GLOSSARY

Pro Rata

Pro rata is a Latin term used to describe a proportionate allocation.

What is Pro Rata?

Pro rata is a Latin term used to describe a proportionate allocation. It is generally related to a method of calculation of a sum of money. For example, it may qualify how demurrage (or despatch) is to be payable for periods which are less than a full day of 24 consecutive hours: If the time lost is 16 hours 48 minutes and the demurrage rate is $5,000 per day or pro rata, the total demurrage payable to the shipowner will be 16.8/24 x $5,000 or $3,500. If, however, the charterparty demurrage clause states that the rate of demurrage is “$5,000 per day or part thereof”, this is better for the shipowner and worse for the charterer because any part of a day is reckoned as a full day; in the above case the charterer would have to pay $5,000. In modern charterparties, the proportional rate is more common because it is fairer to both parties.

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