Demurrage and Despatch
Demurrage and despatch settle the time a ship spends in port compared with the laytime the charterer was given.
Demurrage
If loading or discharging takes longer than the laytime, the charterer pays the ship operator a daily rate agreed in the charter party, usually pro rata for part of a day. The rate compensates the ship operator for the ship being held.
Despatch
If the charterer finishes earlier than the laytime allows, the charter party may give the charterer a payment for the time saved. It is commonly agreed at half the demurrage rate, but the figure is whatever the parties agree. Some charters have no despatch.
Why the clauses matter
They give the charterer a reason to work the ship quickly and protect the ship operator from long delays. The exact rules, such as which time counts and when time stops, are written in the charter party, so read them before you agree.
How demurrage is worked out
The charter party gives a daily demurrage rate and says when the laytime starts and when it stops. The time used in excess of the laytime is multiplied by the daily rate, often to the hour. For example, if loading takes two days longer than the allowed time, the charterer owes two days of demurrage at the agreed daily rate. Time used for bad weather or other events listed in the charter party may not count.
Claims and time limits
The ship operator sends a demurrage claim with the documents that show the times: the notice of readiness, the statement of facts and the port logs. Charter parties often set a time limit for the claim and for the answer, and a claim sent too late can be lost. Keep the records of every port call. See laytime and notice of readiness.
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Related guides
More in glossary
- Time Charter
- Trip Time Charter
- Contract of Affreightment (COA)
- Time Charter vs Voyage Charter
- Laycan
- Charterer
- Shipowner, ship operator, disponent owner
- Ship broker
- Ship fixing and fixture
- Bulk carrier
- Deadweight tonnage (DWT)
- Bill of lading
- Freight
- Baltic Dry Index
- Lien
- Off-hire
- Bunkers
- Cancelling date
- Ton-mile
- Letter of indemnity
- Ballast voyage
- Lighterage
- Stem
- Subjects
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