Trading limits

Trading limits. This expression tends to apply only to time charters. When the Charterer hires the ship for a certain period, he would not normally be restricted in the geographical range within which he can order the ship to proceed except that the ports must be “safe ports”.

Indeed, the shipowner must normally make the vessel available for “worldwide trading”. However, the shipowner could incur loss or damage to the vessel if it is ordered by the time Charterer to a place outside safe limits. Moreover, marine insurers impose limits on the trading areas of insured vessels beyond which the owner would not normally be covered should some loss or damage occur to the vessel.

Therefore the owner can impose a limit or restriction on the time charterer’s freedom of choice to nominate ports. This limit is clearly stated in the charterparty. For example, the New York Produce Exchange form states that the “. . . Charterers agree to hire the said vessel, from the time of delivery, for about . . . within below mentioned trading limits’.. .”. The document continues, ” , to be employed . . . in such lawful trades, between safe port and/or ports in . . . (and then follows a list of countries and regions and-for Canadian East Coast areas-dates during which there are ice-conditions) . . . as the Charterers or their agents shall direct, …”. The ASBATIME farm states this restriction more clearly: “The vessel shall be employed in such lawful trades between safe ports and places within . . . excluding . . . as the Charterers or their agents shall direct . . .” In time charters, the blank spaces after “within” are usually filled in with “Institute Warranty Limits” and also a list of places which the owner considers would be unsafe for his vessel.

During the period of the chatter, despite the “employment clause”, the master may refuse to go outside the trading limits in the charterparty without permission from the owner. The decision to vend the vessel beyond the agreed trading limits depends on further negotiation between the Charterer and the owner and possibly the payment of an amount additional to the hire to cover premiums for additional insurance. In a wartime case in 1943, the master was also relieved from the obligation to sign a bill of lading naming a delivery port outside the trading limits.

If the master obeys the time charterer’s order to a port outside-the agreed-trading limits, perhaps without having read the details in the charterparty, this cannot be considered as a waiver of the restriction by the owner, nor can it prevent the owner from bringing an action against the charterer for breach of the time charter. If the owners agree that the vessel can be sent beyond the trading limits, not only can they require the charterer to reimburse them for additional hull insurance premiums, but also they can negotiate a different rate of hire for the period the ship is outside the limits. In any case, the charterer is still responsible, under his “safe pert” obligation, and his reimbursement of additional insurance premiums does not relieve him of this obligation.

Sometimes the owner himself may breach the trading limits agreed in the time charter and if this results in any loss to the charterer the owner becomes liable. For example, in a case in the U.S.A. (The Universe Explorer, 1985), the ship had been ordered by the owner to South Africa for stores. When the vessel called at Nigeria, the authorities delayed the vessel because of the South African visit. The charterers considered that this had breached the obligation of the owner to make the vessel available for worldwide trading. “Worldwide” included Nigeria. The authorities’ decision against the vessel prevented “trading”. Therefore, during the delay at Nigeria the vessel was off hire. 


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Written by Ship Inspection

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Trade terms