CHARTER PARTIES

GENCON - Clause 7

Demurrage

CLAUSE 7

7. Demurrage	122
Demurrage at the loading and discharging port is payable by the Charterers at	123
the rate stated in Box 20 in the manner stated in Box 20 per day or pro rata for	124
any part of a day. Demurrage shall fall due day by day and shall be payable	125
upon receipt of the Owners' invoice.	126
In the event the demurrage is not paid in accordance with the above, the	127
Owners shall give the Charterers 96 running hours written notice to rectify the	128
failure. If the demurrage is not paid at the expiration of this time limit and if the	129
vessel is in or at the loading port, the Owners are entitled at any time to	130
terminate the Charter Party and claim damages for any losses caused thereby.	131

If the ship needs more time to load or to discharge than foreseen by the laydays, then the ship will be in days of demurrage. The Charterer will have to pay for this a certain compensation to the Ship Owner called demurrage.

The well known expression "Once on demurrage, always on demurrage" means that the excluded time as explained in Paragraph D Excluded Time, is not applicable on the laydays, unless indicated differently in the charter party.

Generally therefore, as soon as the laytime is expired and the ship enters in demurrage, the entire time which follows and that the ship still needs to terminate loading and/or discharging, will be considered as demurrage, 24 hours per day, seven days per week, thus Sundays and holidays and even bad weather included.

Demurrage can however be interrupted in some exceptional cases, e.g. due to a fault of the Ship Owner or of the persons in service of the Ship Owner. In some circumstances, demurrage is only due for those days which would have been laydays if the loading and/or discharging time had not yet expired. Such demurrage days are called "like days".

In the 1976 Revision of the GENCON charter party ten running days and payment day by day were foreseen but these provisions were generally crossed out by the parties.

In the 1994 Revision of the Gencon charter party these references have been deleted.

In certain countries demurrage is limited by law (e.g. in the Scandinavian countries where demurrage is restricted to half of the laytime) but generally the restriction is determined by agreement between the parties.

Damages for detention

When demurrage - which is limited by agreement or by law - is exceeded, the Ship Owner is entitled to a still larger indemnity, which is called "damages for detention". This compensation can be asked on the court but in any case, the burden of proof lies with the Ship Owner, i.e. he must prove that he has suffered a loss.

Instead of a restricted laytime and a compensation for damages for detention, the parties sometimes prefer to include the following clause in the charter party:

"Demurrage for the first ten running days at the rate (e.g. $ 4.000) per day or pro rata for any part of a day, thereafter at the rate (e.g. $ 5.500) per day or pro rata for any part of a day".

Payment of Demurrage

According to the 1976 revision GENCON charter party the demurrage is collected daily (cf. English legislation), usually by the agent. This way, in case of non-payment, the Ship Owner has a guarantee on the payment of the demurrage because, he can exercise his lien on the cargo. In practice the calculation and the payment of the demurrage are done after completion of the loading and/or discharging, with all possible risks. Here we must once again draw your attention on certain problems which can occur in some foreign countries regarding the transfer of currency to the foreign country.

According to the 1994 revision of the GENCON charter party demurrage is also due day by day but payable on receipt of Owners’ invoice.

According to the second paragraph of Clause 7, Demurrage, In the event the demurrage is not paid in accordance with the above, the Owners shall give the Charterers 96 running hours written notice to rectify the failure. If the demurrage is not paid at the expiration of this time limit and if the vessel is in or at the loading port, the Owners are entitled at any time to terminate the Charter Party and claim damages for any losses caused thereby.

It is to be noted, however, that the right to terminate the charter party applies to the loading port only and, for all practical purposes, depends on no cargoes or part cargoes having been loaded and no bill of lading issued transferring the rights to the cargo to a third party (BIMCO’s Comments on the Gencon Charter).

Despatch Money

Despatch money is the reverse of demurrage. Despatch money is a compensation which the Ship Owner must pay to the Charterer when the ship is loaded and/or discharged more rapidly than provided by the laydays that were foreseen. "Despatch" is not as customary as demurrage and if it is indicated in the charter party then it generally amounts to half of the demurrage ($ X demurrage/half despatch).

Despatch money can be calculated in different ways:

"Despatch money for all time saved".

The Charterer is compensated for the entire time which was saved by the Ship Owner, i.e. the consecutive time from the end of loading or discharging to the end of the laytime - all excluded periods not being counted as laytime.

"Despatch money for all working time saved".

Despatch money only applies to the residual laydays, which, in the port, are considered as working days, after the loading and/or discharging of the ship.

"Despatch money for all working time saved at both ends".

With this clause (reversible clause) the laydays in the port of loading can be compensated by the laydays saved in the discharging port. This is disadvantageous for the Ship Owner because the despatch money is less than the demurrage (usually half).

In most charter parties despatch money is no longer found. This is indicated with the words free despatch after the amount of the demurrage (See worked-out GENCON charter party, box 18).

IMPORTANT REMARK

The calculation of the laytime can be influenced by other clauses and circumstances then those provided in the traditional Laytime clauses. Often during negotiations and the stipulation and calculation of the laytime, other clauses have to be taken into account which are in close relation with the "Laytime clauses".

An example of such a clause which can have a drastic influence on the laytime is the "Strike Clause". (See in that relation paragraph General Strike Clause.)

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