Moving freight, whether domestically or internationally, requires a contract of carriage for freight. It is a document that sets the legal responsibilities (duties) of the parties to the agreement, the carrier and the shipper.
Contract of carriage for freight
A contract of carriage is a document that legally binds the shipper and the carrier. The agreement lays down the responsibilities, obligations, and rights of the parties. To some extent, the terms and conditions can be negotiated. It can be paper-based or in an online form.
What is a carrier?
Carrier is an entity that moves freight from one place to another. The carrier may be:
- an air cargo carrier
- a freight trucking carrier
- an ocean carrier
- a rail carrier.
What is a user in the contract of carriage for freight?
In the trading and transport sector, consignor and consignee terms are used. The consignor or consignee is the person that concludes the contract for carriage. A consignor is the initial owner of goods – the seller (the shipper, sender, exporter). The consignee is the recipient of goods shipped to it by a consignor – the buyer (importer). It means that the person sending the goods or receiving the goods can conclude the contract with a carrier.
Who contracts for the carriage and pays for it?
In order to make the whole process easier, freight shipment has been standardized by international conventions. Incoterms are rules commonly used worldwide that define the responsibilities of the buyer and seller. They are published by the International Chamber of Commerce (ICC). The responsibilities are different depending on the chosen term. Some indicate that the sender concludes the carriage of contract, others that it is the buyer’s responsibility.
The international conventions also include the United Nations Convention on Contracts for the International Sale of Goods (CISG, Vienna Convention), the Hamburg Rules, the Hague and Hague-Visby Rules, and the Rotterdam Rules.
What is included in the contract of carriage?
Standardized contract of carriage includes the carrier’s contract terms of conditions. For example, it sets minimum standards for carrier responsibility and liability since it is very important to clarify what happens in case of loss or damage. Some of the information included in the contract of carriage:
- Title: Contract of Carriage, Carriage Agreement
- Identification of parties involved: detailed information about the consignor/the consignee, the carrier
- Scope of services or description of work: the nature of cargo, the mode of transportation
- Timeline, including delays
- The terms and conditions to which the shipper and carrier are legally bound
- Minimum standards for the carrier’s liability
- Terms of shipping (payment schedules) and compensation
- Insurance clause
- Dispute resolution (how to resolve a conflict)
- Warranty clause
- Acts of God clause, force majeure (a situation or effect that cannot be controlled or predicted)
- Dateline (marks the start of the contract), the signatures of the parties.
Is a Bill of Lading a contract of carriage?
It should be noted that a Bill of Lading is not a contract of carriage. The Bill of Lading (B/L) is a transferable document that represents the ownership of the goods. It shows that a contract of carriage exists. The Bill of Lading is issued by the carrier to a shipper. It is a receipt that the carrier has received the goods in good condition and in accordance with the contract of carriage.
Check out our articles on transport documents.