The Shipping Law Blog
A Useful Guide to the World of Maritime Law

Laytime & Demurrage: A Back-to-Basics Guide

One of the more mysterious elements of shipping law, at least to the uninitiated, are the issues of laytime and demurrage. I thought, for this reason, that it might be useful to do a ‘bare bones’ guide to the area. As with other areas identified many people use the terminology incorrectly so don’t get confused by people saying apparently contradictory things. 

 

This area of shipping law deals with the general principle that if you charter (hire) a ship to move cargo from A to B at a set price (i.e. a voyage charter), then you should pay the ship compensation if it gets held up whilst loading or discharging the cargo you wanted to move, i.e. if you delay in getting your goods to the port and the ship’s journey takes 2 days longer as a result, you should compensate the ship for those 2 days lost. Here is the framework that has developed, in simple terms.
Ships are not like trains and cannot confirm absolute timetables for being in place A to B, especially when they are ‘tramping’ (just going where ordered next and not between set ports). So, when you enter a charterparty to hire a ship to move your goods the ship is given Laydays, being the period of days in which the ship can arrive to load your goods. After this point comes the Cancelling Date; if the ship is not there by this date the charterer may cancel the contract, basically because the ship is so late they either no longer wish to move the goods or wish to use another ship. This period is sometimes referred to altogether as the Laycan (Laydays + Cancelling).
When the ship arrives to load or discharge it tenders a Notice of Readiness (NOR) to the charterer, stating that they are ready to load / discharge. After a period of time (normally 6 hours) of giving notification it is considered reasonable for the charterers to have been able to start loading, so Layitme starts to run. Laytime is a period of time set out in the charterparty which gives the charterer an allowance for time to load (often 36 hours, but depends on trade and means of loading – oil tankers load faster than bulk cargo for instance). Once the charterers used up their laytime allowance time switches to Demurrage. Demurrage is a rate of compensation per day (or pro rata per hour) that they must pay to the shipowner for holding up the ship for longer than agreed.
If the ship is held up for reasons for which the charterer is responsible but outside the running of laytime / demurrage then the shipowner can sue the charterer for Detention. Usually the compensation awarded for detaining the ship is the same as the demurrage rate, because the parties have already agreed a convenient compensation calculation for using the ship’s time outside the contract so it is easy for the courts to apply this rate.

Leave a Reply

Your email address will not be published. Required fields are marked *

The Shipping Law Blog

For ten years the Shipping Law Blog has aimed to provide a simple, down-to-earth guide to the world of international shipping and maritime law.

If you have any questions or suggestions please get in touch at editor@theshippinglawblog.com .

Most Popular Posts

A Beginners’ Guide to Sailing

Learning to sail is one of the best ways to familiarise yourself with the basics of operating a vessel on water. Many of the terms draw across to the shipping

A Brief Guide to Liquidated Damages

We often receive queries from readers at the Shipping Law Blog, and today we received one from a non-lawyer, who had been asked to confirm whether one of their contracts

Search The Shipping Law Blog
Questions & Answers
Maritime Disasters
MARITIME STYLE GUIDE
Maritime Law Links
Visitor Loaction Map
Archives
Copyright & Legal

1. All content reserved copyright of theshippinglawblog.com 2015, unless stated otherwise. 2. Header image credit: Paul Gorbould, ‘Leader on Ice’ (Flickr). 3. This website is not intended to provide legal advice and is for interest only. The author does not guarantee the accuracy of any content and, as always, recommends that appropriate professional legal advice is sought by anyone requiring assistance with a shipping law problem. 4. If you have any ideas, recommendations or other queries in relation to the blog please e-mail me at webmaster@theshippinglawblog.com.