10 Contract Clauses That Save You in Volatile Markets

Business Outcome

Passes EU ETS cost exposure to the charterer for the period and trading pattern under their orders while the owner keeps control of compliance and surrender timing.

• Cost follows operational decisions made by the charterer.
• Clear timetable for funding or allowance transfer before surrender.
• Shared data inputs support accurate calculations and audits.

Scope and Phase-In

• 100% of emissions for intra-EU voyages and at berth.
• 50% of emissions for EU to non-EU and non-EU to EU legs.
• Phase-in approach to surrender with increasing share.

Owner Safeguards

• Payment option set: charterer transfers allowances or pays cash equivalent within a fixed number of days.
• Hire default on non-payment with suspension rights after notice.
• Audit rights over MRV dataset, noon reports, port lists, bunker notes.
• Off-hire carve-out where charterer action causes compliance delay.

Sample Rider Language

“Charterer shall fund EU ETS exposure arising from employment of the Vessel during the charter period. Owner will calculate required allowances from verified emissions and applicable shares. Charterer shall transfer allowances or pay the euro equivalent within [X] days of invoice. Failure to comply is a hire default. Owner remains responsible to surrender allowances by the statutory deadline.”

Disclaimer: Example wording for discussion with counsel. Not legal advice.

Business Outcome

Shifts FuelEU costs and penalties created by charterer voyage choices to the charterer, while keeping owner control over verification and reporting workflows.

• Cost follows intensity outcome on the charterer’s routing and fuel selections.
• Clear timetable to fund or settle before the compliance certificate is issued.
• Data and audit trail align to the monitoring plan and verifier checks.

Scope and Targets

• Applies to ships ≥5,000 GT calling EU/EEA ports. Intensity limit is well-to-wake and includes CH₄ and N₂O.
• Reference value 91.16 gCO₂e/MJ. Reduction starts at −2% in 2025 and tightens over time.
• OPS at berth from 2030 for container and passenger ships where available, with defined exceptions.

Cost and Penalties

• GHG intensity deficit penalty ≈ €2,400 per tonne VLSFO-equivalent, about €58–60 per GJ of non-compliant energy.
• OPS non-compliance penalty per port call: €250 × installed MW × hours at berth.
• Repeat deficits increase the penalty by a 10% step-up per consecutive year.
• Flexibility tools: pooling across ships and limited borrowing from next year.

Owner Safeguards

• Charterer funds any FuelEU penalties and OPS breach penalties arising from their orders.
• Settlement path: transfer credits where applicable or pay cash equivalent within a fixed number of days.
• Misuse protection: hire default and suspension rights if payment is late.
• Evidence pack: MRV dataset, FuelEU monitoring plan, LCVs, fuel certificates, berth power logs.
• OPS readiness: allocate hardware, testing and connection time risks where OPS is required.

Sample Rider Language

“Charterer shall bear FuelEU Maritime costs and penalties arising from employment of the Vessel, including any GHG-intensity deficit penalties and OPS non-compliance penalties attributable to Charterer’s orders. Owner will prepare and submit monitoring and verification materials. Charterer shall transfer eligible units if applicable or pay the euro equivalent within [X] days of invoice. Failure to comply constitutes a hire default. The parties will cooperate on pooling or borrowing options where available.”

Disclaimer: Example wording for discussion with counsel. Not legal advice.

Business Outcome

Puts owners in control of routing decisions when a voyage involves a listed risk area or a materially unsafe route. Costs for extra insurance, security, delays, and longer passages are for the charterer when the employment orders create the exposure.

• Owner may refuse or deviate from a route that is reasonably judged unsafe.
• Alternative route can be taken with time and cost shared as set out below.
• Clear documentation supports hire and surcharge recovery.

Triggers and Routing Options

• War risk listings by underwriters or governmental advisories.
• Acts of piracy, UAV or missile activity, mines, or port closures.
• Owner choice to take a neutral route such as Cape when a canal or choke point is impacted.

Cost Components to Allocate

• War risk additional premiums and any breach or transit surcharge.
• Armed guards, citadel kits, trackers, convoy fees, security advisors.
• Extra bunkers and time on longer routes including weather margin.
• Lost slot fees, canal tolls avoided or added, extra port calls if required.

