Cargo Operations, Laytime and Demurrage

Types of charter party and the role of laytime

Module objectiveDistinguish the four forms of charter party and recognise the role that laytime takes in each of them.

Before addressing the mechanics of laytime and demurrage, it is necessary to place them within the correct type of charter contract: their relevance changes radically depending on the contractual form chosen by the parties.

Laytime is central to the voyage charter; under a time charter, time is normally governed by hire and off-hire, and the two systems are not equivalent.

Table 1.1 — The role of laytime in different forms of charter party.

Notice of Readiness and the start of laytime

Module objectiveRecognise what makes a Notice of Readiness valid and how its delivery affects the laytime count.

The Notice of Readiness is the notice required by the charter party by which the vessel states that she has arrived at the contractual destination and is ready to load or discharge. To be effective, it must be tendered to the required recipient, at the required place, time and in the required form, while the vessel is physically and legally ready. A valid NOR does not necessarily start laytime at that instant: time begins in accordance with the contractual notice period and commencement formula.

From the Notice of Readiness to the final laytime calculation (indicative diagram).

NOR validity requirements

• The ship must have arrived at the place specified by the charter party (port, anchorage area, berth, depending on the agreed clause).
• The ship must be physically ready to load or discharge in every respect (clean holds, operational cranes, documentation in order).
• The NOR must be delivered according to the manner and timing set out in the contract (often subject to office hours constraints).

Waiting time: turn time

Between delivery of the NOR and the actual start of the laytime count, a waiting period (turn time) may elapse, whose duration depends on the contractual clauses: some formulas provide that laytime begins a fixed number of hours after the NOR, regardless of when the ship actually manages to berth.

The arrived ship: who pays for congestion

The previous module says the ship must have «arrived at the place provided for in the charter party». That apparently unremarkable phrase is the most expensive one in the contract: how it is written decides who pays for the days spent waiting in the roads when the port is congested — and in a crowded port those days are worth more than the rest of the negotiation put together.

Where the vessel has «arrived»: port charter against berth charter, and the three limits of the WIBON clause.

Port charter and berth charter: two contracts that look alike

Table 3.1 — The distinction that decides who bears the congestion risk.

When a ship has «arrived»: the Reid test

The criterion comes from The Johanna Oldendorff [1974] AC 479, House of Lords. Lord Reid:

Before a ship can be said to have arrived at a port she must, if she cannot proceed immediately to a berth, have reached a position within the port where she is at the immediate and effective disposition of the charterer.

To that Lord Reid added a presumption — rebuttable, but practical: a ship lying at the usual waiting place within the port is presumed to be at the charterer's immediate and effective disposition. It is why, in most cases, it is enough to look at where the ship is waiting.

The geographical limit was set by The Maratha Envoy [1978] AC 1: the waiting place must lie within the legal, fiscal or administrative limits of the port. The ship lying at the Weser lightship had not arrived at Brake, despite twenty-three days of waiting. On what those limits are, The Arundel Castle [2017] EWHC 116 (Comm) holds that where national or local law defines them they control, and otherwise the area over which the port authority exercises its powers.

What WIBON does, and what it does not

The Whether In Berth Or Not clause exists to shift the risk: it allows the NOR to be tendered from the usual waiting place when the designated berth is unavailable, in effect turning a berth charter into a port charter for the sole purpose of starting laytime. But it is a narrow clause, and the three things it does not do are where claims are lost.

Table 3.2 — The three limits of the WIBON clause.

When the NOR is invalid

This is where most laytime litigation comes from, and the English answer has moved twice.

The Mexico 1 [1990] 1 Lloyd's Rep 507 (Court of Appeal) sets the hard principle: a NOR whose statements were untrue when given is a nullity. English law rejects the inchoate notice theory: the NOR does not «spring into life» when the ship later becomes ready. A fresh, valid NOR is required.

The most common laytime clauses

Module objectiveRecognise how the clauses negotiated in the charter party determine the laytime count and check which definitions the contract incorporates.

How laytime is counted depends largely on the specific clauses negotiated in the charter party. Understanding the most widespread formulas is essential to anticipate the practical impact of every event on the count.

The most common laytime clauses in the charter party (indicative diagram; the exact text must always be checked in the contract).

The authoritative definitions: the Laytime Definitions 2013

Before discussing clauses it helps to know a shared vocabulary exists. The Laytime Definitions for Charter Parties 2013, published jointly by BIMCO, the CMI, FONASBA and the Baltic Exchange, are the reference in this field: they replaced the Voylayrules 1993, which in turn followed the 1980 Definitions.

Table 4.1 — Four key definitions from the Laytime Definitions 2013.

Abbreviations should not be read in isolation. A period may be excluded because it falls on a SHEX Sunday and, separately, be affected by a weather qualification. Each qualification must be applied in the order and with the effect provided by the charter party.

Why the choice of clause changes everything

A SHINC clause (Sundays and Holidays Included) causes the laytime count to continue even on holidays, while a SHEX clause (Sundays and Holidays Excluded) excludes them: the practical difference between the two, on an operation spanning a weekend, can be worth one or two days of laytime, with a direct impact on demurrage or despatch.

