The main forms of charter party

Gencon94 vs Gencon76:
Main differences -
advantages & disadvantages
for Shipowners & Charterers

The GENCON (General Charter Conditions) charter party is the most common standard voyage charterparty form used worldwide. Gencon first issued in 1922 and then revised twice: Once in 1976 and one more time in 1994. Despite the fact that such revisions were necessary in order for the terms to be updated in line with the standard shipping practices, each revision also included a few changes which, in fact, amended the rights and responsibilities of the parties, creating a dispute between the Owners and Charterers on which form is fairer. Therefore, despite the fact that the Gencon 94 is the most updated, a lot of charterers prefer to fix their cargoes basis the Gencon 76, since the 1994 revision is considered as Owner’s friendly. Due to this same reason, Owners usually prefer to go with the Gencon 94 form. Therefore, which of the two charter parties will be used is usually a point of negotiation between the parties. Since the Gencon 76 and the Gencon 94 are the most used forms, here, we will focus on these two versions and will discuss the terms that make Charterers and Owners have a strong preference of one form over the other.

GENCON Charter party – What is it about?

GENCON consists of two main parts. The “PART I” (first part) is the box form that includes the main information of the voyage, which each time is agreed between the parties and completed accordingly. This information mainly includes the full style and contact details of the parties (owner/charterer/broker), the vessel’s details (name and main description), the loading and discharge ports, the freight rate, the total laytime available to Charterers, the demurrage rate as well as the vessel’s expected readiness and cancelling date. The boxes in Part I have their reference to Part II where they are further explained. The “PART II” (second part) includes the detailed terms and conditions which apply in each voyage fixed with the GENCON c/p and they are standard unless something different agreed in main terms, during fixing negotiations. This second part describes in detail the Owner’s responsibilities in regards with vessel’s condition, the detailed terms about the payment of freight, the laytime and demurrage as well as Owner’s and Charterer’s responsibilities on the loading & discharging costs. Further conditions which are described in Part II of the Gencon are related with the signing of bills of lading, vessel’s deviation, general average, strikes and port’s unsafety due to ice or warlike events.

Gencon 94 vs Gencon 76 – Differences in Part I

Since the Gencon 94 is a revision of Gencon 76, in order to see their differences one needs to focus on the amendments incorporated with the 1994 revision. Only minor amendments have been made to Part I which do not alter the scope of the c/p but just a few boxes have been added or slightly amended in the 1994 version. Specifically, the reference to the loading and discharging costs in Gencon 76 (box 15) is missing from Gencon 94 and the relevant box has updated so as the parties to indicate whether the ship’s gears will be used or not. Additional boxes which have been inserted in Gencon 94 refer to: the name of agents at loading/discharge ports (boxes 18 & 19), the party who pays the freight tax (box 23), the place of any general average adjustment (box 22) and the law and place of arbitration which will be incorporated in the c/p (point 25).

Gencon 94 vs Gencon 76 – Differences in Part II

Part II has more serious revisions: Owner’s responsibility (clause 2) has been amended to exclude the stowage of the cargo which is now Charterer’s responsibility. Furthermore, Gross terms in clause 5 of Gencon 76 (Loading/Discharging costs) have been removed and f.i.o.s.t terms apply in Gencon 94. Clause 5 is also extended to include a paragraph about the vessel’s gears and another one about the stevedore damages which is a usual area of dispute between the parties. Payment of freight (clause 4) has been amended as well, so as to include also the option of prepayment (payment upon shipment) instead of payment on delivery only which was included in the Gencon 76. Laytime and Demurrage clauses (clause 6 & clause 7) remain, though they have been more detailed and specific, covering additional aspects like its reference on the non-payment of demurrage. Another clause which is extended in Gencon 94 is the lien clause which now includes also the lien on sub-freights (to cover the cases the vessel is sub-chartererd). The canceling clause (clause 9 of Gencon 94 or clause 10 of Gencon 76) is also updated in order to give Owners the right to ask for extension of laycan if the vessel delays and avoid a long ballast leg out of the laycan. Bills of Lading clause (clause 10 in Gencon 94 or clause 9 in Gencon 76) is totally revised – Gencon 94 incorporates the use of a specific bill of lading form, the Concenbill, it gives agents the right to sign B/Ls on behalf of the Master in strict conformity with Mate’s receipts and inserts an express right of indemnity to Owners for issuing bills of lading which may assume greater liabilities to the Owners than under the charter party. General average clause has also been updated to include the place of GA adjustment (London unless otherwise agreed) and basis the updated York-Antwerp Rules 1994. Also the New Jason Clause is inserted in case of General Average in accordance with the laws of USA. Furthermore, the General Strike Clause is revised and the introductory paragraph of the Clause, by which neither the owners nor the charterers will be responsible for the consequences of the strikes and/or lock-outs, has been moved to the end as paragraph (c) and excludes all other cases covered in paragraphs (a) and (b). With this change, the clause is less wide and the chances for a strike or lock-out to fall within this generic exclusion are definitely less than in Gencon 76. Finally, the War Risks clause has been updated with the standard Voywar 1993. On the other hand, a few new clauses have appeared in Gencon 94 like the standard Both-to-Blame Collision which is part of almost any recent c/p, the Taxes and Dues clause which specifies which party is responsible for such expenses and the Law and Arbitration Clause which, unless otherwise agreed between the parties, clarifies that the c/p will be governed by English law and the parties may refer to arbitration which will be held in London. Whilst some completely new clauses have been incorporated into the Gencon 94, only one clause of Gencon 76 has been deleted, i.e. Clause 12 (Indemnity).

