Navigating ship charter contracts: Travel Weekly

Date:

Mark Pestronk

Mark Pestronk

Q: Our agency is the official travel agency for a large membership organization. The organization has asked us to charter a river ship. We have received bids from several river cruise lines, and we have selected one of them based on the business terms. The cruise line has presented a 25-page charter contract which is really difficult to understand. Can you give me some guidance about the important things to look for in the contract? Also, the contract itself is called a “charter party.” That is certainly an odd name, but does it mean anything that I need to be concerned about?

A: Unlike the majority of trade contracts that agencies deal with, ship charter contracts require a great deal of legal expertise and experience. Although I am providing a short checklist of points to consider, I strongly advise you to retain a knowledgeable lawyer.

• First and foremost, you should try to get the client organization (instead of your agency) to sign the contract to charter the ship, so that you are not on the hook for damages in case the organization cancels. If you want to mark up the charter price and not disclose the price that the cruise line charges, you can try to get the client’s permission to sign the contract as attorney in-fact or agent for the client organization.

• You need to make sure that, if the charter doesn’t operate for any reason except for your own breach of contract, you (or the organization, if it is the charterer) will be entitled to a full refund. For example, if the cruise line cancels the charter because of low water or a similar operational reason, the cruise line should not get to retain the money unless the cruise line agrees to pay the cost of chartering an equivalent ship on an equivalent itinerary if yours cannot operate.

• If the cruise is cut short for any reason, the line must arrange or pay for overnight hotel stays and transfers to the scheduled port of disembarkation or the passenger’s home city. 

• Try to provide that you can cancel without charge in the event that more than half of the guests are unwilling or unable to travel to the embarkation point because of supplier shutdowns, State Department advisories or pandemics.

• If you need to cancel for a reason other than those set forth above, the cruise line must use diligent efforts to resell the space and credit you with the new revenue against any cancellation fees that you owe.

• The cruise line should agree to indemnify your agency against all claims related to operation of the cruise. In the event that your agency gets sued due to an operational issue, the cruise line should also agree to cover your legal fees.

• Your agency should be named as an “additional insured” under the cruise lines’ liability policy.

By the way, “charter party” is nothing more than an old-fashioned term for a charter contract. 

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