Exceptions to laytime: what counts and what does not

Module objectiveDistinguish which events interrupt the laytime count and which let it keep running, as defined by the charter party.

Not all time spent in port counts for laytime purposes: the charter party defines which events interrupt the count (exceptions) and which continue to let it run.

What stops the laytime count and what does not, and how the rule reverses once laytime expires.

The most delicate areas

Table 5.1 — Typical situations and their interpretive complexity.

The supercargo's role

Module objectiveDistinguish the supercargo's role from the Master's and recognise the activities they carry out during loading and discharging operations.

The supercargo is the figure, often sent by the charterer, who follows loading and discharging operations on behalf of commercial interests, in a role distinct from but complementary to that of the Master and crew.

What a supercargo actually does

• Supervises loading/discharging operations to verify compliance with commercial instructions.
• Verifies the quantity and quality of the cargo, often in coordination with independent surveyors.
• Documents any delays or inefficiencies attributable to the terminal, useful in the event of a demurrage dispute.
• Acts as a communication channel between ship, terminal and the charterer's office during operations.

The relationship with the Master

The supercargo has no authority over the ship: operational and safety responsibility remains entirely with the Master. An effective working relationship is based on clarity of respective roles and timely communication of respective observations.

The Statement of Facts

The Statement of Facts (SOF) is the document that chronologically records every relevant event during the ship's stay in port: arrival, NOR, start and end of operations, interruptions, causes of delays. It is the factual basis on which the laytime calculation, and in the event of disagreement the entire dispute, is built.

What a good SOF must contain

• The exact date and time of every event, indicating the source (deck log, agent's communication, direct observation).
• Specific, not generic, causes for every interruption (not «bad weather» but «heavy rain from 14:20 to 16:45, operations suspended to protect the cargo»).
• Signature or countersignature of the parties present (agent, terminal, supercargo), with an explicit note if a party refuses to sign or signs with reservations.
• Consistency with other onboard documents (deck log, cargo operations record).

Demurrage and despatch: the economic mechanics

Module objectiveDistinguish demurrage from despatch, recognise when each is payable, and choose between the two despatch formulas of the Laytime Definitions 2013.

Demurrage and despatch have opposite economic effects, but they are not symmetrical remedies. Demurrage is normally the agreed amount payable to the owner for delay after laytime has expired, where the delay is not for the owner’s account. Despatch is payable only if the charter party provides for it and rewards time saved under the agreed formula.

The deviation from the allowed laytime and the two despatch formulas of the Laytime Definitions 2013 (illustrative values).

Table 8.1 — Definitions of demurrage and despatch.

The half: a convention, not a rule

DHD — despatch half demurrage is a common commercial formula, not a default rule: the rate and calculation basis apply only if provided by the charter party.

Damages for detention are not the automatic consequence of the absence of a demurrage clause. They may arise from culpable delay falling outside the period or remedy covered by laytime and demurrage, but the claimant must identify the breached obligation, causation and recoverable loss under the contract and applicable law. Despatch, by contrast, is payable only where agreed.

«All time saved» or «working time saved»: the same ship, two different invoices

Despatch is paid on time saved, but «time saved» has two distinct contractual meanings, both defined in the Laytime Definitions 2013 — and the choice between them changes the invoice substantially.

Table 8.2 — The two despatch formulas of the Laytime Definitions 2013.

The practical calculation of laytime

The laytime calculation, while conceptually simple, requires meticulous attention to contractual and chronological detail. An error in the calculation can cost, or forfeit, significant sums.

The steps of the calculation

• Determine the laytime allowed by the charter party (often expressed in hours or days per tonne of cargo, or as a fixed value).
• Establish the exact moment the count begins, based on the NOR clause and the applicable turn time.
• Add up the time actually elapsed, excluding interruptions recognised as exceptions under the contract.
• Compare the time used with the allowed laytime: the difference, in excess or shortfall, determines demurrage or despatch.
• Apply the contractual rate to the resulting number of days/hours.

A simplified example (illustrative values)

Table 9.1 — Simplified example of demurrage calculation (purely illustrative values).

Reversible and averaging: two ways of treating loading and discharging together

Where the charter party fixes separate laytime for loading and for discharging, there are two mechanisms for linking them — and they are not the same thing, though they are often used interchangeably. Both are defined in the Laytime Definitions 2013.

Table 9.2 — Reversible laytime and averaging compared.

How a good demurrage claim is lost

The previous module teaches how to calculate the claim. This one covers the two ways a correctly calculated claim is lost anyway: by asking for more than demurrage covers, and by presenting it late or badly. The second is by far the more common, and the more avoidable.

What demurrage covers: The Eternal Bliss

A simple question, with an answer that changed twice in two years. If the charterer's delay, besides detaining the ship, also damaged the cargo, can the owner claim that damage in addition to demurrage, or is demurrage all they get?

