What is "demurrage"

Demurrage \De*mur"rage\, n. [Cf. OF. demorage delay. See Demur.] (Law)

1. The detention of a vessel by the freighter beyond the time allowed in her charter party for loading, unloading, or sailing.

2. The allowance made to the master or owner of the ship for such delay or detention.

   The claim for demurrage ceases as soon as the ship is cleared out and ready for sailing.
   --M`Culloch.

   Note: The term is also applied to similar delays and allowances in land carriage, by wagons, railroads, etc.

1640s, from Old French demorage, from demorer (see demur).

n. 1 (context nautical English) the detention of a ship or other freight vehicle, during delayed loading or unloading 2 compensation paid for such detention 3 a charge made for exchanging currency for bullion

1. n. a charge required as compensation for the delay of a ship or freight car or other cargo beyond its scheduled time of departure

2. detention of a ship or freight car or other cargo beyond its scheduled time of departure

The term "demurrage" from Old French demeurage, from demeurer - to linger, tarry - originated in vessel chartering and referred to the period when the charterer remained in possession of the vessel after the period normally allowed to load and unload cargo ( laytime). By extension, demurrage refers to the charges that the charterer pays to the shipowner for its extra use of the vessel. Officially, demurrage is a form of liquidated damages for breaching the laytime as it is stated in the governing contract (the charter party). The demurrage sometimes causes a loss to the seller as it increases cost of the total freight.

The reverse of demurrage is despatch. If the charterer requires the use of the vessel for less time than the laytime allowed, the charter party may require the shipowner to pay despatch for the time saved.

The term demurrage has been incorrectly extended to use in the hire or rental of assets other than ships. Loss of use resulting in additional hire is not demurrage.

Demurrage is the cost associated with owning or holding currency over a given period. It is sometimes referred to as a carrying cost of money. For commodity money such as gold, demurrage is the cost of storing and securing the gold. For paper currency, it can take the form of a periodic tax, such as a stamp tax, on currency holdings. Demurrage is sometimes cited as economically advantageous, usually in the context of complementary currency systems.