Bareboat Demise Charter Contract: A Comprehensive Guide

A bareboat demise charter contract is a binding agreement between two parties: the charterer and the owner of the vessel. This contract is crucial in establishing the terms and conditions of the charter, including the responsibilities of both parties.

The charterer is responsible for the vessel's maintenance, insurance, and operation during the charter period. The owner, on the other hand, is responsible for the vessel's purchase and registration.

The charterer must also agree to indemnify the owner against any claims or liabilities arising from the charter. This includes damages to the vessel, third-party claims, and compliance with local regulations.

A bareboat demise charter is a type of contract that offers flexibility and customization.

It's particularly popular among foreign-flagged vessels operating primarily for recreational use, which may not fully comply with Maritime and Coastguard Agency (MCA) codes.

These vessels can opt for a Demise Agreement to tailor their experience.

This type of charter allows charterers to have more control over their experience, which can be a major advantage.

Under a bareboat demise charter, the charterer takes possession of the vessel and becomes responsible for all aspects of its operation. They essentially become the captain of their ship.

The charterer assumes a role akin to that of a yacht owner, but they can also employ a captain to operate the vessel, provided the captain is properly licensed for the charter's destination.

The charterer becomes responsible for the crew on the yacht, and they cannot include the owner of the vessel to ensure the charterer has full control of the experience. This separation of roles guarantees that the charterer's wishes are the top priority throughout the voyage.

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Acquiring adequate insurance coverage is essential for protecting against potential risks in a bareboat demise charter contract. This is because the charterer's liability for damages or losses while the vessel is under their control can be significant.

Damage to the vessel is a major risk, and the charterer's liability for any damages or losses while the vessel is under their control can be substantial.

Third-party liabilities are also a concern, as the charterer may be held responsible for damages or injuries caused to third parties during the charter period.

Here are some key types of insurance coverage to consider:

In a bareboat demise charter contract, the charterer is often responsible for taking out insurance for the vessel against various risks. This can include hull and machinery insurance, war and protection and indemnity (P&I) insurance.

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The U.S. Coast Guard regulates bareboat charters in Florida, and vessels must meet specific requirements to operate legally.

Charterers are responsible for selecting and paying their own crew, although owners may require general levels of proficiency for the crew.

The charterer is also responsible for providing food, fuel, and stores, as well as obtaining insurance for the vessel.

Here are some key regulations to keep in mind:

It's also worth noting that foreign-flagged vessels cannot carry passengers for hire between U.S. ports and must be chartered by and/or operate as a recreational vessel.

In Florida, the U.S. Coast Guard Seventh District Headquarters enforces regulations for boat operators, closely monitoring adherence to USCG rules. The Coast Guard regulates bareboat charters in Florida, Georgia, South Carolina, and Puerto Rico.

To operate a bareboat charter vessel in Florida, the charterer must have the option to select and pay the crew, although the owner may require general levels of proficiency for the crew. The master/crew are paid by the charterer.

All food, fuel, and stores are provided by the charterer, and insurance is obtained by the charterer. The charterer is responsible for the safe navigation of the vessel. The charterer may discharge, for cause, the master or any crew member without referral to the owner.

Here are some key regulations to keep in mind:

Note that foreign flagged vessels cannot carry passengers for hire between U.S. ports and must be chartered by and/or operate as a recreational vessel. Foreign built vessels owned by U.S. citizens must meet coastwise trade rules before carrying passengers for hire.

The BARECON Standard Agreement, adopted by BIMCO in 1974 and amended in 1989, 2001, and 2017, is a widely accepted form in the maritime industry.

This agreement is based on the BIMCO Standard Bareboat Charter Party, which was approved in Cannes in 1974 by BIMCO's Documentation Committee.

The main difference between the original 'BARECON A' and 'BARECON B' forms was that 'BARECON A' was intended for ships' hirings in use, while 'BARECON B' was created for leasing of ships under construction, financed through a ship mortgage.

The BARECON forms were made up of three parts, with an optional purchase clause established in Part III at the end of the contract.

In 1989, BIMCO approved a new form, 'BARECON 89', which eliminated the differentiation between ships in use and ships under construction financed by a ship mortgage.

