Now that you know what Demurrage is, it is time to move on and learn how to distinguish it from Damages for Detention. But why we should even bother doing so?
This is why: Your vessel is fixed under a voyage charter to carry a cargo of grain from Berdyansk, Ukraine to one / two safe ports in Libya or Egypt in Charterers’ option. The Charterers are obliged under the Charter to nominate the discharge port(s) prior to the vessel crossing Bosphorus.
The vessel loaded her cargo and is currently en route having already crossed Bosphorus southbound. Charterers (Happy Grain), however, having failed to nominate a discharging port yet, they give you a call at your operations department. You pause this youtube video you have been watching on repeat all day and pick up the phone.
-Yes, hi it is Happy Grain here, how are you today?
-Oh yes, hi hello there. Yes, not that bad considering the market rates – lol. I have been waiting your call actually.
-Haha, riiiiight… Well, we need a favour I am afraid.
-Can you ask the Master to wait off Crete until we decide the discharge port. Sorry about this *hangs up*
-I do not see why we should order the vessel to wait.. Hello? Hi? Can you hear me?
Unsurprisingly, the Charterer is facing a problem in his Sale Contract (so many things can go wrong) and for his own reasons has asked the vessel to wait for a moment. Generally speaking, the vessel has to follow Charterers’ legitimate orders.
However, when Owners calculated their freight rate, they made their calculations based on a certain – uninterrupted approximate time for sailing which will now have to be extended due to Charterers’ default. This will naturally lead to additional time being wasted. Vessels’ time costs money you know. How will our Shipowner get compensated for the lost time? They cannot obviously apply Demurrage as the vessel is not at the discharging place and she cannot tender her Notice of Readiness to start Laytime counting.
This is where damages for detention creep in. Generally speaking, Damages for Detention will arise when a vessel is delayed due to Charterers’ fault either on the approach or carrying voyage, or respectively at the port of loading or discharge. They also may cover delays after completion of the cargo operations.
That is all for now folks. Have a question? Fire it away at the comments’ section below. In another session we will be speaking about how are Damages for Detention calculated. AGW.