS IF THE LOADING
DOCUMENT OR DISCHARGE DOCUMENTS
ARE NOT IN PLACE FOR A LINER CARGO?
LINER DELAY IN DOCUMENTATION
•WHAT IS THE DIFFERENCE BETWEEN DETENTION AND DEMURRAGE
•WHAT SHOULD OWNERS DO IF THE DOCUMENTS DO NOT COME AT ALL
FIVE STARS

23. WHAT HAPPENS IF THE RECEIVER DOES
NOT SHOW UP?
CONTAINERS LIMITATION OF LIABILITY
•WHAT IS THE RELATIONSHIP BETWEEN OWNERS, DESPONENT OWNERS,
NVOCC IN THE ABOVE CASE, WHO IS RESPONSIBLE?
FIVE STARS

24. WHICH CARGOES MUST YOU AVOID AND
WHICH COUNTRIES MUST YOU AVOID ?
CARGO AND TRADING EXCLUSIONS
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25. WHAT HAPPENS IN A FORCE MAJEURE?
PORT CLOSURES AND FORCE MAJEURES
•HOW DOES THE FORCE MAJEURE CLAUSE WORK
•WHAT HAPPENS IF THE FORCE MAJEURE IS ENFORCED
•WHO CAN DECIDE IF IT REALLY IS A FORCE MAJEURE OR NOT
FIVE STARS

26. WHAT HAPPENS IF THERE IS AN ERROR
IN THE CHARTER PARTY?
ERRORS IN CHARTERPARTIES
•WHAT TAKES PRECEDENCE IN CASE OF ERRORS
•WHAT SHOULD DO THE MASTER DO IN CASE OF A TYPO ERROR OR A
MATERIAL ERROR
•WHAT HAPPENS IF THERE IS AN ERROR IN A BASE CONTRACT
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27. THANK YOU
FIVE STARS