Hire statement and payment mechanics under a time charter
How a hire statement is built, the deductions that are permitted, and the risk a charterer takes by deducting a contested claim from hire.
A hire statement is the periodic account by which a time charterer pays for the vessel. It starts from the gross hire for the period at the charter rate, deducts address commission to the charterer and brokerage to the broking houses, and then deducts the agreed items: off-hire already established, the value of bunkers consumed during off-hire, owner’s disbursements the charterer has advanced, and any agreed performance claim. How each of those two claim types is measured, and why the owner’s loss and the charterer’s deduction differ by the address commission, is covered in off-hire and performance claims .
The risk sits in the last line. Hire is payable in advance and in full, and a charterer that deducts a contested performance or off-hire claim is at risk of being in default on hire itself, which opens the owner’s withdrawal right. The orthodox position is that a charterer may make a deduction only where the charter permits it or where the claim is for an equitable set-off that is sufficiently closely connected, and that the deduction must be made in good faith on reasonable grounds.
The full article will cover the statement line by line, the treatment of a part period, the semi-monthly and monthly conventions, the commission band and who pays it, the mechanics of an owner’s disbursement account, the rules on permissible deduction and set-off, and how a disputed deduction is unwound after an award.