Route Tradeoff Estimator

Owner Safeguards

• Right to refuse unsafe ports and routes based on a reasonable judgment standard.
• Charterer funds extra premiums, security, and deviation fuel and time where the orders create exposure.
• Hire to run continuously on alternative route with bunkers on charterer’s account.
• Clear audit trail covering security invoices, premium binders, noon reports, and route decisions.

Sample Rider Language

“If in Owner’s reasonable judgment a port, route, canal, or area exposes the Vessel or crew to war risks or piracy, Owner may decline or deviate and employ a safer route. Charterer shall bear any additional premiums, security costs, bunkers, time, and fees attributable to such employment. Hire shall continue during any deviation to the safer route. The parties will cooperate to document costs and routing decisions.”

Disclaimer: Example wording for discussion with counsel. Not legal advice.

Business Outcome

Protects owners from charterer-driven sanctions exposure and gives a fast-track termination right if continuing performance would breach sanctions or expose the ship, crew, or payments. The clause should link to recognized sanctions regimes and trigger automatic off-hire and indemnity.

• Charterer warrants that no sanctioned party benefits from the charter or voyage.
• Owner may refuse orders that would breach sanctions, export controls, or embargoes.
• Termination right activates without penalty where a voyage or counterparty becomes prohibited.

Covered Regimes & Triggers

• US OFAC, EU, UK, UN, and other flag-state or financial sanctions.
• SDN or similar listing of charterer, sub-charterer, cargo owner, or receiver.
• Payments, insurance, or cargoes that would trigger blocking or freezing obligations.
• Voyage deviations to load or discharge in embargoed regions.

Owner Safeguards

• Charterer indemnifies owner for all consequences of sanctions breaches caused by charterer orders.
• Hire and laytime suspend during delays caused by sanctions compliance checks or frozen payments.
• Immediate termination right without penalty if the vessel, owner, or charterer becomes a listed person or the voyage becomes unlawful.
• Evidence pack: KYC, bill of lading parties, end-use certificates, and sanction-screening logs.

Practical Checklist

• Sanctions screening done at fixture, before each load, and before discharge.
• Confirm insurance cover not voided by destination or cargo.
• Keep communication logs for refusal of unsafe or sanctioned orders.

Sample Rider Language

“Charterer warrants that neither it nor any sub-charterer, cargo owner, receiver, or affiliate is a person or entity designated under applicable sanctions laws or engaged in activities prohibited thereby. Owner may refuse or cancel any order that would expose the Vessel, Owner, or crew to sanctions risk. If such risk arises after fixture, Owner may terminate this Charter without liability, with hire ceasing upon redelivery. Charterer shall indemnify Owner against all loss, delay, or expense arising from breach of this warranty.”

Disclaimer: Example wording for discussion with counsel. Not legal advice.

Business Outcome

Updates the traditional “Act of God” clause to reflect real-world shipping disruptions—pandemics, cyber attacks, port lockdowns, and sudden trade restrictions. A clear force majeure clause allows suspension without default and defines when hire or laytime stops or continues.

• Defines qualifying events with precision to prevent misuse.
• Provides a clear process for notice, mitigation, and resumption.
• Clarifies when termination is allowed after extended interruption.

Typical Events Covered

• Epidemics, pandemics, or quarantine orders affecting crew or port operations.
• Port closures, government embargoes, trade bans, or restrictions on entry or departure.
• Cyber attacks disrupting navigation, communications, or port systems.
• Natural disasters, earthquakes, or extreme weather preventing safe navigation.

Notice & Mitigation Duties

• Affected party must promptly notify the counterparty, stating cause and expected duration.
• Obligation to use reasonable endeavors to overcome or mitigate the event.
• Performance suspended only while the event prevents fulfillment of contractual obligations.
• If disruption exceeds a defined period (e.g., 30–60 days), either party may terminate without liability.

Owner Safeguards

• Hire suspension applies only if the vessel is physically prevented from working cargo or proceeding to sea.
• Force majeure cannot excuse non-payment of hire or freight already earned.
• Owners retain right to claim demurrage or damages for delay caused by charterer’s internal events.