In 2020 the High Court said it could be claimed in addition: demurrage would liquidate only the detention loss. It was a much-discussed decision, and it is still cited in that form in a good deal of popular material. But it was reversed. The Court of Appeal, in K Line v Priminds (The Eternal Bliss) [2021] EWCA Civ 1712 of 18 November 2021, held that

demurrage liquidates the whole of the damages arising from a charterer's breach of charter in failing to complete cargo operations within the laytime.

To recover anything more the owner must therefore establish a separate breach of a separate obligation — not merely the delay. The Supreme Court granted permission to appeal in September 2022, but the appeal was withdrawn in May 2023 following a settlement: the Court of Appeal decision is therefore the last word, and remains good law.

The time bar: how good claims die

The SHELLVOY 6 and BPVOY4 time bars from completion of discharge, and the documents to collect while the vessel is in port.

Almost every tanker charter party contains a clause requiring the demurrage claim to be presented within a short period, complete with supporting documents, on pain of extinction. It is the single mechanism that forfeits the most demurrage — and not on the merits: on the calendar.

Table 10.1 — The most common time bars. The documents typically required are the NORs, statements of facts, time sheets, pumping logs, letters of protest, the calculation and the invoice.

Standard forms and typical clauses

Module objectiveRecognise the standard charter party forms and check which edition was incorporated and which rider clauses amended it.

The maritime chartering market relies largely on standard charter party forms, developed by industry associations, which are then modified with specific clauses (rider clauses) negotiated case by case.

Table 11.1 — The most widespread standard forms, with their current edition.

The importance of rider clauses

The standard form text is rarely used unmodified: the parties negotiate additional clauses (rider clauses) that can significantly alter how the standard clauses, including laytime clauses, operate. A common mistake is reasoning on the basis of the standard form while ignoring that a specific rider clause has modified it.

Letters of Protest and dispute management

Module objectiveRecognise when to issue the Letter of Protest, the formal instrument for communicating a disagreement to the counterparty during operations.

The Letter of Protest is the formal instrument by which the Master, or the company, communicates a disagreement to the counterparty over a specific event during operations, preserving its position for a possible subsequent dispute.

When to issue a Letter of Protest

• Delays attributable to the terminal or receiver that the Master considers unjustified.
• Refusal by the counterparty to countersign the Statement of Facts or certain entries in it.
• Damage to the cargo or the ship attributable to operations conducted incorrectly by the terminal.
• Discrepancies between declared cargo quantities and quantities actually loaded/discharged.

How to write an effective Letter of Protest

The document must be specific, factual and timely: generic and late is almost useless in a subsequent dispute. It must state the date, time, facts directly observed (not assumptions), and be formally delivered to the counterparty with a request for receipt, even in the event of refusal to sign.

Dispute resolution

When the parties fail to reach agreement on the laytime or demurrage calculation, the charter party typically provides for a resolution path that culminates, in most cases, in maritime commercial arbitration rather than ordinary court litigation.

From the protest to the award, the three LMAA procedures and what the Arbitration Act 2025 changed.

Why arbitration is the preferred route in the industry

• Arbitration clauses in charter parties — typically seated in London or New York, under the rules of associations such as the LMAA — are widespread and internationally recognised practice.
• Arbitrators specialising in maritime matters understand industry commercial practice better than a generalist ordinary court.
• The award is generally faster to obtain and enforceable internationally thanks to the 1958 New York Convention.

LMAA procedures depend on agreement

The applicable procedure depends first on the arbitration clause and the parties’ agreement, not on the value of the claim in isolation. The LMAA Terms 2021 govern the standard procedure; the parties may incorporate the Small Claims Procedure 2021 or Intermediate Claims Procedure 2021 and agree the relevant thresholds. USD 100,000 is a commonly used SCP threshold and USD 400,000 is often used as the upper ICP limit, but the contractual wording remains decisive.

Table 13.1 — LMAA 2021 procedures: application and thresholds depend on the clause or the parties’ agreement.

The role of documentation in the dispute

The quality of the documentation gathered during operations — Statement of Facts, Letters of Protest, correspondence with the agent — largely determines the outcome of an arbitration dispute. A technically correct position that is not documented promptly is difficult to sustain months or years later.

Emerging trends in commercial voyage management

The management of laytime and demurrage is also evolving, driven by digitalisation and greater standardisation of documentary processes.

Digitalisation of the Statement of Facts

Digital platforms for the electronic recording of port events (electronic SOF) are progressively replacing paper documentation, reducing the risk of disputes over the chronology of events thanks to verifiable timestamps and real-time sharing between parties.

Greater contractual standardisation

Industry associations continue to update standard forms to reduce interpretive ambiguity in the most contentious clauses (particularly those relating to bad weather and port congestion), in an effort to reduce the volume of arbitration disputes.

Interaction with decarbonisation

Speed and consumption warranties, already present in charter parties, have gained new relevance in light of CII and FuelEU Maritime obligations (seen in the dedicated decarbonisation course): managing speed for environmental compliance can conflict with contractual obligations towards the charterer.

What has changed in the last few years is that the market is no longer waiting: BIMCO has already produced the clauses by which the parties divide these obligations, and anyone negotiating a fixture today finds them on the table.

Table 14.1 — The BIMCO clauses that allocate environmental obligations between the parties.