What Is a Contract of Carriage for Freight?
Importance of Contract of Carriage
In this article, you’ll discover the important role a contract of carriage plays in the international shipping process. You’ll also find out why your consignment needs the documentation, whether it’s being shipped as air or ocean freight.
Contract of Carriage: Explained
A contract of carriage is a binding agreement between a freight carrier and a shipper. It’s a legal document in which the carrier agrees in writing to transport specified goods from one location to another.
As with all contracts, the document contains terms and conditions that set out the rights, duties, obligations, and liabilities of the shipper and carrier. The terms and conditions are negotiable by the shipper and carrier or their agents.
Under the terms of a contract of carriage, the carrier agrees to transport goods from a stated place of departure (an airport for air freight or seaport for ocean cargo) to a stated destination. The shipper agrees to pay the carrier for providing this service.
The contract will detail the nature of the goods the shipper wishes the carrier to deliver, and which the carrier agrees to deliver. Dates and times will be agreed upon so both parties know when the cargo is to be shipped and when it’s due to arrive at the destination.
Various international conventions have standardized the law relating to the carriage of goods, as well as the rights and responsibilities of shippers and carriers. These conventions include:
- The Hague and Hague-Visby Rules
- The Hamburg Rules
- The Rotterdam Rules
As regards liability, at the very least, a carrier is expected to take reasonable care of the cargo. The shipper is expected to accurately describe the nature of the freight, including its weight and dimensions. A compensation claim can be made if the shipment arrives damaged or late, or is lost during transit. Under the terms of the Hague-Visby Rules, the carrier’s liability for the goods is discharged one year after the goods have been delivered.
Contracts of carriage can be paper-based. But, increasingly, the shipping industry is adopting new technology with the use of electronic documents becoming more widespread. As a result, many contracts of carriage can now be completed online and shared via email.
What Is a Contract of Carriage Used For?
Although most freight shipping takes place without incident, there are occasions when freight is damaged or lost during transit. For example, acts of God such as severe weather conditions can cause shipping containers to be damaged on ocean vessels—or even fall overboard leading to loss of freight.
A contract of carriage states who is liable for any damage to or loss of goods during transit, and how much compensation is payable if a claim is made. These terms and conditions are usually printed on the reverse of a bill of lading (for ocean shipping) or an airway bill (for air freight).
Contract of Carriage by Air
A contract of carriage for air freight is an agreement between a shipper and an air carrier to transport goods by air from one airport to another. The agreement usually takes the form of an airway bill, a document that proves a contract of carriage has been agreed upon. The contract is said to have been executed when the goods arrive at their destination in good condition and are accepted by the recipient.
Contract of Carriage by Sea
A contract of carriage for sea freight is an agreement reached between a shipper and an ocean carrier to transport freight from one seaport to another on a cargo vessel. The contract usually takes the form of a bill of lading (B/L) which provides evidence that a contract of carriage has been entered into between a shipper and an ocean carrier. The terms of the contract are regarded as having been executed when the goods are received by the importer and signed-off.
A contract of carriage for ocean freight can be incorporated into documents other than a B/L. In such cases, a clause in this separate document will state that the consignment is subject to the terms and conditions laid out in the Bill of Lading, which is issued by the carrier at a later stage of the shipping process. Sometimes, the Bill of Lading will direct the concerned parties to refer to the separate contract of carriage for terms and conditions of the shipment.
The Importance of a Contract of Carriage
International shipping is a process that requires all parties involved to complete various documents. A contract of carriage is one of the most important because it:
- Details the nature of the goods to be shipped
- Shows the destination of the goods
- Outlines the liabilities of the carrier if the goods are damaged or lost during transit
It’s also the one document that clarifies the agreement existing between shipper and carrier. With business shipments often comprising goods worth significant sums of money, the contract of carriage should be considered an essential safeguard during transportation of your merchandise.
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