Disruption Impact Estimator

Sample Rider Language

“Neither party shall be liable for failure or delay in performing obligations hereunder if such failure or delay results from events beyond reasonable control including natural disasters, war, pandemic, cyber disruption, or governmental restrictions. The affected party shall notify the other promptly and resume performance when practicable. If such event continues for more than [45] consecutive days, either party may terminate this Charter without penalty.”

Disclaimer: Example wording for discussion with counsel. Not legal advice.

Business Outcome

Ensures the vessel’s Carbon Intensity Indicator (CII) stays within target bands by aligning operational decisions—speed, routing, and waiting time—with compliance limits. The clause protects owners if charterer orders threaten the ship’s annual CII rating.

• Establishes an agreed CII target or margin for the charter period.
• Prevents charterer orders that would push the ship into a lower rating band.
• Encourages joint planning to maintain an A–C rating and avoid corrective actions.

Operational Controls & Triggers

• Speed and power restrictions applied per EEXI technical limits and CII projection.
• Owners may request charterers to adjust routing or reduce speed to remain on target.
• Agreed CII forecast shared quarterly with supporting voyage data.

Owner Safeguards

• Charterer indemnifies owner for CII degradation resulting from their orders.
• Owner may refuse orders requiring speeds that exceed power limitation levels.
• Hire continues during justified slow-steaming to maintain the CII target.
• Annual CII reports form part of the vessel’s compliance audit package.

CII Impact Estimator

Sample Rider Language

“Charterer shall employ the Vessel in a manner consistent with achieving the annual CII target for the calendar year. The Vessel shall not be required to operate at speeds or power levels that would reasonably cause deterioration of its CII rating. If Charterer orders voyages or patterns likely to breach the agreed CII margin, Owner may require operational adjustments. All additional time or cost arising from such compliance measures shall be for Charterer’s account.”

Disclaimer: Example wording for discussion with counsel. Not legal advice.

Business Outcome

Aligns hire expectations with a clear warranted speed and daily fuel at stated conditions. Locks a fair test so owners are not penalized for weather, currents, shallow water, or fouling that sits outside the promise.

• Warranted speed and fuel tied to a specific sea state and wind scale.
• Method for verifying performance based on consistent, auditable data.
• Clear remedies limited to true underperformance at the stated conditions.

Test Conditions

• Clean, even keel, deep water, no known adverse current or swell refraction zones.
• Weather not exceeding Beaufort 4 and Douglas sea state 3, visibility normal.
• Performance assessed on ocean passages longer than 24 hours, excluding port approaches and TSS slowdowns.
• Data sources: noon reports, ECDIS track, weather routing logs, fuel ROB and flowmeters where fitted.

Owner Safeguards

• No claim unless charterer proves test conditions were satisfied and data is consistent.
• Reasonable hull and propeller cleanliness standard at delivery and periodic cleaning window.
• Weather and current corrections applied using the agreed routing provider only.
• Cap on aggregate performance deductions per calendar month.

Performance Estimator

Sample Rider Language

“Warranted performance: on deep sea passages in clean hull condition, in weather not exceeding Beaufort 4 and Douglas 3, the Vessel shall attain [W] knots on about [F] metric tons per day. Performance shall be determined from noon reports and agreed routing data excluding confined waters, TSS, canals, approach channels, and adverse current zones. No allowance shall be made unless Charterer proves the conditions were satisfied and data is consistent. Aggregate deductions for performance shall not exceed [X]% of hire per calendar month.”

Disclaimer: Example wording for discussion with counsel. Not legal advice.

Core Principle

The safe port or berth warranty holds charterers responsible for nominating a port that is safe both physically and politically for the vessel to reach, use, and depart. The classic test—whether a competent master could reach, stay, and leave without undue risk—still governs but now faces modern issues: sanctions, congestion, and instability.

• The warranty attaches at the time of nomination.
• “Safety” extends beyond navigational hazards to include war zones and sanctions.
• A temporary unsafety (e.g., storm or short blockade) may not breach the clause.

