Legal Definitions - master's draft

A master's draft is a specialized financial contract used in maritime law. It represents a loan taken out by the captain (known as the "master") of a commercial vessel to cover essential and immediate expenses required for the ship's operation or to continue its voyage. These urgent expenses might include fuel, provisions, necessary repairs, or port fees.

The distinctive features of a master's draft are that the loan is secured by the ship itself and the income it expects to earn from carrying cargo (known as "freight"). Repayment of the loan is typically made from the very first funds the ship receives for transporting goods.

Here are some examples illustrating how a master's draft might be used:

• Urgent Engine Repair in a Foreign Port:

  Imagine a large container ship, the Global Trader, is halfway through its journey when a critical component in its main engine fails, forcing it to divert to a remote port for repairs. The ship's master needs to arrange immediate repairs to prevent further delays and potential damage to the perishable cargo. However, the ship owner's usual bank transfer system is temporarily down, making it impossible to send funds quickly.

  To resolve this, the master secures a master's draft from a local maritime lender. This loan covers the cost of the urgent engine repairs and necessary spare parts. The agreement specifies that the loan will be repaid from the freight charges collected once the Global Trader delivers its cargo at its final destination, and the loan is secured against the vessel and its future freight earnings.

• Resupplying Essential Provisions and Fuel:

  Consider a bulk carrier, the Ocean Harvest, scheduled to transport a large quantity of grain across the Atlantic. Just before departure, an unexpected issue with the port's fuel supply system means the ship cannot refuel as planned, and the usual provision supplier is unable to deliver the necessary food and water for the crew on time. The ship's master finds an alternative local supplier for fuel and provisions, but they require immediate payment.

  To avoid a costly delay and ensure the crew's well-being, the master enters into a master's draft agreement with a financial institution. This loan covers the immediate cost of the fuel and provisions, allowing the ship to depart on schedule. The draft stipulates that the loan will be repaid from the freight charges earned from delivering the grain, with the ship and its future earnings serving as collateral.

• Paying Unexpected Port Fees and Pilotage:

  A tanker, the Liquid Gold, arrives at a new port to unload its cargo of crude oil. Due to a miscommunication, the port authorities demand higher-than-expected docking fees, pilotage services (guidance into the harbor), and tugboat assistance, all requiring immediate payment before the ship can berth. The shipping company's central accounting department is closed for a national holiday, preventing a swift wire transfer.

  To prevent significant delays, which could incur substantial penalties, the master of the Liquid Gold arranges a master's draft with a local maritime bank. This loan covers the necessary port charges. The agreement ensures that the funds will be repaid from the freight charges received for the crude oil shipment, and the lender's security is the vessel itself and the revenue from its current and future cargo.