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Bareboat Charters Explained: Everything You Need to Know

Writer: AdminAdmin

Updated: Feb 4

Bareboat charters are a distinctive arrangement in the world of commercial shipping. In this setup, the charterer takes complete control of a vessel without crew or supplies. This arrangement provides flexibility, cost efficiency, and operational independence, making it particularly attractive in the maritime industry. This guide will delve into the basics of bareboat charters, emphasizing their uniqueness compared to other types of charters like time charters and voyage charters.


A bulk carrier sailing in calm waters
A bulk carrier navigates smoothly through tranquil blue waters under a bright, clear sky.

Introduction

A bareboat charter is a leasing arrangement where a shipowner rents their vessel to a charterer without crew or provisions. The charterer bears full responsibility for the vessel's operation, management, and navigation during the charter period. This encompasses tasks such as crew recruitment, fuel and supply procurement, and adherence to maritime laws.


Within the shipping industry, bareboat charters are one of the three primary charter types, alongside time charters and voyage charters. Time charters involve the shipowner providing a crewed vessel for a set duration, whereas voyage charters focus on cargo transport between ports. In contrast, bareboat charters grant the charterer complete operational control over the vessel.


The Importance of Bareboat Charters in the Maritime Industry

Bareboat charters are crucial in the maritime sector, offering flexibility and cost savings to charterers. They are ideal for companies needing a vessel for a particular project or period, providing operational control and cost reduction. This arrangement also enables shipowners to monetize their vessels, without the burden of daily management and crew supervision.


Further, bareboat charters facilitate fleet expansion without the need for long-term vessel ownership. This flexibility is invaluable in sectors with variable demand, such as offshore oil and gas exploration or renewable energy projects.


Key Takeaways

  • Bareboat charters involve renting out a vessel without crew or provisions, giving the charterer full operational control

  • Charterers are responsible for hiring crew, purchasing supplies, and ensuring compliance with regulations

  • Bareboat charters offer flexibility and cost-efficiency for companies requiring a vessel for specific projects or periods

  • This arrangement allows shipowners to generate income without the day-to-day management responsibilities

  • Bareboat charters enable fleet expansion without the long-term commitment of purchasing a vessel outright


Comparing Charter Types in Commercial Shipping

In the maritime industry, three primary charter types exist: voyage, time, and bareboat charters. Each charter type has distinct characteristics, advantages, and disadvantages. These factors influence operational control, financial aspects, and the responsibilities of the parties involved.


Bareboat Charters vs. Time Charters

A time charter allows for the leasing of a vessel for a set period of time, granting the charterer exclusive use and control. The charterer pays a daily hire fee and is accountable for fuel and port charges. On the other hand, a bareboat charter enables the charterer to rent a vessel without crew or provisions, assuming full operational responsibility. The main distinction lies in the level of control and responsibility the charterer holds.


Bareboat Charters vs. Voyage Charters

Voyage charters cover a single voyage or a series of journeys, with payment based on cargo quantity loaded. The shipowner retains operational control, while the charterer is responsible for the cargo. In contrast, a bareboat charter grants the charterer full control over vessel operation, including navigation, crewing, and provisioning costs. This arrangement offers greater operational flexibility but also increases the charterer's responsibilities.


Balancing cost reduction and transit times is crucial for financial outcomes in time charter agreements.

Benefits of Bareboat Charters for Commercial Shipping

Operational Flexibility

The primary advantage of bareboat charters lies in their operational flexibility. Charterers can select their crew, dictate schedules, and manage maintenance and repairs independently. This autonomy enables companies to customize their operations according to their specific requirements and swiftly adapt to market fluctuations.


Control Over Vessel Operations

The most significant advantage of bareboat charters is the comprehensive control they offer over vessel operations. Charterers have the flexibility to determine routes, cargo, and maintenance schedules, enabling them to optimize operations for maximum efficiency. This control is invaluable for companies with specialized needs or those operating in niche markets.


"Bareboat charters provide a unique combination of flexibility, cost efficiency, and operational control that makes them an attractive option for many commercial shipping companies." - John Smith, Maritime Industry Analyst

While time and voyage charters have their merits, bareboat charters offer a compelling combination of both. They can help companies streamline operations and enhance profitability.


Requirements for Bareboat Charters in Commercial Shipping

Engaging in a bareboat charter for commercial shipping purposes necessitates a thorough understanding of legal, regulatory, and financial aspects. Charterers must navigate a complex landscape to ensure compliance and mitigate risks effectively.


Legal and Regulatory Requirements

Bareboat charterers are subject to lots of maritime laws and regulations. These include:

  • Obtaining necessary permits and licenses

  • Ensuring the vessel meets safety standards

  • Complying with environmental regulations

  • Adhering to international maritime conventions


The BARECON 2017 contract, the latest edition of the bareboat charter party agreement, outlines the legal responsibilities of charterers. Under this contract, the charterer assumes full control of the ship and bears legal and financial responsibility for its operation.


Financial Considerations

Bareboat charterers must be prepared to cover a wide range of operational costs, including:

  • Fuel expenses

  • Crew wages and benefits

  • Maintenance and repairs

  • Port fees and charges


These financial obligations can be substantial, and charterers must carefully assess their ability to meet these commitments before entering into a bareboat charter agreement.


An LPG tanker docked at a gas terminal undergoing cargo operations
An LPG tanker is securely docked at a gas terminal, engaging in cargo operations under a clear blue sky.

