Shipowners and charterers must make themselves aware of the contract of affreightment. This post details what a contract of affreightment is and the obligations this contract mandates.
What is a Contract of Affreightment?
A Contract of Affreightment is a legal agreement between the shipowner and the charterer. The shipowner agrees to transport a specific amount of cargo for a specific period for the charterer. In this agreement, the charterer is responsible to make payments whether the goods are ready to be moved or not.
A Contract of affreightment is important when considering ship chartering. The terms of the contract express the liabilities, rights, and obligations agreed between the charterer and shipowner. Some obligations include:
-When the agent of the charterer should be given notice by the master
-When the vessel can be loaded and discharged from the port
-When the bills of lading will be issued
-How to pay the demurrage
-Who will be held responsible for potential negligence by the stevedores and crew?
Apart from these, there are other obligations in a contract:
The Seaworthiness of the ship
Every contract that is signed between the shipowner and charterer comes with an understanding that the ship must be seaworthy. The ship must be able to withstand the dangers that it will face during the sea journey. There are also certain other terms detailed in the contract. These would include the sufficiency of fuel, efficiency of the crew, and others that are vital for transporting goods. The ship should meet the charter requirements sufficiently to serve the purpose for which it has been agreed. In every aspect, the ship should be ready to complete the service delivery.
Staying on the agreed route – no deviation
The shipowner commits to sticking to the route ( and not to deviate) agreed in the contract of the carriage. Deviation from the agreed route is not considered to be a reasonable switch from the pre-decided route mentioned in the contract. Deviation in the route can only be highlighted out by a party reviewing the contract. If no particular route is mentioned in the contract then the direct route between the port of loading and unloading is considered to be the proper route. However, the ship can choose to deviate to another path if the agreed path exposes it to some danger to the ship or its cargo. It may be acceptable if it is necessary to prevent damage to the ship, crew, or cargo.
No shipping dangerous goods
It is dangerous to ship certain goods without notifying the carrier. The shipper should not do it unilaterally. Some commodities may not only be dangerous during the beginning of the transport but later in the form of leaks or fumes. If the shipper fails to notify the carrier about the dangerous commodities or hides them for some reason, the shipper will be responsible for any accidents or damages that occur to the ship or cargo.
The obligation of reasonable dispatch
The shipowner or the carrier must be capable to perform the dispatch duties effectively. If the terms in the contract do not mention a specific time frame the dispatch should be done within a reasonable period. This would be based on the shipowner’s expectations. If the carrier violates this obligation the charterer may claim damages. The charterer will not be able to claim any damage if the delay is caused due to natural factors like storms, rain, or something else beyond their control.
Nominating a safer port
If the charterer (voyage or time) can nominate the port of their choice, it should be a safe one. It is the responsibility of the charterer to nominate a port that is safe for the charter service and to ensure that it remains safe for the period of the contract. The safe period will include the time the ship reaches the port till the time of its departure. The ship must be able to leave the port safely once the loading or unloading is completed.
Frustration occurs when the contract cannot be completed without one party being at fault, for example, if the chartered ship is damaged or the charterer is lost. It reflects an incapability to perform the contract. Delay in transport also falls under frustration as it precludes achieving the objectives. The party alleging the delay must prove the frustration. They must satisfy the court and prove that the contract remains useless or stands as illegal due to its failure to perform.
When chartering a ship for a time or voyage charter, ensure that it is protected throughout the contract period. The charterer charters the ship from the shipowner by having an agreement in the form of a Contract of Affreightment. Such an agreement brings certain obligations which need to be aware of.