Time Charter

Under a time charter the charterer takes the commercial use of a fully crewed and maintained ship for an agreed period, which may be a few months, several years, or a single trip timed from delivery to redelivery — and pays the owner a rate of hire, traditionally per day, for that time. The essential bargain is that the owner continues to provide and run the ship as a working asset, keeping it manned, maintained, insured and in class, while the charterer decides where it trades and what lawful cargoes it carries within the limits set by the contract.

The division of costs follows this split of control. The owner meets the fixed costs of the ship (crew wages, maintenance, stores, insurance and class) out of the hire it receives. The charterer meets the variable, voyage-related costs, most importantly the bunker fuel, together with port charges, canal tolls and cargo-handling expenses, because it is the charterer who chooses the voyages that incur them. This is why a time charter's terms on the ship's guaranteed speed and fuel consumption matter so much: the charterer is paying for the fuel and relies on the vessel performing as described.

A central feature of the time charter is the off-hire clause. If the ship is prevented from working by a cause on the owner's side (a breakdown, a shortage of crew, drydocking for repairs) hire may cease to be payable for the lost time, shifting that risk to the owner. Standard forms such as the NYPE govern most time charters, amended by negotiated clauses on trading limits, safe ports, redelivery condition, and the handling of bunkers on delivery and redelivery. Time chartering lets an operator control tonnage without owning it, and lets an owner secure steady employment for a ship, so it is fundamental to how fleets are built and deployed.