Owner Remedies

• Right to reject unsafe nomination before arrival without being off-hire.
• If already en route, deviation to a nearby safe anchorage at charterer’s expense.
• Indemnity for loss or damage resulting from unsafe nomination.
• Termination option if the port becomes permanently unsafe or embargoed.

Port Risk Evaluation Tool

Estimate comparative port safety scores for quick reference.

Sample Rider Language

“Charterers warrant that the port(s) or berth(s) nominated shall be safe for the Vessel to reach, use, and depart at all times relevant to the voyage. If the port becomes unsafe, the Master may proceed to the nearest safe anchorage pending further orders, such delay to be for Charterers’ account. Charterers shall indemnify Owners against all loss, damage, or delay resulting from the nomination of an unsafe port or berth.”

Disclaimer: Example wording for discussion with counsel. Not legal advice.

Business Outcome

Tightens when hire may be suspended by defining true “loss of time,” narrowing trigger events, and adding owner-friendly carve-outs for delays caused by charterer operations or external authorities. Keeps hire running unless the vessel is genuinely unavailable for the chartered service.

• Uses a clear “loss of time” yardstick, not just “deficiency of men or stores.”
• Separates breakdown from speed/consumption efficiency claims.
• Allocates third-party and bureaucracy delays to charterers where appropriate.

Off-Hire Triggers

• Main engine or essential machinery breakdown that prevents the service.
• Stranding, grounding, collision, fire—where the vessel cannot proceed.
• Detention by authorities caused by owner’s ship-related fault.
• Bunkers or stores contaminated by owner’s supply fault that stops the service.

Carve-Outs (Hire Continues)

• Port congestion, weather delays, pilotage and traffic schemes, customs/immigration holds not caused by the owner.
• Charterer-caused delays: slow cargo ops, documentation errors, missed berth windows.
• Fuel quality issues from charterer-provided bunkers (save for safety deviations).
• Regulatory inspections and PSC where no deficiency leading to detention is found.

Notification and Proof

• Off-hire runs only from written notice with time, position, cause, and evidence.
• Stops when the service resumes; periods of part-performance are prorated.
• Evidence pack: log extracts, defect reports, class notations, repair invoices.

Off-Hire Exposure Estimator

Sample Rider Language

“Hire shall not be suspended unless and until the Vessel suffers a breakdown or accident that results in a loss of time preventing the service required hereunder. Off-hire, if any, shall run only from written notice stating time, position, and cause, and shall cease upon resumption of service. Delays arising from weather, congestion, orders or acts of Charterers or their agents, customs, immigration, quarantine (absent Owner fault), or from Charterer-supplied bunkers or documents shall not place the Vessel off-hire.”

Disclaimer: Example wording for discussion with counsel. Not legal advice.

Core Provisions

The modern piracy clause allocates liberty and cost when transiting or avoiding high-risk areas. It balances safety with commercial necessity—letting owners deviate or refuse routing through a declared risk zone, and sharing costs when passage is agreed.

• Owners may refuse to enter any area listed as “War Risk” or “High-Risk Area” under Joint War Committee circulars.
• If agreed to proceed, war risk premium, kidnap/ransom, and additional insurance are for charterer’s account.
• Deviation or delay for security routing, convoy, or armed guard embarkation is not off-hire.

Cost Sharing & Adjustments

• War risk additional premium and crew bonus reimbursed by charterers upon proof.
• Armed guards or citadel equipment charges shared per prior agreement, typically 100% charterer’s account.
• Delays from convoy assembly or authority clearance treated as “on-hire.”
• Alternative routing costs to avoid risk zones to be jointly reviewed; owner may recalculate bunker adjustment clause accordingly.

Risk Index Calculator

Sample Rider Language

“If the Vessel is ordered to or through any area designated as a war or high-risk area, Owners shall be entitled to refuse such orders or to require Charterers’ confirmation to proceed, in which case all extra premiums, crew bonuses, and additional costs or delays shall be for Charterers’ account. Any deviation for the purpose of avoiding a high-risk area or embarking security personnel shall not be deemed off-hire.”

Disclaimer: Example wording for discussion with counsel. Not legal advice.