Charter Party Terms and Clauses

What are charter party terms?

Charter party terms are the individual clauses that make up a charter party, the contract under which a shipowner lets a vessel to a charterer to carry cargo. Each term governs one part of the deal: how long the charterer has to load and discharge, what happens when that time is exceeded, what the freight covers, when the vessel must arrive, and who pays for fuel and cargo handling. Taken together they turn a price agreement into a full operating contract.

This page is a reference list. It enumerates the key terms a dry-bulk chartering desk meets in almost every fixture, gives a one-line definition of each, and links out to the dedicated page where that term is explained in full. The clauses are grouped three ways: time and laytime clauses, which govern the schedule and carry the heaviest money risk; cost and freight clauses, which decide what the freight rate buys and how cost moves between the parties; and operational and delivery clauses, which set how the vessel is nominated, when it must arrive, and how cargo work is handled. For the contract that holds all of these clauses together, see the charter party page.

Time and laytime clauses

The time clauses are the spine of a voyage charter. They define how long the charterer is allowed for cargo operations, when that allowance starts, and what is paid when the allowance is overrun or beaten. These clauses carry direct money: every hour saved or lost is priced. The table lists each time clause with a short definition and a link to its full page.

Clause	One-line definition	Full page
Laytime	The time the charterer is allowed for loading and discharging before extra charges start.	Laytime
Notice of readiness	The notice the master tenders to confirm the vessel has arrived and is ready, which starts the laytime clock.	Notice of readiness
Laycan	The arrival window inside which the vessel must be ready, after which the charterer may cancel.	Laycan
Demurrage	The daily rate the charterer pays the owner when laytime is exceeded at the port.	Demurrage
Dispatch	The reward, usually half the demurrage rate, the owner pays the charterer for finishing cargo work before laytime runs out.	Dispatch

These five clauses work as a chain. The notice of readiness starts the laytime clock once the vessel has arrived within the laycan window. Laytime then counts down the allowed hours for loading and discharging. If the charterer beats the clock, dispatch is earned; if the charterer overruns it, demurrage is owed. A desk that understands this chain understands where most fixture money is won or lost, which is why these are the clauses owners and charterers negotiate hardest.

Cost and freight clauses

The cost and freight clauses decide what the freight rate actually buys and where additional cost can land on each party. The headline number on a fixture is the freight rate, but on its own it says nothing about cargo handling or fuel, both of which can move the real cost of a voyage materially. These clauses fill that gap.

Clause	One-line definition	Full page
Freight rate	The price the charterer pays the owner to carry the cargo, quoted per tonne or as a lump sum.	Freight rate
Free In and Out (FIO)	A clause that puts the cost of loading and discharging on the charterer, so the freight covers sea carriage only.	FIO
Bunker clause	The clause that allocates fuel cost and protects the owner against bunker price movements between fixture and voyage.	Bunker clause

The freight rate is the anchor, but the FIO and bunker clauses decide how much of the voyage cost it really covers. Under FIO terms the charterer pays for stevedoring at both ends, so a freight rate quoted FIO is not comparable with one that includes cargo handling. The bunker clause matters because fuel is the largest single cost of running a ship, and on a voyage fixed weeks before it sails the owner needs protection against bunker prices rising in the meantime. Reading the freight rate without these two clauses gives a misleading picture of the deal economics.

Operational and delivery clauses

The operational and delivery clauses govern how the voyage is set up and how cargo work is paced. They sit alongside the time and cost clauses and often feed straight into them: the loading and discharge rate, for example, is the figure used to convert allowed tonnes into allowed laytime hours.

