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Wednesday, November 25, 2009

Great question from a shipowner reader of the blog

The following interesting question was asked on my post regarding the definititon of a 'ballast bonus'

I have decided to BUMP the question and you guys can make up your own minds.



Here is a tricky one for you. My vessel is opening in West Africa. The Charterer wants to take the vessel not dlosp but rather APS Recalada in order to load Up River Parana. We agree a daily rate and then we also agree a ballast bonus of xxxx$. My vessel begins its voyage to Recalada crossing the Atlantic, is eventually at Recalada and the ballast bonus paid. The day after and after receiving the ballast bonus my vessel for some reason has an electrical default and burns not being able to perform the agreed trip. The question is DOES THE CHARTERER HAVE THE RIGHT TO CLAIM BACK THE BALLAST BONUS???????


Hello Anon and thanks for the question.

First let me say that I am not a lawyer so the following is only my opinion. A few things remain uncertain in your story that would require clarification.

1. If the vessel has delivered and you have infact recieved the ballast bonus payment (usually a few day after delivery) has the ship infact started loading the cargo? If ther is cargo onboard this would complicate the issue.

2. Can the ship be fixed / repaired at the port or nearby. What is the time frame for repair.

3. Has the market changed significantly since the fixture was agreed and are there other ships around?


We dont know the above information but here is my intial thoughts. When you agreed the contract with the charterer part of any shipping contract stipulates that you must provide a ship in fully working condition for the 'entire duration' of the contract. If for some reason you cannot, and this reason has nothing to do with the charterers, then technically you would be in breach of contract.

Then you have to think about a remedy.

The charterer will probably argue he is within his rights to insist that you perform either with this ship or another one. Then it could be an offhire issue etc

If you cannot perform then he would probabloy seek damages and this would be reflected in the price of chartering a replacement ship.

The question here is does the Ballast Bonus come into play? - Well my opinion is that the ballast bonus although not charter hire, has been factored into the overall cost to the charterer and thus would contitute an unexpected loss to the non performance of the contract.

Again I am not a lawyer so this is only my opinion and I am sure the legal jargon I am using is not 100 percent on the mark - but you get my drift. Its reasonable to assume (and the law/arbitrators should reflect what is reasonable) that due to no fault of the charterers they should not have to forgoe a huge lumpsum ballast bonus payment - especially when you are ulimatley walking away from all resonsibilities...

Thats my opinion anyway - I am sure you could mount an arguement the other way...

Feel free to disagree..


Love the question - if anyone else want to pose another legal questions for debate - go for it!



  1. I believe that the whole issue is connected to whether the vessel has been delivered to charterers or not.
    Say for example, she is to be delivered at Recalada between 20 and 23rd of November. She has crossed the Atlantic, but she has the problems you mentioned, and she misses the laycan, I believe that you are not entitled to receive the Ballast Bonus.
    BUT, if she arrived and has been delivered to Charterers within the LAYCAN and then failed, then you have a more hairy situation.
    In thid case, it all comes to the C/P, the repairs and all that. I believe that the issue is connected to the seaworthiness of the ship, which is a term that is hard to define even for lawyers.
    If the ship has been delivered, and the issue not being very serious, I believe the ship will go offhire until you have her back "seaworthy" to perform the trip.

    But then again, that's my opinion.

  2. The contract is always made for a seaworthy ship and shipowners are responsible for the staff , the stores etc for proving the ship at load port with the stipulated time along with resonable despatch and due diligence . After the charter party has been inked , the expenses will be borne by the shipowner because its his responsibility to complete the voyage within the express and implied terms and conditions . So yes charter can claim his money , because a ballast bonus can be considered like an advance payment for the sucessful discharge of the cargo .

    but lets face it we live in an unpredictable world thats why we have an angel named insurance ...so whosoever ends up paying ...hopefully insurance was taken. In the end risk must always be covered.

    I hope my attempt at the answer was ok VS ??

  3. Hi Guys

    Thanks reply Anons...nice discussion.

    Looks like we have a consesnus - yes you will need to pay back to ballast bonus!

    We know the vessel has delivered because he mentions that - he also says the bb has been paid so delivery is therefore assumed.

    The clincher though is that the shipowner has not fulfilled (spellieing) his obligations under the cantract.

    I like the point about insurance - Anon you answer was awesome - call again!


  4. I agree with Anons.

    Owner provide a seaworthy and cargoworthy vessel is a condition precedent to contract which means this is a event which must occur before performance under a contract become due.

    In this case, charterer should have the right to cancel the contract and of course any ballast bonus paid in advance can be claimed back.

    This is only my opinion, i wish Armando should have a look of this.

    Abt insurance,i would like to point out non-seaworthiness is a general exclusion on all kinds of Marine insurance. Insurance is an Angel
    but Insurance Companies are not.


  5. Hey Milano ...lol ur right , to be honest , i did'nt want to use the word Angel ...Urban

  6. Hi guys,

    PLease let me share with you my pont of view:

    First lets start from the definion of ballast bonus "BB is money intended to cover the owners’ actual costs of bringing the ship to the position where the time charterers may use it". In other words money paid by a time charterer to a shipowner to compensate him for not finding a cargo near the place of re-delivery of the ship at the end of the charter.

    The vessel was placed to Charterers' service on arrival Recalada, which she actually did.
    Charterers accepted full delivery of the vessel under a c/p which I trust to be of a usual NYPE form.
    Unless, there was a specific provision for the bb in c/p, this nype c/p stipulates that any money paid in advance and not earned shall be returned to the Charterers at once.

    Since the vessel performed her ballast voyage succesfully, arrived and delivered to Charterers service, it is my opinion that she is entitled to the agreed for this purpose ballast bonus.
    Consequently the bb must be considered "earned" by the Owners and not to be returned to Charterers.

    However, I would like to hear the final settlement.


  7. Interesting perspective Mark.

    I guess there is a whole can of worms here we dont really know about.

    Lets just say that according to your explanation the ship arrives and thus has 'earned' his ballast bonus and thus must be paid.

    Question - What if the 'problem' with the ship was already evident (to the shipowners atleast and not the charterers) during the ballast leg and the shipowners were unable to fix the problem during this leg - then the ydecide to keep quiet and claim the ballast bonus - only to claim ignorance when the malfunction becomes evident? This is a whole new ballgame and can happen alot expecially with gear etc.

    Also under you explanation I would expect that the owners would still be under an obligation to fix the ship or possibly supply another ship?

    They cannot merely walk away with a ballast bonus in pocket having done little else than 'deliver' - IMHO

    Anyway - interesting stuff..

  8. The problem is very simple.
    Through the CP in force, owners are entitled to freight payment + balast bonus, subject of loading, carrying and safely discharging the cargo from A to B.
    Did the owner kept his side of the contract? No.

    No honey, no money!

    Charterers has ALL rights to demand his BB back.