Despatch money

Despatch money. Despatch money (or simply “Despatch”) is the compensation paid to charterers provided the charterparty contains a stipulation to this effect if the loading or discharging operations are completed within the laytime allowed by the charterparty, that is, before the agreed laytime has expired. In other words, despatch money is the opposite of demurrage. The reason for the compensation is to reimburse charterers, shippers or consignees for any expenses they may have incurred in order to save time to the vessel. Despatch is not payable if the charterparty does not contain a clause providing for its payment.

Sometimes a charterparty may not contain a clause providing for the payment of despatch The GENCON clause dealing with “Demurrage” does not contain a despatch provision. A rider clause has to be insisted on by a charterer. Also, in tanker charterparties, demurrage may be provided for (for example, under the Worldscale system) but not despatch.

The amount of demurrage and despatch is a matter for negotiation before the fixture. In cases where owners expect despatch will have to be paid anyhow, they will try to fix demurrage at the lowest possible figure which will consequently keep the despatch rate down on the Despatch half demurrage (or D1/2D) terms. Some alder charterparties may contain a printed despatch (and demurrage) clause for a fixed rate.

Sometimes despatch money actually means a concealed reduction in the rate of freight, for example, in cases Where despatch is based on a rate of loading or discharge, which is out of proportion to the quantities which the charterers can actually load or discharge with the facilities at their disposal without incurring extra expenses.

If the charterers actually incur expenses in order to arrange for a quicker turn round, it is justified to charge despatch money for working time saved, as obviously it is also in the shipowners’ interest to have their vessels turned around quickly. This applies with even more force in times of high open market rates. The main point is that the guaranteed rate of loading or discharge approximates the normal capacity of the ports in question. If the rates of loading and discharge have been fixed at an unrealistically low level, which in no way corresponds with the normal facilities of the ports, such action can only be regarded as a device to earn an excessive amount of despatch money.

If a clause states that “Despatch shall be payable at half the rate of demurrage for all working time saved in loading and discharging . . .” the use of the word “working” may lead to dispute if one side considers a “working day” to mean a day of 24 hours, but the other (usually the charterer) considers a working day to mean the number of hours customarily worked in a particular port. In this case Sundays and holidays (and probably rainy days) would be excluded from the time saved, but the number of hours usually worked per normal weekday may be less than 24, thus resulting in higher despatch being payable. The use of “actual” working time saved would help the charterer, and on the normal meaning of words, this is the course a court would probably take.

Demurrage and despatch calculations are part of laytime calculations and these are shown in Chapter 2. Different examples are used where despatch is stated to be payable for all time saved and for working time or laytime saved. The differences in amounts can be seen. Moreover, the time saved can be sometimes greater than the laytime allowed, depending on the terms of the charterparty. This would be particularly true if the ship was to load or discharge cargo at more than one port and the total laytime was much greater than the actual time used in one (or more than one) of the ports.

If an event occurs which is excepted from laytime, and if the cargo handling is completed before the event takes place; despatch would still be due. This would be the case, for example, if a strike clause, such as in the CENTROCON or GENCON charterparties provided that despatch is payable for all time saved in loading including Sundays and holidays saved.

The question whether shipowners are interested in speeding up loading and discharging by all means possible, e.g., by working overtime at their expense, although this will imply a substantial bill for despatch money, or whether they are quite satisfied when charterers are using full laytime, allowed under the charterparty or even delay the vessel’s despatch, thus paying demurrage, entirely depends on the state of the freight market, assuming, of course, that the subsequent employment on the next charter is not jeopardised by extraordinary delay. Assuming for the sake of argument, that a vessel is likely to earn a profit on the next fixture, it is evident that a shipowner will gladly pay despatch money for every day saved in loading or discharging, unless this would imply that the vessel will then arrive too early for her next employment (as a rule, the laycan will be fixed with a sufficient margin). However, if the open market rates have declined to such a low level that the daily running costs are barely covered, the owner will be satisfied when his ship is “on demurrage”, at more than the running costs, producing a profit, which cannot be made by normal trading.


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Despatch days

Despatch-All laytime saved (LTS)