Definition, Legal Nature, and Turkish Supreme Court Practice
I. Introduction
Maritime trade, an inherently international and high-risk sector carrying a significant portion of global trade volume, relies heavily on the charterparty (contract of carriage by sea) as one of its fundamental agreements. In the Turkish Commercial Code (Law No. 6102, “TCC”), maritime trade is regulated comprehensively under a separate book, and the contract of carriage of goods by sea (charterparty) is addressed under the title “Contract of Carriage by Sea” (Navlun Sözleşmesi) in TCC Article 1138 and subsequent articles.
The charterparty is more than just a carriage contract; it establishes a highly technical and complex legal relationship concerning the identities of the parties (carrier, actual carrier, shipper/charterer, consignee), freight claims and possessory lien, the legal effects of the bill of lading, the carrier’s liability for loss, damage, and delay, limits of liability, and time-bar/extinctive periods.
This article will examine the definition, elements, and parties of the charterparty; the rights and obligations of the carrier and charterer; its relationship with the bill of lading; the carrier’s liability regime, possessory lien, and time-bar/extinctive periods, all in light of the current and significant decisions of the 11th Civil Chamber of the Turkish Supreme Court (Yargıtay).
II. Concepts of Freight and Charterparty
1. The Concept of “Freight” (Navlun)
The term “Navlun” (Freight) is used both to denote the contract itself and the remuneration paid under this contract. In doctrine and practice, freight is defined as the transportation fee paid for the carriage of goods by sea, while the charterparty (Navlun Sözleşmesi) is the contractual relationship governing this carriage service.
While the TCC does not contain a specific, standalone definition article for the charterparty, a systemic evaluation of its provisions confirms that it is a bilateral contract imposing obligations on both parties: the carrier undertakes the commitment to carry the goods by sea in exchange for the freight, and the counterparty (charterer/shipper) assumes the obligation to pay the freight.
2. Types of Charterparties (TCC Art. 1138)
According to TCC Article 1138, in return for freight, the carrier undertakes:
- In a Voyage Charter (Yolculuk Çarteri), to place the entire ship, a part of it, or a specific space at the charterer’s disposal.
- In a Contract of Carriage of Specific Goods (Kırkambar Sözleşmesi, liner/parcel carriage), to carry specific, identified goods by sea.
Accordingly, contracts for the carriage of goods by sea are primarily divided into two types:
- Voyage Charter: Involves the allocation of the entire ship or a part of it to the charterer for a specific voyage.
- Contract of Carriage of Specific Goods (Liner/Parcel): The carrier undertakes to carry specific goods without allocating a specific space on the ship.
Furthermore, agreements like time charter and bareboat/demise charter are widely used in practice. Some of these are considered more akin to ship lease contracts rather than classical charterparties, and are therefore evaluated under the principles of the Law of Obligations rather than the TCC’s charterparty provisions.
III. Parties and Designations in the Charterparty
The charterparty relationship involves multiple roles and designations. The correct identification of these roles is critical, especially for determining who has the right to claim and who is liable.
1. Carrier and Actual Carrier
In the TCC, the carrier is defined as the person who makes the contract of carriage or on whose behalf it is made, while the actual carrier is the person, as the owner, charterer, or operator of the ship, who performs the whole or a part of the carriage.
In practice, the roles of shipowner/managing owner (armatör/donatan), time charterer, ship manager, and forwarding agent (taşıma işleri komisyoncusu) often intersect, leading to serious disputes over who is the contractual carrier and against whom a lawsuit can be filed.
In its decision No. 2023/341 E., 2024/2357 K., the 11th Civil Chamber of the Supreme Court debated whether a broker, a shipping company, or the ship owner was the “contractual carrier,” considering the ship’s fixture recap, the consignee details for the freight, and the owner listed on the liability insurance policy. It concluded that the company which only acted as a broker and executed the charterparty on behalf of the owner, only receiving a commission, was in the position of a forwarding agent/broker, and the true carrier was the ship owner.
This decision highlights that the designation of “carrier” in a charterparty belongs to the party who undertakes the commitment of carriage, not simply the party who issues the freight invoice or collects the payment.
