TIME CHARTERER’S TO GIVE DIRECTIONS AS TO THE EMPLOYMENT OF THE

VESSEL vis-à-vis SHIP OWNERS RIGHT

Introduction

Time charterparty is one among the various forms of charterparty. Time charter is defined by a
period of time where the payment is made by way of „hire‟ calculated on a daily basis 1. To be
precise, time charter is a contract of hire and services rather than being a contract of carriage 2.
Under a time charterparty the charterer will have a greater freedom as to the use of the vessel and
to give orders as to the employment of the same. Even though there is no transfer of possession
and ownership of vessel to the charter, the right to make full use of the vessel during the
charterparty period is granted to the charter 3. This means that the charter may give the master
orders relating to the employment of the vessel subject to the trading restrictions under the
charterparty and not as to the navigation of the vessel and employment of the master and the
crew4. Thus in a time charterparty scenario the charterer has the commercial management of the
ship and his profit is basically the difference between the hire paid to the ship owner and the
amount he earns by way of freight 5. Under a charterparty contract the master of the ship is
obliged to carry out the orders of the charterer with respect to the employment of the ship, but
not always obliged to obey their orders immediately 6. But it is to be noted that the charterers
order with respect to the employment of the ship must always be balanced by the terms which
protect the ship owner‟s interest in his ship. If the ship owner suffers any loss as a result of
complying with the orders of the charterer relating to the employment of the ship, ship owner can
always claim indemnity from the charterer7. Even if the indemnity provision is not expressly
mentioned in the charterparty there is always an implied obligation by the charter to indemnify
the ship owners against any loss suffered as a result of master complying with charterers‟ order8.

1
Simon Baughen, Shipping Law, Cvendish Publishing Ltd., 2nd Edn., 2001, at p. 172.
2
Scrutton on Charterparties and Bills of Lading, London Sweet & Maxwell Publications, 21 st Edn., 2008, at p. 311.
3
Whistler International v. Kawasaki Kisen Kaisha Ltd. (The Hill Harmony) [2001] 1 Lloyd‟s Rep. 147.
4
Stephen Girvin, Carriage of Goods by Sea, Oxford University Press, 2 nd Edn., 2011, at p.664, Southampton on
Shipping Law, Informa Publications, 1st Edn., 2008 at p. 69.
5
Caslav Pejovic, The Identity of the Carrier Problem under Time Charters: Diversity Dispute and Unification of
Law, 31 J. Mar. L. & Com. 379.
6
Michale Wilford, Time Charters, LLP Publications, 5th Edn., 2003 at p. 315.
7
Nicholas Hamblen & Susannah Jones, Charterers‟ Orders-To obey or not to obey, 26 Tul. Mar. L. J. 105.
8
The Berge Sund, [1993] 2 Lloyd‟s Rep. 453 (CA).
This paper will mainly focus on the aspect that what all will come under the scope of the term
„employment of the vessel‟ and to what extend can the charterer exercise his right to give
directions as to the employment of the ship without infringing the ship owners primary interest in
it.

Relationship between master and the charterer:

As mentioned earlier, unlike other forms of maritime contracts time charter is a contract for
services. Under a time charter situation the vessel undertakes two tasks simultaneously: the
charter‟s duty to the shipper to carry goods under a carriage contract and the ship owner‟s
obligation to conduct the voyage under the time charter 9. When the charterer presents the bills of
lading the master signs it so that the ship owner contracts with the shipper through the master for
the benefit of the charterer10. From the employment clause under the charterparty it seems that
the master is the servant of the charterer. The actual authority of the master to sign the bills of
lading comes from the ship owner, who is his principal, and not from the charterer. Under the
time charter the duties relating to the carriage of goods are divided among the ship owner and the
charterer with the intention of making profit out of it. In a commercial sense this could be
considered as a joint venture between ship owner and the charterer.11 Although the master is
obliged to follow the charterers‟ orders regarding employment of the ship, it is always the ship
owner who is vicariously liable for any negligence of the master in the execution of those
orders12.

