Question

Farco Farm Ltd located in Texas is a company managing farms on which grains (corn, barley, wheat and rice) are grown on a large scale. Recently the owners of the farms signed an agreement with a flour mill in Ghana to provide wheat to offset a spike in demand on the local producing capacity. Based on the volume requested the cargo will be shipped in equal consignments of 40000 tonnes to support production demands over 8 months .
Farco farms Ltd has been a major local supplier and is branching out into international markets for the first time. They desire to get the business arrangement inked in their best interest and hired you as a broker. The first set of shipments represents the probationary period to determine whether the contract can be a long term one.
1. Advise your Principal on the most appropriate type of charter and the right size ship that would be fitting for the transport of the cargo consignments over the period.
2. Advise Farco Farms Ltd of the appropriate needs to get into clearly outlining and explaining the recommended type. Explain the role and responsibilities of Farco Farms Ltd and the prospective ship owner in the charter arrangement. Also include two advantages and two (2) disadvantages of the choice made.
3. Summarize two other charter options giving the premise on which they were rejected.

Answer 1

1&2. Voyage charter will be advisable due to following reasons:

a. Usually this type of contract is selected when charterer has no experience about the operation of ship. And in this type, the ship owner promises to carry on board a specific ship a particular cargo with all the responsibility of operating expenses (such as port charges , vessel insurance, taxes) for a single voyage from one or more loading ports to one or more discharging ports.

b. In this type of charter the charterer contracts to provide a cargo at given rate per day. The charter is generally for bulk cargo, stipulated in tons or cubic feet, for all or part of the carrying capacity of the vessel.

Size of ship: supermax vessel as is compatible with all the ports with size of around 50,000 to 60,000 DWT( dead weight tonnage) and can be as long as 200 meters or 656 feet.

Content :

I.             name of the parties.

II.            the name and nationality of the ship.

III.           grain capacity.

IV.          description of the good loaded.

V.            port of loading and discharge

VI.          laydays.

VII.         time for loading and discharge.

VIII.        payment of freight

IX.           demurrages.

X.            despatch.

XI.           other relevant matters.

2&3. Advantages & disadvantages and premises on which other two were rejected.

Voyage charter	Time charter	Barboat chartering
Operation cost borne by ship owner.	Operation cost borne by charterer	Operation cost borne by charterer
Risk of loss of time - borne by the ship owner	Risk of loss of time - normally fall on charterer’s account.	Risk of loss of time - normally fall on charterer’s account.

Note : 1.the person who charters the ship is known as charterer.

2.the person who charters out his ship is known as ship owner