2. Charterer, Consignee, Shipper, and Freight Debtor
On the counterparty side of the charterparty, the charterer (charterer/shipper) is usually involved; the charterer often also holds the title of shipper (yükleten). The consignee (gönderilen) is the party entitled to take delivery of the goods at the port of destination.
According to TCC Article 1200, the principal debtor of the freight is generally the charterer; the consignee becomes the freight debtor only if authorized to pay the freight by the contract, bill of lading, or a non-negotiable sea waybill.
In a Supreme Court decision concerning a “freight claim” (evaluating a Gencon 94 Charter Party dated 31.08.2016 and the underlying contract), the lower court ruled that since there was no record on the bill of lading authorizing the consignee to pay the freight, the freight debtor was the charterer according to TCC Art. 1200, and the consignee could not be held liable for freight.
This approach is consistent with the stable jurisprudence of the Supreme Court and lower courts; identifying the correct party liable for the freight is crucial, especially regarding the exercise of the possessory lien and the party against whom enforcement proceedings should be directed.
IV. Formation, Form, and Documents of the Charterparty
1. Formal Requirements and Contract Formation
The TCC does not mandate any specific form for the validity of a charterparty. The contract can be formed through the mutual and concurring declarations of intent of the parties, be it written, verbal, or via “fixture recap” correspondences accepted according to industry custom.
However, due to the international and technical nature of maritime trade, in practice, the terms of the charterparty are determined by evaluating:
- Charterparty contracts themselves,
- “Fixture recap” emails, and
- Bills of Lading and other transport documents,
all together.
Supreme Court and Regional Court of Appeals decisions show that where a written charterparty does not exist, the legal relationship between the parties is often determined primarily through the bill of lading and transport documents.
2. Charterparty – Bill of Lading Relationship
The Bill of Lading (B/L) is a document issued by the carrier or the master, proving the receipt of the cargo, serving as evidence of the contract of carriage, and constituting a negotiable instrument (document of title).
According to TCC Article 1237:
- The relationship between the carrier and the holder of the bill of lading is governed by the provisions of the bill of lading.
- The relationship between the carrier and the charterer/shipper is governed by the provisions of the contract of carriage (charterparty).
If the bill of lading refers to a voyage charterparty, TCC Art. 1237/3 requires that a copy of the charterparty must be provided and presented to the bill of lading holder; otherwise, the charterparty terms may be asserted against the B/L holder only to a limited extent.
In its decisions No. 2016/8794 E., 2017/6687 K. and 2016/1662 E., 2017/4494 K., the 11th Civil Chamber of the Supreme Court concluded that even if the bill of lading contains a reference to the charterparty, unless it is proven that a copy of the charterparty was provided to the B/L holder, arbitration/jurisdiction clauses contained within the charterparty will not bind the B/L holder, such as the insurer by subrogation or the consignee.
This jurisprudence holds critical importance in practice, particularly concerning whether arbitration clauses bind the bill of lading holder.
V. Carrier’s Obligations and Liability Regime
1. Duty of Due Care for the Cargo and Seaworthiness
TCC Article 1178 and subsequent articles comprehensively regulate the carrier’s duty of due care for the cargo in sea transport. Accordingly, the carrier is obliged:
- To make the ship seaworthy at the beginning of the voyage,
- To ensure that the holds and other parts where the cargo is carried are fit for the reception and carriage of the cargo, and
- To diligently protect the cargo during loading, stowage, carriage, and discharge.
These provisions are drafted in parallel with the Hague/Visby Rules, establishing a regime that approximates strict liability for the carrier but also recognizes some limited grounds for exoneration from liability.
2. Limitation of Liability and TCC Art. 1112
TCC Article 1112 stipulates that any clause which directly or indirectly nullifies or reduces the carrier’s liability under TCC Art. 1178 below the statutory limits shall be null and void.
