The Hidden Costs in Clause 29: Are You Overlooking the USD 1,500 Monthly Surprise?

 📡 “The Hidden Costs in Clause 29: Are You Overlooking the USD 1,500 Monthly Surprise?”

❓ Yes/No Questions to Spark Curiosity

1. Do you know if your lumpsum payments under Clause 29 cover more than just communication charges?
2. Are you aware that “victualling and gratuities” could include crew-related welfare expenses?
3. Have you ever challenged or negotiated the USD 1,500 lumpsum in your fixture recap?

 

📖 Clause Breakdown: What Does Clause 29 Actually Mean?

Clause 29 of the NYPE charter party often goes unnoticed during negotiations but can carry cost implications that become evident later during operations.

 

Text of Clause:

“Charterers to pay a lumpsum of USD 1,500 per month or pro rata for all victualling / gratuities and cost of cables.”

 

Let’s break it down:

 

🔍 Key Elements:

• Lumpsum of USD 1,500 per month: This is a fixed cost charged by owners to charterers. It covers recurring miscellaneous expenses not separately invoiced.
• Victualling: Refers to food supplies, often crew-related. It suggests that a portion of crew welfare costs may be bundled here, especially when services like additional provisions are provided during port calls.
• Gratuities: Covers small cash gifts or mandatory tips typically paid in certain ports (e.g., to stevedores or port officials in specific countries).
• Cost of cables: Though traditional telegram cables are outdated, this still legally covers communication expenses—such as wireless station use, telexes, or even satcom messages, depending on the vessel setup.

💡 Implications:

• Not limited to communication: Many believe this clause only refers to telecom charges, but it extends to food and tipping.
• Risk of double-charging: If not properly tracked, owners might charge actual communication costs and collect the lumpsum—check your accounting system.
• Outdated language: The clause references “cables,” a term that's mostly obsolete. Yet, the legal interpretation still holds unless explicitly amended.
• Pro rata application: If the charter period is less than a full month, this clause allows owners to apply the lumpsum proportionately, which can impact off-hire periods and termination calculations.

⚖️ Case Law / BIMCO Note:

No direct case law is associated with this clause, but BIMCO guidance encourages clarity in communication-related costs and recommends itemizing modern comms like satellite phone use, internet access, and IT support—especially with digitalisation on board.

 

🧭 Actionable Steps

 

For Charterers:

• Verify whether the fixed lumpsum is in line with actual vessel comms and port practices.
• During negotiations, ask for an itemised breakdown if the clause is amended or the lumpsum seems high.

 

For Owners:

• Ensure you’re not charging twice (lumpsum + actuals) unless the CP permits it.
• Update this clause language in rider clauses or fixture recaps for transparency.

 

For Operators/Managers:

• Flag this clause early during charter review for financial accuracy.
• Keep internal records to track if the lumpsum is truly covering the costs incurred.

 

Clause 29 might seem like a minor administrative line item, but it quietly absorbs a variety of costs that can affect voyage profitability if misunderstood. Don’t let outdated terminology or vague language cost your operation more than necessary.

💡 If this breakdown helped clarify the clause and its real-world implications, like this post, share it with your ops team, and subscribe to the ShipOpsInsight blog for more deep dives into NYPE and Gencon clauses. Empower your decisions, clause by clause.