Charters‟ Orders as to the employment of the vessel

The basic rule of time charter is that the master and the crew are employed by the owner and at
the same time they must carry out charters‟ orders as to the employment of the vessel. The term
„employment‟ has been defined in the case of Larrinaga S.S Co.v. The King13 as “employment of
the ship to carry out the purposes for which the charterer wishes to use her”. The charterer‟s right
to give orders as to the employment of the ship is not unlimited or absolute as the master can

9
Caslav Pejovic, The Identity of the Carrier Problem under Time Charters: Diversity Dispute and Unification of
Law, 31 J. Mar. L. & Com. 379.
10
Raoul Colinvaux, Treatise on the law relating to the carriage of goods by sea, 13 th Edn., 1982 at p.707.
11
Supra n. 9.
12
Stephen Girvin, Carriage of Goods by Sea, Oxford University Press, 2 nd Edn., 2011, at p. 670.
13
[1945] A. C 246 (H. L).
always refuse to comply with such orders if it is something affecting the safety or seaworthiness
of the vessel. The master is only obliged to carry out those orders which are legitimate and fall
within the scope of the underlying charterparty. The employment of ship includes those orders
relating to the types of bills of ladings to be used, the selection of agents at various ports, the
type of cargo to be loaded and the ports between which the vessel should trade 14. Thus the ship
owner conducts the voyage pursuant to the employment orders made by the charterer.

On receiving orders from the charterer the master should act reasonably after analyzing the type
of order. Courts have in many instances held that matters of navigation besides the management
of the ship always remain the responsibility of the master being the agent of the ship owner 15. It
is always possible to have an overlap between the employment order and the order relating to the
navigation of the ship. Matters of navigation are completely under the masters‟ jurisdiction and
he is not obliged to comply with such orders by the charterer. A distinction has been made
between the order as to employment and navigation in the case of Larrinagra S.S Co. v. The
King16. In the instant case the court held that the order to sail from one port to another is
considered as an order as to the employment, but the order as to when the vessel was to leave the
port is an order as to how the vessel should act in the course of that employment and the same is
completely a matter of navigation. But many a times it is very difficult to draw a distinction
between these two orders. In the case of The Erechthion17 the court held that the orders of the
harbour master to proceed to an anchorage were orders as to employment and the advice of the
pilot as to precisely where the ship should anchor was a matter of navigation.

In the case of Hill Harmony the charterers ordered the vessel to proceed to the destination port
by the quicker of the two usual routes. But the master took the alternative rout as he experienced
some navigational problem on the other route the previous time. As a result of this the ship was
delayed at the destination port and the charterers claimed for damages. The Court of Appeal held
that the ship owner was not liable to the charterer as the decision as to which route to take was a
matter of navigation and an alternative decision was made by the master considering the safety
of the vessel. But this decision was overruled by the House of Lords stating that the decision as

14
William Tetley, International Maritime and Admiralty Law, International Shipping publications, 2002 at p.156,
Scrutton on Charterparties and Bills of Lading, London Sweet & Maxwell Publications, 20 th Edn., 1996 at p. 367.
15
The Hill Harmony [2001] 1 Lloyd‟s Rep. 147, The Sussex Oak (1950) 83 Lloyd‟s law Rep. 297.
16
Supra n.9.
17
[1987] 2 Lloyd‟s Rep. 180.
to the route to be followed is a matter of employment and not a matter of navigation 18. Thus the
time charterers were successful in recovering the financial risks occurred in terms of loss of time
due to masters‟ non compliance to the route they have specified 19. Since the charterer is paying
for the bunker and if the vessel could be used in such a manner which reduces the bunker
consumption, they are entitled to make such orders. The master is obliged to carry out such
orders so far as it does not directly affect the navigation of the vessel20.