In its decision dated 25.02.2020, No. 2020/691 E., 2020/5087 K., the 11th Civil Chamber of the Supreme Court ruled that in cases of damage to cargo loaded on deck, despite clauses written on the bill of lading such as “deck cargo, carrier not responsible,” the carrier could not be exonerated from liability under TCC Art. 1178 and Art. 1112. The decision emphasized the extraordinary risks of deck carriage and that these risks cannot be entirely passed on to the charterer by contract.
Another case referenced in the same study detailed the issues of who closed the container lid in container transport, who was at fault for defective stowage, and whether the notice period under TCC Art. 1185 was complied with.
3. Notice Requirement and TCC Art. 1185
TCC Article 1185 sets forth a notice requirement acting as a preliminary warning for a claim for compensation to be brought against the carrier in cases of damaged or missing cargo upon delivery. In sea transport, this notice generally must be given in writing within 60 days; otherwise, the TCC provides a presumption that the carrier delivered the goods properly and without damage, and the claimant bears the burden of rebutting this presumption.
In the Supreme Court’s 2020 decisions, emphasis is placed on the role of this notice requirement and the delivery reports in determining the stage at which the damage occurred (road transport, loading, stowage, sea voyage, or post-delivery), particularly in containerized carriage.
4. TCC Art. 1188 and Extinctive Period (Time-Bar)
According to TCC Article 1188, any right to claim compensation against the carrier due to loss, damage, or delayed delivery of the goods shall be extinguished if judicial proceedings are not initiated within one year. This period begins to run from the date the goods were delivered or, if not delivered at all, from the date they should have been delivered.
In doctrine and Supreme Court practice, this period is considered an extinctive period (hak düşürücü süre); unlike a statute of limitations, it cannot be interrupted by the parties’ will and must be taken into account ex officio by the judge.
VI. Obligations of the Charterer and Consignee, Freight, and Demurrage
1. Freight Obligation, Maturity, and Method of Payment
Under the TCC system, the charterer is the principal debtor of the freight (TCC Art. 1200). However, if the contract or bill of lading explicitly authorizes the consignee to pay the freight, the consignee can also become a freight debtor.
Freight generally becomes due and payable at the port of destination, upon request for delivery of the goods, and at the latest, at the end of the laytime (free time for discharge). Thus, the provisions regarding the maturity of the freight are intertwined with the rules on default of the creditor (TCC Art. 1174) and refusal of performance. The charterer usually pays the freight in money; according to TCC Art. 1198, leaving the goods themselves in place of performance (instead of payment) for the freight is generally not possible, regardless of whether the goods are damaged or not.
2. Possessory Lien (TCC Art. 1201 et seq.)
TCC Article 1201 grants the carrier the right to seize and exercise a possessory lien over the goods for claims arising from the charterparty, including freight, demurrage, expenses, and other claims. This lien is limited to the last voyage that the goods accompanied and can be exercised only to the extent necessary to cover the claim.
To convert the possessory lien over the goods into cash, TCC Art. 1398 and Enforcement and Bankruptcy Law (İİK) Art. 270-271 are applied concurrently: an inventory of the goods must be prepared, and subsequent enforcement proceedings for the realization of the pledge must be initiated within 15 days.
3. Demurrage Claim and Yargıtay 11. HD 2018/1538 E., 2019/7393 K.
Demurrage (sürastarya) is the waiting charge payable when the loading or discharging exceeds the agreed laytime, and it is an accessory obligation arising from the charterparty.
In the Supreme Court’s decision No. 2018/1538 E., 2019/7393 K., in a demurrage claim case heard by a specialized maritime court, it was accepted that the ship management company, acting on behalf of the owner under the ship management agreement, was authorized to file a lawsuit for the demurrage claim and thus had the standing to sue (aktif husumet ehliyeti).
This decision is an important precedent concerning who owns the demurrage claim and who can file a lawsuit for it, particularly establishing the management company’s standing within the framework of ship management agreements.
VII. Bill of Lading, Delivery, and Carrier’s Liability: Examples from Supreme Court Jurisprudence
1. Delivery of Goods to the Wrong Party – Yargıtay 11. HD 2016/1648 E., 2017/890 K.
The Supreme Court’s 11th Civil Chamber decision No. 2016/1648 E., 2017/890 K. examined a claim for damages filed because goods carried by ship were delivered to a third party who presented a forged delivery order (ordino).