Clause	One-line definition	Full page
Loading and discharge rate	The agreed tonnes per day for cargo operations, used to calculate how much laytime the charterer gets.	Loading and discharge rate
Laycan	The arrival window that sets when the nominated vessel must present and be ready at the load port.	Laycan
Charter party	The overarching contract that contains every clause above and binds owner and charterer.	Charter party

The loading and discharge rate is the operational clause that most directly drives the time clauses. A rate of 10,000 tonnes per day on a 50,000 tonne cargo gives five days of laytime; agree a lower rate and the charterer buys more time but the owner may price that into the freight. Laycan also appears here because it is operational as well as time-related: it tells both parties the dates the vessel must be ready, which is what nomination and port scheduling are built around. The charter party itself is the container for all of these clauses, and any term in this list only has force because the charter party makes it binding.

How the clauses fit together in a voyage

One coal fixture, every clause in sequence

A charterer fixes a Panamax to lift 70,000 tonnes of coal on a voyage charter. The clauses fire in order across the life of the fixture.

The charter party is signed, setting a freight rate of around USD 18 per tonne on FIO terms, so the charterer carries the stevedoring cost at both ports.
A bunker clause is included to protect the owner against fuel cost rising between fixture and sailing.
A laycan window is agreed; the vessel must arrive and be ready inside it, or the charterer can cancel.
On arrival the master tenders notice of readiness, starting the laytime clock.
Laytime is calculated from the agreed loading and discharge rate: 70,000 tonnes at 14,000 tonnes per day gives five days.
The charterer finishes loading and discharging in four days, beating laytime, and earns dispatch. Had it overrun, demurrage would have been owed instead.

The sequence above shows why these are grouped, not read in isolation. The cost clauses are settled at the moment of fixing, the operational clauses set up the arrival and the cargo rate, and the time clauses run during the port stay and decide who pays whom at the end. A clause that looks minor on the page, such as the loading and discharge rate, can determine whether the same port call ends in dispatch earned or demurrage owed. That is the practical reason a chartering desk treats the charter party as a single connected system rather than a list of separate terms.

Scope and what this page does not cover

This page is an index of the core charter party terms in dry bulk, with a one-line definition of each and a link to the full explanation. It groups the clauses into time and laytime, cost and freight, and operational and delivery, and shows how they connect across a voyage. It does not reproduce model clause wording from standard forms such as GENCON, which are published by their respective bodies and must be read in the official text, and it is not legal advice on how any clause will be construed in a specific dispute or jurisdiction. The freight figure in the worked example is representative, not a market quote. For the contract that holds these clauses together see charter party; for the clauses themselves follow the links to laytime, demurrage, dispatch, notice of readiness, laycan, loading and discharge rate, freight rate, FIO and the bunker clause.

Frequently asked questions

What is the difference between charter party terms and a charter party?

The charter party is the contract itself: the agreement between the shipowner and the charterer for the use of a vessel. Charter party terms are the individual clauses inside that contract, such as laytime, demurrage, freight and laycan, that set out each party's rights and obligations. See charter party for the contract as a whole.

Which charter party clauses cause the most disputes?

The time clauses are the most contested, because they carry money directly. Laytime, the notice of readiness that starts the laytime clock, and demurrage together account for most fixture disputes. A defective notice of readiness or a contested laytime calculation can shift tens of thousands of dollars between owner and charterer.

Are laytime and laycan the same thing?

No. Laycan is the window of dates within which the vessel must arrive and be ready to load, after which the charterer may cancel. Laytime is the amount of time the charterer is allowed for loading and discharging once the vessel has arrived and tendered notice. One governs arrival, the other governs cargo operations.

What does FIO mean in a charter party?

FIO stands for Free In and Out. It is a cost clause that puts the cost of loading and discharging the cargo on the charterer rather than the shipowner, so the freight rate covers only the sea carriage. See FIO for how it shifts cargo-handling cost.

How do these clauses relate to the freight rate?

The freight rate prices the carriage, but the surrounding clauses decide what that rate actually covers and where extra cost can arise. FIO removes cargo handling from the rate, the bunker clause handles fuel cost movements, and demurrage adds cost when laytime is exceeded. Read the freight rate alongside these clauses, never in isolation.