Who Pays When the Ship Waits? The Clock Was Agreed in Advance

A ship costs its owner money every day whether it is moving or sitting, and time spent in port loading and unloading is time it cannot earn elsewhere. The charter agreement therefore allocates that risk explicitly, granting the charterer an agreed allowance of time for the operation, counted in days, and charging an agreed daily rate for every day taken beyond it. The allowance is free in the sense that it is already priced into the freight. What the arrangement does is convert an argument about delay into a calculation, which is the whole point of putting a number on it.

The details of counting are where the disputes live:

• •The clock starts when a valid notice of readiness is given
• •The vessel must actually be ready in fact, not merely say so
• •Some days are excluded by agreement, such as Sundays and holidays
• •Weather preventing work usually stops the clock, if the wording says so
• •Once the vessel is on the extra rate, exclusions generally stop applying
• •The reverse payment, for finishing early, is usually half the rate

Shipping arbitration is dominated by these disputes and the reasons are structural. The sums are large, since daily rates for a bulk carrier run to tens of thousands and a delay of a fortnight is a serious amount of money. The wording varies between standard forms and between individual contracts, so precedent is only partly transferable. The events are complicated, involving port congestion, berth availability, weather, customs, cargo condition and the actions of parties who are not party to the contract at all. And the notice of readiness is a particularly fertile source of argument, since a notice given while the vessel is not genuinely ready may be invalid and the clock may then never have started.

The single document that starts the clock has generated more argument than anything else in the field, and the reason is that a great deal of money turns on whether it was valid. A notice must be given by the right person, to the right person, at the agreed place, within the agreed hours, and the vessel must genuinely be ready in every respect, including holds cleaned to the required standard and any inspection passed. A notice given while the vessel is still waiting for a berth may or may not count depending on the wording, and forms differ on exactly this point. An invalid notice does not usually cure itself, so the clock may never have started at all.

The same word and a related idea appear in two other places worth distinguishing. Railways and container terminals charge for equipment retained beyond a free period, which is the identical principle applied to a wagon or a box rather than a vessel, and it is a substantial cost for importers who cannot clear cargo quickly. Separately, economists use the term for a charge on holding money itself, proposed by Silvio Gesell as a way of discouraging hoarding and keeping currency circulating, and applied in a famous local experiment in an Austrian town in 1932 that was shut down by the central bank. The two uses share the underlying notion that holding something idle should cost.

A charter grants a fixed allowance of days for loading and unloading and charges an agreed daily rate beyond it, which converts an argument about delay into a calculation. Disputes concentrate on when the clock started, since a notice of readiness given before the vessel is genuinely ready may be invalid. The same principle charges for containers held too long, and the word also names a charge on holding money.