Off-Hire

What it does

An off-hire clause identifies the events that stop the clock on hire under a time charter, so that the charterer does not pay for time during which the vessel is not fully at its disposal. Time charter hire normally runs continuously from delivery to redelivery, and the off-hire clause is the agreed exception: when a listed cause prevents the full working of the ship, hire is suspended for the period and to the extent provided.

Typical off-hire events include breakdown of machinery, deficiency of crew or stores, damage to the ship, drydocking, and detention arising from the vessel's condition. The clause defines both the triggering causes and the method of calculating the lost time, whether on a net loss-of-time basis, counting only time actually lost, or a period basis, running off-hire for the whole duration of the event once it is triggered.

Commercial effect

The off-hire clause allocates the risk of the ship not performing between the parties. Under a time charter the charterer pays a continuous daily rate and bears most commercial risks of the voyage, but the off-hire clause carves out time lost through the vessel's own incapacity and shifts that risk to the owner, who is not paid while the ship cannot do the job the charterer is paying for.

How the clause is drafted has real money in it. A net loss-of-time clause gives the charterer credit only for time genuinely lost, while a period clause can stop hire entirely for the duration of an event even if some work continued. The list of causes, the threshold before off-hire begins, and the treatment of consequential time all determine how much hire the charterer can withhold when things go wrong.

Owner's perspective

The owner wants the off-hire events defined narrowly and the calculation tied to time actually lost, so that hire is suspended only when the ship genuinely cannot work and only to the extent of the real loss. It resists broad or open-ended off-hire wording that would let the charterer stop hire for minor or partial interruptions that do not truly prevent the vessel from performing.

The owner also watches the interaction with its maintenance obligations and with any deductible threshold, since it would rather absorb a short qualifying period than expose itself to off-hire from the first moment of every minor issue. Clear definitions protect the owner's hire income, which is the whole return on the charter, against deductions that go beyond the bargain the clause was meant to strike.

Charterer's perspective

The charterer wants a comprehensive off-hire clause so that it does not pay for a ship it cannot fully use, capturing the realistic ways the vessel might be prevented from working, including breakdowns, crew deficiencies, and time spent dealing with the ship's condition. It is paying a continuous rate and wants assurance that incapacity on the owner's side relieves it of hire.

The charterer also cares about the calculation basis and the consequential effects, since an interruption can cost time well beyond the event itself, for example a missed tide or a lost berth. It presses for off-hire to capture that knock-on time where fair, and for the threshold before off-hire begins to be low, so that the financial consequence of the ship not performing rests with the owner.

Negotiation points

• The list of off-hire events and how tightly or broadly each is defined.
• Whether hire is suspended on a net loss-of-time basis or for the whole period of the event.
• Any threshold or deductible period before off-hire begins to run.
• The treatment of consequential time lost, such as a missed tide or berth, after the event.

Common variations

• A net loss-of-time off-hire clause crediting only time actually lost.
• A period off-hire clause suspending hire for the full duration of a triggering event.
• A clause with a stated threshold (for example a number of hours) before off-hire starts.
• An off-hire clause expressly covering drydocking, deviation for the ship's purposes, and detention.