BARECON 89 Standard Bareboat Charter revised (Printed in BIMCO Bulletin No. 2, ) BIMCO introduced the first standard bareboat charter. BARECON 89 (BARECON ). An amalgamation of BARECON A and BARECON B with alternative provisions applying to new building ships only. BARECON 89, Bareboat charter, Smartcon . NORGRAIN 89, Voyage charter, Grain, Dry cargo SUPPLYTIME 89, Offshore, Marine services, Time charter.

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Rather than catering only for a single fixed charter period, BARECON envisages the parties agreeing an extra period on top, exercisable at the charterers’ option. The length of this extra period must be stated in box 18 on the face of the form, along with the deadline by which the charterers must give notice to the owners if they wish to extend. Although owners and charterers sometimes did this ad hoc, by adding bespoke wording, the inclusion of a clear mechanism for extending the charter period in BARECON is to be welcomed.

BARECON maintains the position under the form that the charterers cannot claim against the owners for not meeting any conditions, representations or warranties in relation to the vessel once delivery has taken place. As this imposes a severe restriction on the charterers’ rights, BIMCO has decided to extend the obligations on the owners in relation to the condition of the vessel on delivery.

The owners now have an absolute obligation to deliver the vessel in a seaworthy condition and, in every respect, ready for the charter service, whereas, under the old form, the owners needed only to “exercise due diligence” in this regard. This is a significant tightening of the owners’ obligations on delivery. To further protect the charterers’ interests, BARECON provides that, if the charterers have inspected the vessel prior to delivery, it shall be delivered in the same condition as at the time of the inspection, fair wear and tear excepted.

Charterers would be well-advised to ensure that an inspection is carried out before delivery to take advantage of this protection.

These amendments are helpful in striking a balance between the owners’ and charterers’ rights on, and after, delivery in relation to the condition of the vessel. When drafting BARECONthe BIMCO sub-committee recognised that the charterers could be exposed in the event of the vessel sustaining damage shortly before delivery, suggesting that the charterers “should seek to negotiate an amenable settlement with the owners in respect of damage that has occurred between inspection and delivery”.

Although the time of delivery is the latest point at which the charterers can raise claims relating to the condition of the vessel, an exception is made for “latent defects” — defined in BARECON unlike earlier versions of the form as defects “which could not be discovered on such an examination as a reasonably careful skilled person would make”.

The owners will be liable for the cost of but not the time for repairs or renewals arising out of “latent defects” in the vessel which existed at the time of delivery. The latent defects must, however, manifest themselves within a fixed period after delivery if they are to form the basis of a claim against the owners.

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The parties are free to agree the length of the fixed period baarecon a default period of 12 months will apply if no other agreement is reached mirroring the position under BARECON BARECON has a new clause allowing the charterers to “place a maximum of two 2 representatives on board the Vessel at their sole risk and expense” for “a reasonable period prior to delivery of the Vessel”. The charterers and bareconn representatives are required to sign “the Owners’ usual letter of indemnity prior to embarkation”.

A similarly worded provision entitles the owners to place two representatives on board prior narecon redelivery. In its explanatory comments accompanying the new form, BIMCO says that “the representatives are there to familiarise themselves with the ship but without interfering with its operation”.

The operational and safety benefits barexon ensuring that the charterers’ representatives are familiar with the vessel are clear, and so this new clause has been welcomed; but there is scope for dispute between the parties as to how long the ” reasonable period prior to delivery” should be, or whether the letter of indemnity that the charterers must sign is fair and reasonable.

To reduce the risk of such issues arising, the parties may wish to prescribe expressly the length of the period in which the charterers’ and owners’ representatives are allowed onboard prior to delivery and redelivery respectively, and the wording of the letters of indemnity that will need to be signed could be appended to the charter form, so that their terms are clear from the outset.

BARECON What’s new? : Clyde & Co (en)

Another new measure in BARECON is the inclusion of a clause permitting the charterers at delivery and the owners at redelivery to arrange for an underwater inspection, to be performed by a diver approved by Class and in the presence of a Class surveyor. The inspection would determine the condition of the rudder, propeller, bottom and other underwater parts of the vessel.

This new regime acknowledges that it is braecon common for owners and charterers to agree to underwater inspections as part of the surveys on delivery and redelivery. BARECON had prescribed that, in the event of any structural changes or barrcon equipment becoming necessary for the continued operation of the vessel by reason of new Class requirements or by compulsory legislation, the cost of compliance would if above a certain level be shared between the parties in such a way as to achieve “a reasonable distribution” of the cost between them, bearing in mind the length of the period remaining under the charter period.

No specific formula for the cost-sharing was ever included in the form, leading to uncertainty and potential disagreement. The parties have a choice: Different versions of the formula apply depending on whether the modification will remain to the end of the expected lifespan of the vessel, or only for a shorter period. The owners and the bareboat charterers were co-insureds under a policy, and it was held by the Supreme Court that the bareboat charterers had no liability to the owners in circumstances where the insurance covered the claim.

This meant that there was no claim that could be passed down from the bareboat charterers to the time charterers, and therefore no avenue for recovery by the insurers of the losses they had sustained, an outcome that was greeted with some surprise by the industry. BARECON seeks to close this gap by expressly providing that the insurance clauses in the form are “intended to secure payment of the loss insurance proceeds as a first resort to make good the Owners’ loss”.

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If the insurance pays out on the owners’ loss, such payment “shall be treated as satisfaction but not exclusion or discharge of the Charterers’ liability towards the Owners”.

The intention, therefore, is to leave open to the insurers an avenue of recovery against third parties such as time charterers from whom the bareboat charterers may have a valid claim in respect of a loss. The revisions made by BARECON to the earlier iteration of the form are helpful in clarifying the basis on which the parties are contracting and in reducing the potential for dispute.

Although the addition of new provisions may introduce uncertainty in some respects, their advent comes with a clear commercial rationale. The form also strikes a sensible balance between the competing interests of the owners and charterers. Charter period Rather than catering only for a single fixed charter period, BARECON envisages the parties agreeing an extra period on top, exercisable at the charterers’ option.

Condition on delivery BARECON maintains the position under the form that the charterers cannot claim against the owners for not meeting any conditions, representations or warranties in relation to the vessel once delivery has taken place. Latent defects Although the time of delivery is the latest point at which the charterers can raise claims relating to the condition of the vessel, an exception is made for “latent defects” — defined in BARECON unlike earlier versions of the form as defects “which could not be discovered on such an examination as a reasonably careful skilled person would make”.

Familiarisation BARECON has a new clause allowing the charterers to “place a maximum of two 2 representatives on board the Vessel at their sole risk and expense” for “a reasonable period prior to delivery of the Vessel”.

Lloyd’s Maritime and Commercial Law Quarterly

Underwater inspections Another new measure in BARECON is the inclusion of a clause permitting the charterers at delivery and the owners at redelivery to arrange for an underwater inspection, to be performed by a diver approved by Class and in the presence of a Class surveyor. Maintenance BARECON had prescribed that, in the event of any structural changes or new equipment becoming necessary for the continued operation of the vessel by reason of new Class requirements or by compulsory legislation, the cost of compliance would if above a certain level be shared between the parties in such a way as to achieve “a reasonable distribution” of the cost between them, bearing in mind the length of the period remaining under the charter period.

Comment The revisions made by BARECON to the earlier iteration of the form are helpful in clarifying the basis on which the parties are contracting and in reducing the potential for dispute.