The observations made by Lord Bingham in the case of Hill Harmony are worth mentioning.
Lord Bingham referred employment of the vessel as charterers‟ “key right under the contract”21
and also said that decisions as to the employment include all decisions pertaining to the
commercial use of the vessel but they should not “encroach on matters falling within specified
professional maritime expertise of the master”22. In fact all most all the orders given by the
charter will have something to do with the commercial use of the ship or it‟s earning capacity. It
is always problematic to determine the limit of such orders. In the light of The Hill Harmony
decision it can be said that the charterer could fix the route and he could even give instruction
after the commencement of the voyage 23. The owner wouldn‟t want to risk himself by refusing
the charterers‟ order which might lead to repudiation of the contract and thus ultimately it will be
the charterer who will be navigating the vessel24.

Charterers‟ order which the master is not obliged to obey:

If an order of the charterer is affecting the navigation or management of the ship or something
contrary to the terms of the charter, the master is not obliged to follow such orders. In case if the
master complies with such orders which he should not have under reasonable circumstances, the
owner may lose the right to invoke the indemnity provision under the charter. 25 Thus we can see
that the right of charterer to make orders is not unlimited and is subject to the safety of the
vessel, master‟s interest in the vessel and provisions under the charter. In certain special

18
The Hill Harmony [2001] 1 Lloyd‟s Rep. 147
19
Supra n.1, at p. 177.
20
Nicholas Hamblen & Susannah Jones, Charterers‟ Orders-To obey or not to obey, 26 Tul. Mar. L. J. 105.
21
The Hill Harmony [2001] 1 Lloyd‟s Rep. 147 at p. 643.
22
Ibid
23
Angela Maxweell, “Employment” from calm waters to war zones: The unique nature of time charters and the time
charterer‟s right to exploit the full earning power of the vessel, 79 Tul. L. Rev. 1505.
24
Nicholas Hamblen & Susannah Jones, Charterers‟ Orders-To obey or not to obey, 26 Tul. Mar. L. J. 105.
25
Michale Wilford, Time Charters, LLP Publications, 5th Edn., 2003 at p. 320, Supra n. 22.
circumstances it will be quiet unreasonable for the master to comply without further enquiry. In
the case of The Houda26 the court held that the right of the master to delay for a reasonable time
should be determined in each case as to how a person of normal prudence would have acted in
those circumstances. The primary obligation on the charterers is to order the vessels only to ports
which, at the time when their order is given, are prospectively safe. A port is considered to be
safe when a particular ship can reach it, use it and return from it without being exposed to danger
in a relevant period of time 27. At the time when the order is given by the charterer the port should
be prospectively safe and if it becomes unsafe after the commencement of the voyage the
charterer is duty bound to reverse his order and send the vessel to a nearest safe port. This test
regarding the safe port obligation was laid down in the case of Kodros Shipping Corp. v.
Empresa Cubana de Fletes28. If there is no express term in the charter dealing with the matters of
safety, the master is under no obligation to comply with those orders which endanger the ship,
cargo or crew. It implies that the orders given by the master should be “within the limits of
obviously grave danger”29. In certain situations if the master and the owner, due to war or
aggression, consider a port as unsafe they are entitled under the charter war risk clause to refuse
such orders, and the charterer can make new orders.

In the case of Pearl Carriers Inc. v. Japan Line Ltd. 30 there was a due diligence clause under
clause 3 of the Shelltime 3 charter. The charterer ordered the vessel to proceed to Kuwait during
the Iran-Iraq war when Iran was using Kuwait terminals. In masters opinion it was dangerous to
proceed to Kuwait but was persuaded by the owner and the charterer to proceed to Kuwait for a
US$ 36000 war risk bonus. The vessel was damaged and the crew members were injured by
missiles from Iranian plane. The court in this case held that the charterers were liable to
indemnify the losses as there was a breach of obligation to exercise due diligence under clause 3
of the charter31. This implies that the charterer should comply with terms and conditions of the
charterparty while making such orders.

