Sunday, 4 July 2010

GUIDE: Contracts of Affreightment

There are two basic types of contract of affreightment:
1)      Bills of Lading; and
2       Charterparties.
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A document issued by a carrier, to a shipper, acknowledging that goods have been shipped on board for conveyance to a specified party and place.”

A Bill of Lading has three main purposes:
a)     1. It acts as a receipt for the goods, showing the carrier took possession of them,
b)     2. It is evidence of a contract of carriage,
c)      3. It is a document of transfer, being freely transferable.

Common Types of Bill

Straight Bill – This is a non-negotiable Bill, stating clearly the consignee’s name. It can be endorsed over, but it is risky as if the carrier had for instance a maritime lien over the goods, the endorsee is bound by it in the same way the

Sea-Waybill – This is simply a receipt for cargo, and not a document of title. It is not transferable or negotiable. It is commonly used today when a company is shipping goods between branches in different countries, or where the cargo will arrive with the consignee before the original documents do.

Through / Multimodal / Combined Bill – Cargo carried under this type of Bill of Lading will go right through to destination, in other words by sea then by rail, or road or airfreight.

House Bill – The covering Bill to the real Ocean or Master Bill, issued by a freight forwarder.

Liner Bill – A Bill of Lading issued by a carrier that provides a regular service on a specified route. 

The Process
* Generally, once cargo has been shipped (or sometimes before) three original Bills of Lading are drawn up by the carrier, and one is given to the shipper. The information is usually just that supplied by the shipper.
* Sometimes the shipper draws it up and the carrier merely signs it, but this is unusual.
* They should not bear a date that is earlier than the date on which the cargo was fully loaded on board (The Wilomi Tanana [1993]).

Identifying the Carrier from the Bill of Lading
* The court will look at the logo printer on the Bill, the signature and wording of the signature box, and the terms on the back; specifically whether there is an IOC (Identity of Carrier) Clause.

“This is a contract between a shipowner and someone who wishes to hire o let their ship, for a period of time or for a particular voyage.”

Types of Charterparty

Time Charterparty – This is where you hire the ship for a set period of time. The owner remains in charge of it but you can take it where you like, transporting what you like. You pay a fee plus the fuel you use and port charges you incur. 

Demise / Bareboat Charterparty – This is a sub-type of Time Chartering, where a ship is hired for a long period (years) and the charterer provides crew, insurance, maintenance themselves. Often the charterer obtains ownership after a set period of payments, and the Charterparty therefore acts as a form of finance (like HP on a car) for the sale of the ship.

Voyage Charterparty – This is where a cargo interest just charters a ship for one particular job (moving a bulk pig iron purchase from Rio to Beijing for instance). No crew costs, fuel costs or port charges are passed on by the owner, there is usually only one catch-all fee (but the charterer pays the stevedores). A miniature version is a Slot Charter Agreement, where a carrier agrees to give a charterer a certain number of container slots on a voyage from x to y.


Bunker Clause (Fuel Clause) – The charterer agrees to pay owners for all fuel on the vessel at the time of taking it over (delivery) - at the market rate at the port of delivery. The owner agrees to do the same to the charterer with any fuel left at the port where the vessel is returned to owners (port of redelivery).

Ship Clause – The owner of the ship warrants that the ship will be seaworthy in every respect at the point of delivery or beginning of the voyage.

Ice clause – Inserted when the ship is headed for a port which may be closed due to ice.

Lighterage Clause – Usually spells out that vessel can deliver goods near the port (for onwards transit by lighter) instead of exactly at it if necessary. Sometimes also declares that the delivery can be at any port in a certain range – Thamesport, Tilbury or Felixstowre for example.

Negligence Clause – Typically excludes shipowner’s liability for loss or damage to the goods during transit, save for a lack of due diligence by them.

Ready Berth Clause – Essntially says that shipowners have completed their job once they have arrived at the delivery port, and not once berthed , as in many ports they may have to wait for a berth and they will not pay the costs of this, and indeed the ship will charge for any laydays spent waiting for such a berth.


Because of the complex nature of charterparty agreements and the number of clauses and safeguards that need to be built in to satisfy each party generally a charterparty agreement is entered into on a standard industry wording, such as a Gencon, Heavycon, Barecon etc., as appropriate. Sometimes the satandard wording is used, but more commonly an amended form of that wording is agreed, with some clauses removed, added and / or amended.


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