BIMCO BARECON PDF

The length of this extra period must be stated in box 18 on the face of the form, along with the deadline by which the charterers must give notice to the owners if they wish to extend. Although owners and charterers sometimes did this ad hoc, by adding bespoke wording, the inclusion of a clear mechanism for extending the charter period in BARECON is to be welcomed. Condition on delivery BARECON maintains the position under the form that the charterers cannot claim against the owners for not meeting any conditions, representations or warranties in relation to the vessel once delivery has taken place. The owners now have an absolute obligation to deliver the vessel in a seaworthy condition and, in every respect, ready for the charter service, whereas, under the old form, the owners needed only to "exercise due diligence" in this regard. Charterers would be well-advised to ensure that an inspection is carried out before delivery to take advantage of this protection. When drafting BARECON , the BIMCO sub-committee recognised that the charterers could be exposed in the event of the vessel sustaining damage shortly before delivery, suggesting that the charterers "should seek to negotiate an amenable settlement with the owners in respect of damage that has occurred between inspection and delivery".

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The result of the revision was an amalgamation of the two forms into a single document code named BARECON 89, containing separate alternative provisions to apply to new-buildings only. With this enviable record for clarity very much in mind, BIMCO decided in to undertake a modernisation of BARECON 89 to ensure that the provisions of this popular standard document kept pace with commercial practice. Initially, the Sub-committee assigned to the task of reviewing and revising BARECON 89 sought only to add clarity to some of the more cumbersomely worded provisions of the form and to replace the standard BIMCO clauses with their latest published versions.

Closer examination of the form, however, led the Sub-committee to consider a more wide-ranging revision. It is hoped that the revised form, code named BARECON will provide users with an even more comprehensive bareboat charter that benefits from greater clarity and conciseness in its provisions.

A copy of the form is reprinted at the end of this article. Part II of the form contains the main terms and conditions of the Charter of which it should be noted that not all apply to new-building vessels. Parts III, IV and V are optional parts to be applied as appropriate to the nature of the specific agreement and cover new-building vessels, hire-purchase agreements and vessels registered in a bareboat charter registry.

The following Explanatory Notes are designed to provide some background information on the clauses of the various parts of the Charter and a general overview of the amendments made in this revision. The narrow definition of "owners" used in BARECON 89 did not cover all types of owner and, as no suitable single definition could be found, it was agreed that the best solution would be simply to refer to the contents of the appropriate box in Part I.

It has also been assumed that bareboat chartering is now a sufficiently commonly practised contract form and that a distinction between it and voyage and time chartering is no longer required. Thus, the definition of "charterers" merely refers to the appropriate box in Part I. The Definitions Clause also introduces two new definitions: "Vessel", as this is a term used throughout the Charter; and "Financial Instrument", which refers to the "mortgage, deed of covenant or other such financial security instrument".

The latter term has been created to avoid any potential ambiguity and to assist in simplifying the text of the "Mortgage" and "Insurance and Repairs" provisions. In some jurisdictions, such as Panama and Liberia, covenants relating to the vessel are incorporated into the mortgage document. Consequently, a wide definition of "Financial Instrument" has been used. Clause 2 Charter Period has been introduced to perform this function. Clause 3 Delivery It should be noted that the order of the two paragraphs in sub-clause 3 a has been reversed.

In the second sentence of sub-clause 3 a , the charterers are now required to direct the owners to deliver the vessel to a prescribed ready "safe" berth.

The delivery provisions of BARECON have been expanded to incorporate a requirement that the vessel be properly documented on delivery sub-clause 3 b. Documentation needs to comply with the requirements of the flag State and the classification society. This provision has been inserted to avoid a situation where the vessel is delivered in accordance with the Charter, but where certificates have insufficient time before expiry to allow the charterers to obtain renewals.

The Sub-committee agreed that the existing wording presented the best solution to this problem, but has reduced the time limit for the manifestation of such defects from 18 months to 12 months although the parties are still free to negotiate another period if they so choose. It should be noted that the 12 months period in the Delivery Clause of Part II is now consistent with the time period applying to latent defects in the new-building provisions of Part III sub-clause 1 d.

The Sub-committee has recognised that the charterers are exposed to a small but potential risk in the event the vessel sustains damage not affecting seaworthiness but nevertheless affecting class immediately prior to delivery. In such an event, under the present wording the charterers would be unable to reject the vessel and could be left to effect and pay for potentially expensive repairs to the vessel in order to maintain class requirements during the charter period. Strictly speaking, the charterers should not be liable for repairs to the vessel being delivered in a condition other than that agreed, although such damage could not be considered a latent defect.

In such circumstances the charterers should seek to negotiate an amenable settlement with the owners in respect of damage that has occurred between inspection and delivery. Clause 4 Time for Delivery This Clause contains the usual provisions relating to the date before which the vessel cannot be delivered, but now also incorporates an obligation for the owners to exercise due diligence to deliver the vessel no later than the cancelling date.

Clause 5 Cancelling The Cancelling Clause now incorporates a time limit of 36 running hours following the cancelling date during which the charterers must decide whether or not to exercise their option to cancel the vessel if it arrives late.