26
[1994] 2 Lloyd‟s Rep. 541.
27
The Eastern City, [1958] 2 Lloyd‟s Rep. 127.
28
The Eva No.2, [1982] 2 Lloyd‟s Rep. 307.
29
Portsmouth S. S. Co. v. Liverpool & Glasgow Salvage Association, [1929] 34 Lloyd‟s List L. Rep. 461.
30
The Chemical Venture, [1993] 1 Lloyd‟s Rep. 508.
31
Ibid.
The charterer has an obligation to redeliver the ship within an agreed range of time. The
redelivery at the right place at the agreed time brings an end to charterer‟s obligation to pay
hire32. If the ship is redelivered outside the agreed redelivery period the ship owner can claim
from the charterer the full charterparty hire for the shortest route that would take the ship from
the actual redelivery port to the agreed redelivery range, less the sum the ship could reasonably
be expected to earn in that period33. This being the case, the master may refuse to obey an order,
which if performed, will not enable the redelivery of vessel in time 34. Such orders are usually
termed as illegitimate last voyages. Thus there is no obligation on the part of the master to
comply with such orders which in turn helps in protecting the owner‟s interest in the ship.

It is a breach of the contract for the charterers to ship goods excluded by the charter and the
master may refuse an order to load such cargo. Goods will not amount to lawful merchandise if
their loading amounts to a breach of the local law or if they cannot be lawfully discharged at the
nominated discharge port. They should also be lawful under the law of the ship‟s flag and the
governing law of the charter35. The shipment of excluded cargo might also entitle the owners to
treat the charter contract as discharged 36. If such a shipment of cargo is made with the knowledge
of the master or the crew, the owner is not entitled to discharge the contract nor can he claim
indemnity for damage occurred due to the dangerous cargo37. The master of the ship chartered on
the New York Produce form must normally sign bills of lading as presented to them by the
charterers or their agents. But there are certain circumstances in which the master may refuse to
sign bills of lading up on charterers‟ instruction. When the bills of lading contain a material
misrepresentation the master has the right to disobey the charterer‟s order and not to sign the
bills of lading. It is the duty of the master to inspect the cargo and ensure that the bills of lading
reflect the apparent condition of the shipment. Signing bills of lading containing material
misrepresentations will be something contrary to the purpose of the time charters which is to
enable the time charter to use the ship during the period of the charters for commercial purposes
in the manner they think fit 38. It was a common ground between the parties that if the bills of

32
Stephen Girvin, Carriage of Goods by Sea, Oxford University Press, 2 nd Edn., 2011, at p. 685.
33
Malaysian International Shipping Corp. v. Embresa Cubana de Fletes, [1981] 2 Lloyd‟s Rep.518.
34
Nicholas Hamblen & Susannah Jones, Charterers‟ Orders-To obey or not to obey, 26 Tul. Mar. L. J. 105.
35
Michale Wilford, Time Charters, LLP Publications, 5th Edn., 2003 at p. 177.
36
The Evgenia Chandris, [1951] 1 K. B. 240.
37
Supra n. 34.
38
The Nanfiri, [1979] 1 Lloyd‟s Rep. 201.
lading impose more onerous obligation on the owner than those which are stipulated in the
charter, “the owners are entitled to the benefit of an implied indemnity” 39.

Another aspect where the master encounters with charterers‟ order is with regard to the delivery
of goods. The general rule followed under carriage of goods by sea is the presentation rule. It has
been a well settled principle that “the ship owner who delivers goods without production of the
bills of lading does so at his peril”40. In such a situation the time charterer cannot give orders to
the master to deliver the cargo to another person who is not entitled to receive it. Complying with
the order of the charterer if the master delivers the cargo then both the master and the owner shall
be liable for tort of conversion as well as for the breach of carriage contract 41.Master has the
right to deny such orders and deliver the cargo to such other person who is entitled to receive it.