A few of the above mentioned amendments have materially changed the responsibilities of the parties, making the Gencon a more Owner’s friendly charter party form. The following have contributed to such turn:

From Gross terms (in Gencon 76) to F.i.o.s.t (in Gencon 94)

This is one of the most important changes in Gencon 94. The changes in Clauses 2 and 5 (Owner’s responsibility and Loading/Discharging costs), make the GENCON apply f.i.o. terms only. Therefore, Charterers are now ultimately responsible for loading, stowing, trimming and discharge of the cargo. On the other hand, under the Gencon 76 Owners were responsible for stowing/trimming while in case of Gross terms (as per para 5.a) the Owners were also responsible for the loading and discharging operations, including the costs of same.

From payment upon delivery to payment upon shipment

Prepayment of freight is incorporated in Gencon 94. Along with the payment of freight upon delivery, which existed in previous revisions, are the two payment options which apply in Gencon 94. This insertion was very favorable to Owners since it manages to reduce Owners’ risk for nonpayment of freight and improve their cashflow due to the earlier payment of freight. On the other hand, Charterers would definitely prefer payment closest to the delivery of the cargo rather than upon its shipment as it is the case in Gencon 76.

Nonpayment of demurrage clause

Another problem which owners usually face is the delayed payment or the nonpayment of demurrage claims. Under English law the timely payment of demurrage is not always considered as an essential part of the charter party. Therefore, without any specific clause in place, if demurrage was not paid after proper notices had been given, owners ran the risk of not being able to recover their money. Accordingly, to protect Owners’ interests when these unfortunate situations occur, Gencon 94 expressly provides that if demurrage is not paid until the expiration of a specific time limit (i.e. 96 hours), owners will have the right to terminate the charter party and claim damages for any loss occurred.

Indemnity for excess liabilities arising under the bills of landing

A new provision has been included in Gencon 94 giving the owners an express right of indemnity from charterers for issuing the bills of lading as per charterers’ request and as a result of which the owners may face greater liabilities than the ones under the charter party. This wording was not included in Gencon 76 and gives some defense to Owners in case something goes wrong with the bill of lading holder.

Indemnity clause of Gencon 76 is removed

Clause 12 of Gencon 76 limits the indemnity for non performance of the charter party up to the amount of estimated freight. However, there may be a case in which Owner’s claim might be higher due to consequential damages. For example, a vessel takes a long ballast to the loading port, the cargo is not loaded due to charterer’s default and there is no alternative cargo to be loaded onboard. In this case Owner’s damages may exceed the amount of freight. Gencon 94 removes any such limitation and the parties can claim any and all damages they may have.

Why Gencon is the most famous voyage charter party?

As mentioned earlier, Gencon is the most used voyage charter party worldwide. This happens for a variety of reasons such as the following:

  • a) It is produced by BIMCO who is a well established international organization.
  • b) It is a simple charter party form which clearly describes all the main terms of a voyage charter.
  • c) It is generic, can be used in each and every trade and it is not specialized only in a specific cargo or area like other c/p forms.
  • d) Despite the fact that includes terms which may be considered as Charterer’s friendly (Gencon 76) or Owner’s friendly (Gencon 94), in general it is a fair charter party.

In order to evaluate client’s preferences and understand their needs our team organized a complete survey about their chartering practices and habits. The survey showed that Gencon 94 is, by far, used more regularly than any other form. Also the majority of professionals prepare a charter party after the recap and the 96% replied that they do not use any software for this activity. Therefore, preparing a c/p is considered as a complex work for 38% of the respondents and time consuming since the 58% require 2 hours or more in order to prepare same. According to this survey, 59% of the respondents would definitely like to use electronic software in order to prepare the charter parties while another 18% might consider using same. Further to this survery results and in order to accommodate its customers’ needs, OpenSea have future plans to prepare such a tool which shall allow professionals create the charter as a result of online exchanges. It will be much faster, convenient and will avoid manual typing errors or omissions. But right now OpenSea helps easily find right cargo for right ship (or vice versa) and creates new level of transparency on the freight market.

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