BIMCO has published a standard form Charterparty Guarantee, in respect of the guarantee of Charterers’ payment obligations and liabilities under a time charterparty. As well as payments due to Owners by Charterers, the document also incorporates a guarantee in respect of Charterers’ liabilities for other items including bunkers, port charges and stevedoring costs. Owners may find themselves liable for such items if Charterers default on payment.
When entering into a charterparty, particularly in the current economic climate, Owners need some certainty that they will be paid the sums due to them. As a result, it has become increasingly common for Owners to demand a guarantee in respect of Charterers’ performance, which will often be provided by Charterers’ parent company or an associated company. Such a guarantee will give Owners rights of recourse should Charterers fail to honour their obligations by, for example, failing to pay sums due and/or redelivering the vessel early. It also provides Owners with an additional target should Charterers become insolvent, an all too common occurrence in today’s market.
However, a guarantee will be worth very little if it is poorly drafted. Incorrect or insufficient wording may mean that, in reality, Owners’ right to pursue the guarantor is not sufficiently defined. BIMCO’s standard form guarantee aims to help avoid the “pitfalls” arising from poor drafting by providing what they describe as a “clearly worded and comprehensive guarantee of the charterer’s obligations to pay all sums due under the charter party”.
The full text of the guarantee is available on the BIMCO website, together with explanatory notes which set out the reasoning behind the key clauses in the guarantee.