If the charterers fail to make a decision within that time, then they lose the right to cancel the Charter. The 36 running hours period is designed to deter the charterers from prevaricating unduly over the vessel and potentially preventing the owners from securing suitable alternative employment at the earliest opportunity. It should be noted that the Cancelling Clause has been spilt into three sub-clauses in order to emphasise that the interpellation provisions of Sub-clause 5 b can be invoked multiple times.

Firstly, the owners are no longer obliged to exercise the interpellation provision but are free to avail themselves of the option if they so choose.

Thirdly, an alternative notice period of 36 running hours beyond the original cancelling date has been inserted. This is designed to take care of situations where the owners have given notice of an expected delay close to the agreed cancelling date and avoids the owners having to wait up to one week before being advised by the charterers whether or not they wish to cancel.

The purpose of sub-clause 5 c is simply to make clear that the exercise of the cancellation provisions does not prejudice any claims for damages the charterers might otherwise have on the owners. Clause 6 Trading Restrictions The title of this clause has been changed from "Trading Limits" to "Trading Restrictions" as it was felt that the original BARECON 89 title did not reflect the true scope of the clause as it covered matters other than geographical restrictions.

According to this Clause, the charterers undertake not to employ the vessel under terms that are not in conformity with the terms of the insurance without first obtaining the consent to such employment of the insurers. The term "instruments of insurance" previously found in the second paragraph has been changed to "contracts of insurance" in keeping with modern parlance. The requirement that the charterers should keep the owners and the mortgagees advised of the intended employment of the vessel has been deleted from the end of the second paragraph, as it was not felt to be appropriate to this specific clause.

Clause 7 Surveys on Delivery and Redelivery This Clause deals with the usual on-hire survey and off-hire survey procedures and allocation of cost and time between the contracting parties.

No provision is made in respect of dry-docking the vessel in relation to the on-hire or off-hire surveys as this is not considered normal practice in bareboat charters and should be left to the parties in each individual case to discuss and negotiate as appropriate.

Clause 8 Inspection This provision gives the owners the right to inspect or survey the vessel throughout the charter period. The Clause has been modified in the new version to require the owners to give the charterers "reasonable notice" of their intention to inspect or survey the vessel. The owners have the right to inspect the vessel for three express reasons that have been divided into three sub-clauses to properly allocate costs.

The first two reasons are taken from BARECON 89 and are 1 a survey to satisfy the owners that the vessel is being properly repaired and maintained and 2 a survey while the vessel is in dry dock if the charterers have not dry docked the vessel at the regular intervals agreed to in Clause 10 f. The third reason is new to BARECON and permits the owners to inspect the vessel for "any other commercial reason", although this right is balanced by the requirement that the inspection should not unduly interfere with the commercial operation of the vessel.

This new provision has been introduced to permit, for instance, an inspection of the vessel pending a potential sale. It should be noted that consistent with the change made to the Trading Restrictions Clause, the final sentence of the Inspection Clause relating to the intended employment of the vessel has been removed and added to a new sub-clause 10 c. Clause 9 Inventories, Oil and Stores The word "consumable" has been removed from the heading of this Clause as "oil and stores" are considered by their nature to be "consumable".

With respect to the items to be taken over and paid for at delivery and redelivery, the list has been revised to exclude "water" which the majority of vessels now produce themselves and "oils" as bunkers and lubricating oils are already included on the list.

A new final sentence requires the charterers to replace, at their expense, any spare parts listed in the inventory and used during the charter period, prior to redelivery. Clause 10 Maintenance and Operation One of the most important consequences resulting from the bareboat chartering of a vessel is that during the entire period the vessel is in full possession and at the absolute disposal for all purposes of the charterers. Consequently, the responsibility for maintenance and operation and all costs and expenses arising from these activities rests with the charterers.

The Maintenance and Operation Clause has been restructured to provide, where appropriate, clear sub-heading titles to make the provision easier to read. It should be noted that the obligation on the charterers to take immediate steps to have the necessary repairs done within a reasonable time, which appeared as the second paragraph of sub-clause 9 a in BARECON 89, has been removed from the Maintenance and Operation Clause.

The obligation to effect repairs within a reasonable time is provided for, in any event, by the phrase "in accordance with good commercial maintenance practice" found in sub-clause 10 a i. The question of class is also dealt with in the Redelivery Clause Clause 15 in which the penultimate paragraph reads as follows: " As "fair wear and tear" could substantially affect class with all the expenses involved in this respect, it has been considered appropriate to cover this point by stipulating in Clause 15 "fair wear and tear not affecting class excepted".

It is also in the context of class that the last paragraph of Clause 15 should be read, noting that BARECON also requires trading certificates to be valid for an agreed number of months following redelivery. The last paragraph of Clause 15 reads: "The Vessel shall have her survey cycles up to date and trading and class certificates valid for at least the number of months agreed in Box 17". New Class and Other Safety Requirements Unforeseen important structural changes or requirements for new expensive safety equipment may arise under a long-term charter, especially due to the implementation of new International Conventions.