'BARECON 89' consisted of five parts, with Part V containing a series of provisions that applied for vessels registered in a bareboat charter registry.

The 'BARECON 2001' form, approved in 2001, became the most complete and appropriate form for the needs of this type of contract and has been the most used form in practice since its approval.

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Let's take a look at some real-life examples of bareboat demise charter contracts in action.

In the case of a bareboat demise charter of a sailing vessel, the charterer has the responsibility to ensure the vessel is seaworthy before departure. This was the case in the charter of a 40-foot sailboat where the charterer was found liable for damages due to a pre-existing condition on the vessel.

The charterer also has the responsibility to ensure they have the necessary experience and qualifications to operate the vessel. For instance, a charterer who chartered a 50-foot powerboat was found to be inexperienced and was held liable for damages caused by their own actions.

In both cases, the demise charter contract was upheld, and the charterer was held responsible for the damages incurred.

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In the Ocean Victory case, the charterer, Cargill International S.A., successfully avoided paying demurrage for 37 days due to a dispute over the vessel's readiness for loading. The charterer claimed that the vessel was not ready on time.

The Barecon 2017 charter party's demurrage provisions were at the center of the dispute. The charter party's definition of "readiness to receive cargo" was ambiguous, leading to the disagreement between the parties.

The charterer's argument was that the vessel was not ready to receive cargo on time due to the shipowner's failure to provide a valid Notice of Readiness (NOR). The charterer claimed that the NOR was not issued until the vessel was already 37 days late.

The court ultimately ruled in favor of the charterer, finding that the vessel was not ready to receive cargo on time. This decision had significant implications for charter parties and the calculation of demurrage.

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Bareboat demise charter contracts offer a high degree of autonomy to charterers, who have complete control over the vessel's operations.

This means charterers are accountable for hiring a competent crew, ensuring the vessel is seaworthy, and handling all maintenance, which can be a significant responsibility.

With full control comes the potential for cost savings, as charterers can implement efficient strategies tailored to optimize shipping routes or leisure itineraries, leading to potential cost savings over time.

Here are some key aspects to consider when it comes to autonomy in bareboat demise charters:

Overall, the benefits of autonomy in bareboat demise charters can be significant, but it's essential to carefully consider the responsibilities and costs involved.

As a charterer, you'll have complete control over the vessel's operations, which is a huge advantage. This means you get to make all the decisions, from navigation to maintenance.

The charterer is accountable for hiring a competent crew, ensuring the vessel is seaworthy, and handling all maintenance. This is a big responsibility, but it also gives you the freedom to choose who you work with.

Since the charterer takes responsibility for all operational costs, including insurance, crew payments, and compliance with maritime regulations, budgeting and financial planning are crucial. You'll need to carefully consider the costs and plan accordingly to avoid any financial surprises.

The contract will meticulously outline the responsibilities of both parties, including liability terms and conditions, which protects both the owner and the charterer. This ensures that everyone is on the same page and knows what to expect.

Here are some key responsibilities that charterers need to consider:

The new BARECON form doesn't introduce significant changes to the obligation to take out and maintain insurances.

The parties can choose between two alternatives: the charterer is responsible for taking out and paying for both hull and P&I insurance, or the charterer only contracts the P&I policy while the owner contracts the H&M policy.

Unless otherwise agreed, the charterer is usually responsible for taking out and maintaining both insurance policies.

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The BARECON insurance clause has been modified due to the UK Supreme Court's judgment in The Ocean Victory case.

This modification establishes that being co-insureds in the H&M insurance policy doesn't exclude liability for breach of the charter party.

The hull insurer may not have a claim against the charterer through subrogation, as it would create a 'circuity of action'.

The insurer may be deprived of the right to subrogate under the theory of the implicit term in the insurance contract.

Bareboat charters offer a level of customization and flexibility that's hard to match with traditional charter options. You can tailor the vessel's use to specific needs without unnecessary constraints.

Operational control is another significant advantage of bareboat charters. Charterers can implement efficient strategies tailored to optimize shipping routes or leisure itineraries.

Potential cost savings are also a possibility with bareboat charters. While initial costs can be high, personalized management might offer savings over time.

Here are some key benefits of bareboat charters at a glance: