What is a lump-sum charter?
A lump-sum charter is a voyage charter in which freight is agreed as a fixed total monetary sum for the use of the vessel’s cargo capacity, or a contractually designated portion of it, for a specific voyage, irrespective of the actual weight or volume of cargo loaded or delivered. It decouples the carrier’s remuneration from the physical quantity carried and transfers the volume-utilization risk to the charterer.
That is the defining contrast with a standard voyage charter, where freight is calculated as a rate per unit of mass or volume, such as USD per tonne, and accrues in proportion to intaken or delivered cargo quantities confirmed by draft surveys or weighbridge certificates. Under a lump-sum charter, the carrier earns the agreed total sum once the contractually designated performance milestone is reached, typically completion of loading, provided the vessel presents the contractually guaranteed capacity, regardless of how much of that space the charterer actually fills.
English common law, which governs most international charter parties, treats a lump-sum freight as a definite sum agreed for the hire of a ship for a specified voyage, uncoupled from the quantity of cargo actually carried, as Lord Lindley put it in Williams v. Canton Insurance Office Ltd [1901] AC 462. In Thomas v. Harrowing Steamship Co [1915] AC 58 (HL), the House of Lords went further: if the shipowner delivers any substantial part of the cargo at the contractual destination, the full lump-sum freight is payable without deduction, even if the vessel itself is lost en route to an excepted peril and the cargo is forwarded by other means. The Dominique [1989] 1 Lloyd’s Rep 431 (HL) confirmed that where freight is contractually deemed earned on shipment or completion of loading, the charterer’s obligation to pay becomes absolute and non-returnable, and survives even a later termination of the charterparty for the shipowner’s repudiatory breach.
How a lump-sum charter works in practice
Lump-sum freight is commercially quoted as an all-inclusive figure, for example USD 350,000 FIOST (Free In/Out Stowed and Trimmed), tied to an express warranty of the vessel’s available deadweight cargo capacity (DWCC) and gross cubic capacity (grain or bale space). If the owner cannot present the warranted capacity, whether because of excess bunkers, unpumped ballast, or a structural obstruction, the charterer can claim a proportional freight reduction or damages for breach of the capacity warranty.
BIMCO’s GENCON 2022, at clause 7, distinguishes per-tonne freight, which is earned progressively as cargo is loaded, from lump-sum freight, which is earned only on completion of loading and is non-returnable once earned, vessel or cargo lost or not lost. Older GENCON 1994 fixtures instead governed payment timing through box selections in Part I, choosing between advance freight on signing of the bills of lading or freight payable on right delivery. Offshore standard forms, such as BIMCO SUPPLYTIME, apply the same “earned on shipment or commencement” logic to lump-sum mobilization or transit charges. When a GENCON-family form is adapted for a lump-sum fixture, the per-tonne freight wording is deleted and replaced with an express lump-sum amount, a statement that freight is earned on completion of loading, and a non-returnable, lost-or-not-lost clause. Specialized forms built for project and heavy-lift cargo, such as BIMCO’s HEAVYCON 2007 and HEAVYLIFTVOY, carry lump-sum freight as their default structure rather than an amendment.
Lump-sum charters also change how two familiar voyage-charter concepts apply. Deadfreight, the damages an owner claims when a per-tonne charterer short-loads, is not applicable under a lump-sum charter: because the owner is paid the full agreed sum regardless of the volume loaded, there is no lost freight to claim on unsupplied tonnage. Laytime and demurrage, by contrast, operate exactly as they do on a per-tonne fixture: the charterparty still sets an allowed time for cargo operations, and demurrage still accrues at the agreed daily rate as a separate remedy for delaying the vessel, unaffected by the lump-sum freight structure.
| Cost or risk axis | Owner exposure | Charterer exposure |
|---|---|---|
| Bunker | Owner | None |
| Port costs and disbursements | Owner | None |
| Canal dues and towage | Owner | None unless agreed deviation |
| Cargo quantity / deadfreight | None: full lump sum earned regardless of quantity loaded | None: deadfreight does not apply under lump-sum freight |
| Broken stowage | None: owner is paid for the space offered, not how it is packed | Charterer bears any unutilized void space in the holds |
| Capacity warranty (DWCC / cubic) | Owner liable for damages or freight reduction if guaranteed capacity is not presented | None, subject to a valid capacity claim |
| Demurrage and despatch | Owner pays despatch | Charterer pays demurrage on laytime overrun |
| Cargo claims | Owner (Hague-Visby liabilities) | Owner subject to FIO stow |
| Crew and maintenance | Owner | None |
Lump-sum charter vs per-tonne voyage charter and time charter
The clearest way to place a lump-sum charter is against the two instruments it sits between: the per-tonne voyage charter, which prices the cargo actually carried, and the time charter, which prices the vessel’s time rather than any single voyage.
| Lump-sum voyage charter | Per-tonne voyage charter | Time charter | |
|---|---|---|---|
| What is paid for | A fixed sum for total vessel capacity or specific holds, one voyage | A unit rate (USD per tonne) on weight or volume loaded or delivered | A daily hire rate for the continuous duration of the charter |
| Cargo quantity risk | Charterer bears the full risk: lump sum is due regardless of short-loading | Shared: owner can recover deadfreight on a shortfall | Charterer bears the risk: daily hire is due regardless of cargo volume |
| Voyage costs allocation | Shipowner pays bunkers, port charges, canal fees, pilotage | Shipowner pays bunkers, port charges, canal fees, pilotage | Charterer pays bunkers, port fees, canal tolls, stevedoring |
| Laytime and demurrage | Applies, unaffected by the lump-sum structure | Applies | Does not apply: delay is absorbed through ongoing daily hire |
| Best for | Mixed cargoes, project or heavy-lift goods, draft-restricted ports | Bulk commodities with a reliable stowage factor | Programme cargo, multi-voyage trading, fleet control |
Use a lump-sum charter when the cargo’s stowage factor or bulk density is uncertain or highly variable, so that a per-tonne rate would create disputes over vessel draft and cargo intake. Use a standard per-tonne voyage charter when the commodity has a reliable, well-documented stowage factor and the charterer wants to pay only for what is actually loaded. A time charter is the right instrument when the cargo interest has a programme of lifts rather than a single voyage and wants to control the vessel’s employment directly.
Risk allocation between owner and charterer
A lump-sum structure redistributes commercial risk relative to a per-tonne voyage charter. The shipowner is fully protected against short-shipment: if the charterer cannot supply a full cargo, the owner’s revenue on that voyage is unaffected, and broken stowage, the unutilized void space created by irregular cargo shapes or dunnage, is borne by the charterer rather than the owner. The owner is paid for the volume placed at the charterer’s disposal, not for how efficiently it is packed. Owners also benefit operationally when a charterer short-loads: full revenue is earned while the vessel’s reduced displacement lowers bunker consumption and light-draft port or canal dues. Set against that protection is the owner’s strict exposure on the capacity warranty. If the vessel cannot accept the guaranteed DWCC or cubic volume, the charterer can claim damages or a freight deduction.
The charterer, in exchange, gains full commercial flexibility over the hired capacity: it can combine multiple cargo types or alter a loading plan without renegotiating a per-unit rate. That flexibility comes with the mirror image of the owner’s protection: the charterer carries the full financial exposure for underutilizing the vessel. If it fails to supply enough cargo to fill the contracted space, the effective freight cost per tonne rises sharply. Conversely, if the charterer loads to the vessel’s full guaranteed DWCC or cubic capacity, the effective per-tonne cost can drop below the prevailing per-tonne market rate, which is the commercial upside that makes a lump-sum deal attractive when the charterer is confident in its cargo supply.
Worked break-even example
Break-even between lump-sum and per-tonne freight on a project-cargo parcel
- Vessel
- Warranted DWCC of 12,000 mt
- Option A
- Per-tonne freight at USD 34.00 per mt
- Option B
- Lump-sum freight at USD 374,000, FIOST
- Break-even quantity
- 11,000 mt (lump sum / per-tonne rate)
- Cargo type
- Mixed scrap and project units, uncertain stowage factor
- Key clauses
- GENCON 2022 clause 7 adapted for lump sum, freight earned on completion of loading, non-returnable, vessel or cargo lost or not lost
The break-even cargo quantity is the point where the per-tonne total (rate x quantity) equals the lump sum: USD 374,000 / USD 34.00 per mt = 11,000 mt. Below that quantity, the per-tonne option is cheaper for the charterer; above it, the lump sum is cheaper.
If cargo supply falls short at 9,500 mt, the per-tonne charter costs USD 323,000 against a fixed USD 374,000 lump sum, a per-tonne saving for the charterer. If the charterer loads to the vessel’s full 12,000 mt DWCC, the per-tonne charter would cost USD 408,000 against the same USD 374,000 lump sum, so the lump-sum structure now saves the charterer USD 34,000 and lowers the effective rate to about USD 31.17 per mt.
This is the trade a charterer is actually making at the point of fixing: a lump sum is a bet that the vessel will be loaded close to its full warranted capacity. Below the break-even point, the charterer has effectively pre-paid for space it did not use.
Common mistakes and misuse
- Claiming deadfreight on a lump-sum fixture. Deadfreight is a per-tonne remedy for short-loading. Under a lump-sum charter the owner has already been paid the full agreed sum, so there is no deadfreight claim to bring, whatever the loaded quantity.
- Leaving legacy per-tonne freight wording in an adapted GENCON form. A lump-sum fixture built on GENCON must delete the per-tonne freight clause and substitute express lump-sum wording confirming the total sum, that freight is earned on completion of loading, and that it is non-returnable, vessel or cargo lost or not lost.
- Treating the DWCC and cubic capacity warranty as boilerplate. Because the whole commercial logic of a lump sum rests on the owner presenting the warranted capacity, a charterer that skips verifying the vessel’s capacity figures against the stem plan is exposed if the owner cannot actually load to the warranted tonnage.
- Ignoring broken stowage when comparing a lump-sum quote to a per-tonne quote. A lump-sum rate that looks expensive on a naive per-tonne comparison can be the cheaper option once the unfillable void space around irregular project cargo is priced into the per-tonne alternative.
- Forgetting that laytime and demurrage are unaffected. Some charterers assume a lump-sum structure loosens the laytime regime because freight is already fixed. It does not: the demurrage clock runs exactly as it would on a per-tonne fixture.
- Fixing lump sum on a cargo with a stable, well-documented stowage factor. Lump sum earns its premium by removing measurement disputes on uncertain cargoes; on a commodity like grain or coal with a citable stowage factor, a per-tonne rate is usually the cheaper and simpler structure.
When a lump-sum charter is the right choice
A lump-sum charter is the right instrument when the cargo has an uncertain or highly variable stowage factor, such as mixed scrap metal, forest products, or bundled timber, where a per-tonne rate would create friction over draft limits and cargo intake at the load port. It is close to the default structure for project cargo, heavy lift, and breakbulk, industrial modules, wind turbine blades, transformers, and mining equipment, because the broken stowage those shapes create would otherwise cost the owner lost revenue under a per-tonne rate; BIMCO’s HEAVYCON and HEAVYLIFTVOY forms build lump-sum freight in as standard for exactly that reason. It also suits a part-cargo parcel, where a trader wants a guaranteed, isolated allocation of a specific hold at a predictable total cost, and voyages into ports with seasonal draft restrictions, such as river or estuary berths, where the charterer is willing to take on the draft-variation risk in exchange for securing the vessel.
For a cargo with a stable, well-documented stowage factor, a standard voyage charter priced per tonne is usually the simpler and cheaper choice. Structuring the capacity warranty, the freight clause, and the laytime terms on a lump-sum fixture is a specialised drafting exercise; our ship-brokering desk handles lump-sum inquiries for project, heavy-lift, and mixed-cargo parcels.
Scope and what this page does not cover
This page explains the commercial mechanics of a lump-sum charter and how it differs from a per-tonne voyage charter. It does not provide clause-by-clause legal drafting, jurisdiction-specific case-law analysis beyond the headline English authorities cited above, or freight-rate forecasts for any lane or cargo type. For clause drafting and current market levels, work with chartering counsel and a desk-side broker. To structure a lump-sum fixture for a project, heavy-lift, or mixed-cargo parcel, get a quote.