Firm Offer(of a cargo or of a ship). A charterparty is a contract. An enforceable contract is formed when there is a definite or “firm’ offer incorporating terms, and the offer is unconditionally accepted by the person to whom it is made. There are other requirements but for chartering purposes, for now, an offer and acceptance are analytical “tools” by which agreement is seen to exist or not. During the negotiations for a fixture offers are part of the negotiation process; an offer by one party, or his shipbroker, can be met by a counter-offer by the other side. A counter-offer is not an acceptance.
The phrase “firm offer” is used (from a professionally ethical point of view, should be used) by the owner’s broker in the negotiation communications to indicate that the ship is being offered to only one possible charterer at a time. The phrase could also be used by a charterer’s broker inviting owners or owners’ brokers to submit firm offers for a particular cargo (“FIRM OFFERS INVITED …”) for which the charterer has already concluded transactions with sellers and/or buyers. If the charterer is “FIRM AND READY TO TRADE”, the shipowner may instruct his broker to communicate a FIRM OFFER immediately, especially when there is a chance of competition from other owners. A FIRM OFFER indicates the shipowner’s commitment to covering the cargo being offered by the charterer and not merely “fishing for business”. If the charterer is interested in the terms offered by the shipowner the negotiations begin. If not, the common message from the charterer or his broker (“charterer’s agent”) is usually:
CHARTERERS DECLINE OWNERS’ OFFER WITHOUT COUNTER. It is usual to include certain main terms in a FIRM OFFER.
For a ship being offered on a dry cargo voyage charter, these are:
Identity and domicile of the shipowner and charterers
Ship’s name and (detailed) description
Cargo quantity and accurate description of nature Loading berths and/or ports
Discharging berths and/or ports Laydays/cancelling dates (“Laycan”)
Loading and discharging rates and conditions (such as “SHEX . . .”)
Freight rates and manner of payment
Costs of loading/discharging/stowing/trimming (e.g. “FIOST”)
Rates of demurrage and despatch, if any
Any special clauses to be incorporated into the charterparty (such as “Both-to-Blame collision clause”)
Commissions Charterparty form preferred (with main amendments)
The details will change with ship types and types of charter. For example, for tankers the main terms can be as above with some changes. For example, for loading and discharging operations, laytime will be “all purposes” instead of a loading and discharging rate in metric tons per hour. Also, the freight rate may not be in “US$ per metric ton” but with reference to the “WORLDS CALE” system or any other internationally recognised freight rate scale.
For a ship being offered for a period or time charter, the place of delivery and redelivery and the relevant dates of delivery and redelivery will take the place of the loading and discharging berths/ports; other main terms can be specified such as bunker details (quantity; type and price) on delivery and redelivery, intended trade and any limits, hire amount and conditions of payment. The other terms are as above for a dry cargo voyage charter.
The FIRM OFFER will usually have a time limit, especially on a good market, to indicate to potential charterers that other business is available for the shipowner. This also helps with the freight rates from the owner’s point of view. The words commencing the FIRM OFFER include this time limit, for example, a FIRM OFFER can run as follows:
FROM OWNERS’ TO CHARTERERS’ BROKERS
(Time and date of transmission of message)
FIRM OFFER FOR REPLY HONG KONG LATEST BY
(Date and Time)
GREENWICH MEAN TIME AS FOLLOWS:
(and the above details follow as appropriate.)