Right to an Indemnity by the owners for complying with charterers‟ lawful orders:

The losses suffered by the ship owner as a result of master complying with the employment
orders of the charterer is counter balanced by the implied or express indemnity provisions under
the charterparty. Where the indemnity is expressed or implied, it will not be restricted to certain
aspects, but covers all matters relating to employment of ship by the charterer. 42 The charter
must indemnify the ship owner if the chartered ship is damaged by loading a particular cargo
ordered by the charterer or if the ship is delayed at a port to which it has been ordered by the
charterer.43 It is to be noted that the charterer is obliged to indemnify the ship owner only against
the direct consequences of the master obeying orders regarding employment. It must be shown
by the owner that there is sufficient nexus between the loss and the employment order and the
chain of causation has not been broken44. If there is any intervention from the part of the owner
or the master or any negligent act from the part of the crew member which contributed towards
the loss, the chain of causation is deemed to be broken and the charterer is not obliged to
indemnify45. However, there are other situations also in which the indemnity will not apply. It
will not apply where the order involves commission of manifestly tortuous acts and in case of
39
The Caroline P, [1984] 2 Lloyd‟s Rep. 466.
40
The Houda, [1994] 2 Lloyd‟s Rep. 541.
41
Nicholas Hamblen & Susannah Jones, Charterers‟ Orders-To obey or not to obey, 26 Tul. Mar. L. J. 105.
42
Royal Greek Government v. Minister of Transport, (1949) 83 Ll. L. R. 228, Stephen Girvin, Carriage of Goods
by Sea, Oxford University Press, 2nd Edn., 2011, at p.667.
43
The Erechthion, [1987] 2 Lloyd‟s Rep. 180.
44
The Oropesa [1943] 74 Lloyd‟s List L. Rep. 86.
45
The White Rose [1969] 2 Lloyd‟s Rep. 52.
losses occurred as a consequence of orders as to the navigation of the vessel. Thus it could be
said that the interest of the ship owner is protected to an extent by making the charterer liable for
any damage caused as a consequence of complying with his orders pursuant to the employment
of the vessel.

Conclusion:

As already stated, the right to give directions as to the employment of the vessel is one of the
“key right” of the time charterer. Case laws show that such a power is very wide as they are
entitled under the charterparty to use the ship for any commercial purpose. All those lawful
orders as to the employment of the ship should be strictly obeyed by the master without undue
delay. In a charterparty situation the interest of the ship owners are also at stake. Charterparty
itself has certain checks and balances on the employment of the vessel by incorporating clauses
such as trade limits, lawful merchandise, safe port obligation etc. Case laws have time and again
ruled that the master can disobey or delay the orders if he has reasonable grounds for believing
that such an order is ambiguous, affects the navigation or safety, or if it is something contrary to
the charter. The strict obligation to obey charterers‟ lawful orders is counter balanced by an
implied or express obligation to indemnify owners against losses. It also implies that the more
the charterers right to give directions as to employment of the vessel, the more the owners right
of indemnity. Thus both the rights are balanced and go hand in hand.

Pranoy K. Kottaram

Advocate and Legal Consultant

 BIBLIOGRAPHY

1. Simon Baughen, Shipping Law, Cvendish Publishing Ltd., 2 nd Edn., 2001.

2. Scrutton on Charterparties and Bills of Lading, London Sweet & Maxwell Publications,
21st Edn., 2008.
3. Stephen Girvin, Carriage of Goods by Sea, Oxford University Press, 2 nd Edn., 2011.
4. Southampton on Shipping Law, Informa Publications, 1 st Edn., 2008.
5. Caslav Pejovic, The Identity of the Carrier Problem under Time Charters: Diversity
Dispute and Unification of Law, 31 J. Mar. L. & Com. 379.
6. Michale Wilford, Time Charters, LLP Publications, 5 th Edn., 2003.
7. Nicholas Hamblen & Susannah Jones, Charterers‟ Orders-To obey or not to obey, 26 Tul.
Mar. L. J. 105.
8. Raoul Colinvaux, Treatise on the law relating to the carriage of goods by sea, 13 th Edn.,
1982.
9. William Tetley, International Maritime and Admiralty Law, International Shipping
publications, 2002.
10. Scrutton on Charterparties and Bills of Lading, London Sweet & Maxwell Publications,
20th Edn., 1996.
11. Angela Maxweell, “Employment” from calm waters to war zones: The unique nature of
time charters and the time charterer‟s right to exploit the full earning power of the vessel,
79 Tul. L. Rev. 1505.