Suspending Performance Under Bargehire – A Useful Right For Owners?

Under a conventional cargo time charter party, the right to suspend performance for non-payment of hire provides owners with a powerful commercial tool to leverage late hire payments. However, based on industry feedback, applying the same sanction under BARGEHIRE is impractical.

A barge fixed on BARGEHIRE operates outside the direct control and operation of the owners, who may not know the location of the barge or its current activity on a day-to-day basis. These simple facts essentially hinder any attempts by owners to “suspend” performance pending the payment of hire.

So, what can owners do when hire is not paid for a barge? The answer is termination. This may seem drastic, but it makes perfect sense from a practical and commercial point of view. A right to suspend performance provides no benefit to owners, as they are unable to exercise such a right over a chartered barge.

“BARGEHIRE is by nature a bareboat contract where charterers take total control over the barge and owners are not performing any services which can be practically suspended to force charterers to pay,” says Dirk Kwantes (LKL Oceantrade B.V.), chairman of the subcommittee revising BARGEHIRE 2008.

“We want the revised BARGEHIRE 2008 to have a clear and effective procedure to deal with non-payment of hire. If charterers do not pay hire in accordance with the agreed terms, owners can terminate the contract provided the five-day grace period has expired,” Kwantes says.

The new edition of BARGEHIRE is being developed by representatives from LKL Oceantrade B.V., Cashman Equipment Corporation, Ugland, Heerema Marine Contractors, Subsea 7 and Shipowners’ Club.
Source: BIMCO