The decision concluded, in summary:
- The carrier’s responsibility is limited to checking whether the bill of lading was issued with a proper series of endorsements (endorsement chain).
- However, according to the former TCC Art. 1052 (with similar regulations in the new TCC), the carrier has a duty to notify the consignee when the goods arrive at the port of destination.
- If the carrier fails to prove that they made this notification, the carrier may be held liable for the loss incurred by the consignee or seller who could not collect the value of the goods.
This decision indicates that the carrier must not only deliver to the bill of lading holder but also fulfill its notification obligation, and failure to prove notification can expand the carrier’s liability arising from the charterparty.
2. Determination of the Legal Relationship in the Absence of a Charterparty
In Regional Court of Appeals and Supreme Court decisions, it is accepted that where there is no written charterparty between the parties, but the bill of lading and other transport documents exist, the legal relationship between the parties will be determined by the provisions of the bill of lading, and the charterparty provisions will be applied only to the extent they are incorporated into the bill of lading.
This approach is practically important for determining which provisions, and specifically which jurisdiction/arbitration clauses, will apply in lawsuits filed by the insurer through subrogation.
VIII. Termination of the Charterparty, Failure to Take Delivery, and Failure to Tender Cargo
1. Failure to Tender Cargo
If the charterer fails to perform its obligation to tender cargo to the ship, or fails to perform it properly, the carrier has the option to terminate the contract, claim “dead freight,” or resort to other sanctions stipulated in the contract. Doctrine and practice accept that in cases of failure to tender cargo, the carrier can claim compensation for the lost freight and incurred expenses.
The termination of the charterparty due to the failure to tender cargo is a common occurrence, especially in voyage charters; in such cases, the intentions of the parties, fixture recap correspondences, and charterparty clauses are evaluated together to determine which party is in default.
2. Carrier’s Rights and Obligations in Case of Failure to Take Delivery
If the consignee or charterer fails to take delivery of the goods after they arrive at the port of destination, the carrier’s liability does not end. Pursuant to TCC Art. 1174 et seq., the carrier retains the right to preserve the goods, store them when necessary, and convert the goods into cash by exercising its possessory lien after a reasonable period.
In this situation, the carrier can:
- Claim necessary expenses incurred for the preservation and storage of the goods,
- Exercise the possessory lien for all its claims, including freight and demurrage,
- Convert the goods into cash pursuant to İİK Art. 270 et seq. when necessary.
IX. Conclusion and Evaluation
The charterparty is one of the most fundamental contracts in maritime trade, requiring a very delicate balance for the correct identification of the parties’ designations, the proper establishment of the relationship between the bill of lading and the contract provisions, and the sound application of the TCC’s provisions concerning the carrier’s liability, possessory lien, and extinctive periods.
The recent decisions of the 11th Civil Chamber of the Supreme Court show that the jurisprudence is becoming increasingly refined in areas such as:
- Clarifying the distinction between carrier – actual carrier – owner – broker (2023/341 E., 2024/2357 K.),
- The relationship between the B/L and charterparty and the effect of arbitration/jurisdiction clauses in the charter on the B/L holder (2016/8794 E., 2017/6687 K.; 2016/1662 E., 2017/4494 K.),
- The carrier’s liability regime under TCC Art. 1112-1178-1185-1188, covering the duty of due care, deck cargo, and the notice requirement,
- Demurrage claims and the ship manager’s standing to sue (2018/1538 E., 2019/7393 K.),
- The carrier’s liability in case of presentation of the B/L, the duty of notification, and delivery to the wrong party (2016/1648 E., 2017/890 K.).
Parties involved in charterparties in practice—shipowners, charterers, forwarding agents, insurance companies, and cargo interests—must closely follow this jurisprudence in addition to the TCC provisions, as it holds great importance for:
- Drafting contract and bill of lading texts,
- Formulating jurisdiction and arbitration clauses,
- Correctly identifying the freight debtor,
- Exercising the possessory lien and observing the extinctive periods.
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