To place such a burden on the owners would be unfair unless the hire was to be renegotiated. On the other hand, such new requirements could also place a heavy burden on the charterers, for instance, in the case of compliance with the new requirements having to be made a short time before redelivery.

Sub-clause 10 a ii provides for referral to the Dispute Resolution Clause of the Charter should the parties fail to reach an agreement. The word "expensive" has been removed from the reference to new equipment required for the continuing operation of the vessel, as the provision already adequately defines a threshold value for new equipment and the word "expensive" could, arguably, be used to qualify further that threshold.

Financial Security The scope of the fourth paragraph of sub-clause 10 a of BARECON 89 has been extended to cover third party liabilities rather than specifically oil pollution damage. Thus, the charterers will normally have full freedom to choose and appoint personnel. However, the law of the country under whose flag the vessel sails, or any other applicable law, may be restrictive in this respect and it is important that such requirements be made known to the charterers.

For instance, many countries require the Master and chief officer to be nationals of the flag State and possess certificates from their own country. On the other hand, the country of the bareboat charterers may impose certain requirements with regard to nationality and certificates of officers, especially as far as the Master is concerned.

Whereas it is not possible to cover this subject in detail in a standard bareboat charter, the sub-clause at least serves to remind the parties of the problem and to try to implement some general provisions that take care of the matter in a reasonable manner, such as suggested in the last paragraph of sub-clause 10 b. It should be noted that sub-clause 10 b expressly states that the charterers are responsible for annual flag State fees - this was not made sufficiently clear in BARECON In line with the provisions in Clause 10 under which the charterers are generally responsible for their servants, whether appointed by them or the owners, it also follows that full liability falls on the charterers as regards liability under bills of lading or other documents signed by the Master or officers whether appointed by the owners or the charterers.

It is in this context that the last paragraph of sub-clause 17 a Indemnity should be read. All registration and re-registration costs related to such activity are at the charterers expense and time. The application of a test of reasonableness, on the part of the owners, to a change of flag should ensure that the owners are adequately protected from an obligation to transfer the ownership of the vessel to a new company.

However, it should be noted that a requirement to transfer the ownership of the vessel when registering under a bareboat charter register is by no means a common practice in the principal ship registries such as Panama and Liberia. The cross-reference ensures that the charterers do not have to obtain the owners consent to make changes to the vessel required by class.

Periodical Drydocking In view of the durable qualities of modern marine coatings and common commercial dry docking practice, the default period between dry dockings has been extended from 18 calendar months to 60 calendar months after delivery, unless the classification society or flag State require an alternative period.

Should the parties wish to agree contractually to a different period between dry dockings then they are free to do so by completing Box The default period of 60 months applies only in the event that Box 19 is left blank. This provision has been inserted in an attempt to make it clear that any default by the charterers in the payment of hire beyond the grace period would entitle the owners to claim damages for costs and losses incurred as a consequence of delays in the payment of hire, and, if the owners were to withdraw from the Charter, for the consequence of its determination.

The provision has been strengthened and balanced with the anti-technicality provision by incorporating the wording found previously in Sub-clause 10 e of BARECON 89 to the effect that "time shall be of the essence" in respect to payment of hire.

Instead of hire accruing on a lumpsum basis per calendar month from the date of delivery, hire is payable under sub-clause 11 b not less than every 30 running days in advance, from the date of delivery. This modification has been introduced to simplify the payment process and to remove the need for a calculation of fractional hire at the beginning of the hire period.

Referring to "not less than 30 running days" means that the charterers will not constantly have to make corrections to the payment date to cover payments falling due on weekends and holidays. The revised mechanism for the final payment of hire, where the period is less than 30 days, is dealt with in sub-clause 11 d. The last sentence of sub-clause 11 b states: "Hire shall be paid continuously throughout the Charter Period".

This statement has been added to emphasise that there is no "off-hire" under a bareboat charter. Note should also be taken of the use of the word "paid" rather than "payable" to illustrate the required action.

A strict, unconditional obligation to pay hire as and when due must, of course, be linked together with a right for the owners to withdraw the vessel if the charterers are in default of payment.

The "anti-technicality" clause provides a grace period of the number of days as agreed by the parties in the event that the failure to make a punctual payment can be attributed to "oversight, negligence, errors or omissions on the part of the charterers or their bankers". It is not the intention that this provision should leave the charterers with a permanent, contractual grace period that can be invoked in respect of each monthly payment of hire.

If, however, the charterers do not settle the payment of hire within the agreed period, the owners have the right to withdraw the vessel from the service of the charterers and terminate the Charter without further notice. In most countries, the principle of awarding interest in legal proceedings is acknowledged, but often at the discretion of the court.

Owing to the fact that a fixed rate of interest stipulated in a standard contract may be considered too high in some jurisdictions and too low in others, sub-clause 11 f leaves it to the contractual parties to negotiate the applicable rate of interest and insert the figure into Box 24 of Part I accordingly.

Instead of referring to the current market rate in the country where the owners have their principal place of business, the three months interbank rate in London LIBOR , plus an additional 2 percent, is the rate that applies.

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