Bareboat charter: general guide

In this article, I answer the main questions about bareboat charters:

1. What is a bareboat charter?
2. Is a bareboat charter a lease agreement or a contract of carriage?
3. What are the duties and responsibilities of the shipowner and charterer under a bareboat charter?
4. How is a bareboat charter different from other charters?

The nature of a bareboat charter

For practical purposes, charters in shipping are classified into three types:

1. Bareboat (demise)
2. Time charter
3. Voyage charter

However, the English doctrine more often divides charters as follows:

1. Bareboat charter;
2. Other charters (voyage and time charters).

What is the point of this division?

A bareboat charter is, by its nature, a pure lease/hire contract whereby the ownership and use of the vessel are fully transferred from the shipowner to the charterer. The charterer becomes the rightful owner of the vessel at the time of the contract. Under a bareboat charter, the shipowner leases only the vessel (without the crew and master) and receives a fee – the hire.

At the same time, a time charter, and especially a voyage charter, is closer to a service contract – carriage. The owner remains the shipowner (he determines the vessel’s fate, outfits the vessel with the crew and appoints the master), and the charterer receives the service of carrying the cargo.

Bareboat charters are often entered into not for the purpose of carrying out further cargo but as part of a financial arrangement. For example, a bank finances the purchase of a vessel. The bank will be the owner (until the shipowner repays the loaned funds) but will give the customer the vessel on a bareboat charter for the loan repayment.

It is noteworthy that Ukrainian legislators do not have a unified approach as to what kind of contract a bareboat charter is (lease or carriage). There are only a number of indirect indicators in some acts (Merchant Shipping Code, Ship Arrest Convention 1952, etc.) which can be used to assert that a bareboat charter is a lease contract.

Duties and responsibilities of the parties

The shipowner has few obligations: to hand over the vessel in the agreed condition. The situation is more complicated for the charterer: he has to deal with navigation, repairs, operation and insurance.

Talking about responsibility, it should be remembered that the crew and the master are hired by the charterer. This implies that the charterer is responsible for their actions (or inaction).

The shipowner may also be liable for tort (non-contractual wrongdoing). For example, a seaman is injured because of a defect in the ship that the shipowner knew about but did not correct. In other cases, the charterer is usually liable to third parties. Usually, the charterer provides the shipowner with a guarantee against third-party claims for a certain amount. This is provided for in most charters.

More complicated situations arise when a claim is made against the ship – in rem (e.g., in the event of a collision). Although the charterer will formally be liable, the shipowner may be involved in the dispute because the claim is made directly against his ship.

Other features of a bareboat charter

In addition to those already mentioned, the nature of a bareboat charter implies the following features:

1. As the shipowner effectively loses possession of the vessel, he also cannot exercise a lien over cargo in the event of non-payment of hire.
2. The charterer acts as the carrier under bills of lading, not the shipowner. This is because the charterer hires the master who acts as his servant.
3. If a charterer hired a ship under a bareboat charter and the same charterer has a second ship against which a maritime claim is made, the first ship (hired under a bareboat charter) may also be arrested in support of that claim. This would not be possible if the vessel was chartered under a voyage or time charter.

If you need legal assistance with bareboat charters, feel free to contact me via email, Telegram, or WhatsApp.