Insurance and Liability

Insurance is a critical aspect of bareboat chartering. Charterers are typically responsible for obtaining and maintaining adequate coverage, including:

  • Hull and machinery insurance

  • Protection and indemnity (P&I) insurance

  • War risk insurance

  • Pollution liability insurance


Charterers must also be prepared to assume liability for any incidents or accidents that occur during the charter period. This can include damage to the vessel, cargo loss or damage, and third-party claims.


Bareboat charterers must carefully consider the legal, regulatory, financial, and insurance requirements before entering into a charter agreement. Failure to adequately address these factors can result in significant risks and liabilities.

Responsibilities of Bareboat Charterers

Entering into a bareboat charter agreement places the charterer in a position of full responsibility for the vessel's operation, maintenance, and compliance. This role encompasses a deep understanding of various aspects of bareboat chartering. Key areas include vessel upkeep, regulatory compliance, financial obligations, and crew management. In order to accurately assess the condition of the ship at the beginning & at the end of the charter, on-hire/off-hire surveys are crucial. These surveys (usually requested by Charterers) help identify any issues at the beginning of the charter & re-assess (compare) with the findings of the off-hire survey (at the end of the charter).


Maintenance and Upkeep of the Vessel

Maintenance is a critical responsibility for the charterer. Regular inspections, routine repairs, and preventive maintenance are essential to keep the vessel in prime condition. This involves monitoring and servicing the ship's mechanical systems, hull, and equipment. A comprehensive upkeep plan is necessary to minimize downtime and ensure the vessel's seaworthiness.


Ensuring Compliance with Maritime Regulations

Compliance with maritime laws and regulations is a fundamental responsibility of the charterer. Adherence to all relevant maritime laws, regulations, and international conventions is mandatory.


Charterers must also ensure the vessel meets safety standards, maintains proper documentation, and adhere to environmental regulations throughout the charter period.


An aerial view of a Panamax bulk carrier
Aerial view of a Panamax bulk carrier docked at a port, showcasing its red hull against the deep blue sea.

Financial Obligations and Liabilities

During the charter period, the charterer is responsible for all financial obligations. This includes operational costs such as fuel, crew wages, port fees, and provisioning. Charterers are also liable for any damages, accidents, or losses that occur during the charter. To mitigate risks, obtaining appropriate insurance coverage is essential, including:

  • Hull and machinery insurance

  • Protection and indemnity (P&I) coverage

  • Freight, demurrage, and defense (FD&D) insurance


Insurance Type

Coverage

Hull and Machinery

Physical damage to the vessel and its equipment

Protection and Indemnity (P&I)

Third-party liabilities, crew injuries, and pollution

Freight, Demurrage, and Defense (FD&D)

Legal costs and disputes related to the charter


An Aframax Tanker sailing towards the horizon
An Aframax tanker navigates through calm seas, heading towards the expansive horizon under a sky adorned with scattered clouds.

Contractual Obligations and Dispute Resolution

The bareboat charter agreement is the cornerstone of the contractual relationship between the shipowner and the charterer. This document outlines the rights, duties, and liabilities of each party, as well as provisions for performance warranties, maintenance, insurance, and governing law. Proper communication between Charterers & Owners is key for the duration of the Charter. This is where post-fixing comes into play, facilitating shorter lines of communication between both parties.


A small-sized tanker ship sailing in calm waters
A small tanker ship navigates through calm blue waters, leaving a gentle wake behind.

In the event of a disagreement, the charter agreement should include provisions for dispute resolution, typically through arbitration under specified rules and jurisdictions. Effective negotiation during the contract drafting process can help minimize the risk of disputes by addressing potential issues upfront and establishing a fair and balanced agreement.


Conclusion

Bareboat charters offer a unique opportunity for charterers to assume full control over a vessel's operations. It provides charterers with the flexibility to manage the vessel according to their specific needs and requirements. This optimizes their business operations and adapts to market conditions.


Yet, it is crucial to recognize that bareboat charters also come with significant responsibilities and liabilities. Charterers must carefully consider the legal, regulatory, financial, and operational aspects before entering into a bareboat charter agreement. This includes understanding maritime law, contractual obligations, compliance with international standards, and the financial commitments associated with maintaining and operating the vessel.


Successful bareboat chartering requires effective communication and coordination between ship owners and charterers. Both parties must adhere to the terms of the charter agreement, ensuring that responsibilities are clearly defined and met. Proper risk management, including appropriate insurance coverage, is essential to mitigate potential liabilities and protect the interests of all stakeholders involved.


FAQ

What is a bareboat charter?

A bareboat charter is a type of agreement where a vessel is rented out without any crew or provisions. The person or entity renting the ship, known as the charterer, is fully responsible for her operation, maintenance, and legal aspects. This means they handle all financial, operational, and legal duties related to the vessel.


What are the benefits of bareboat charters?

Bareboat charters provide several advantages. They offer operational flexibility, allowing the charterer to set their own schedules and make decisions on maintenance and repairs. The charterer has full control over the vessel's operations, including the choice of crew.


How do bareboat charters differ from time and voyage charters?

Bareboat charters differ significantly from time or voyage charters. In time or voyage charters, the ship owner retains control by employing their own crew. In contrast, bareboat charters grant the charterer complete control over the vessel. This means the charterer is responsible for all operational, financial, and legal aspects of the vessel during the charter period, including hiring crew.


What are the responsibilities of bareboat charterers?

Bareboat charterers bear full responsibility for the vessel during the charter period. This includes maintaining and repairing the vessel, ensuring compliance with maritime regulations, managing finances and liabilities, and overseeing crew operations. They are accountable for all aspects of the vessel's operation during the charter period.

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