Freight Contracts

Freight contracts are one of the most important types of contracts in transportation and logistics law. Freight, in its most general sense, is the transportation fee paid for the transport of goods from one place to another. Although it is a concept frequently used in maritime transportation, in practice it is also used to mean transportation cost in road, air, and combined transportation processes.

In commercial life, freight contracts have significant legal consequences for carriers, shippers, consignors, consignees, freight forwarders, shipping agents, logistics companies, and import-export companies. The price of the transportation service, the payment schedule, the identity of the freight debtor, the scope of additional costs, delay, demurrage, warehousing, insurance, damage, and delivery terms must be clearly regulated in these contracts.

An incomplete or vaguely drafted freight contract can lead to serious disputes in the future. In particular, when transportation charges are not paid, the cargo is delivered damaged, the goods are delivered late, or disputes arise regarding additional costs, the rights and obligations of the parties are assessed according to the freight contract. Therefore, freight contracts must be prepared in a way that is suitable for commercial needs and the type of transportation.

What is freight?

Freight is the price paid for transportation services. The carrier undertakes to collect the goods from the designated location and deliver them to the destination, while the sender or relevant party agrees to pay the freight charges in return.

Freight costs can vary depending on the type of transport, distance, type of goods, weight, volume, mode of transport, route, delivery time, insurance status, and additional services. In sea transport, freight can be determined based on containers, tons, volume, or voyages. In road transport, pricing can be based on vehicles, loads, kilometers, pallets, or partial loads.

Freight may not only refer to the main transportation cost. Depending on the contract, loading, unloading, port charges, transshipment, waiting, demurrage, detention, storage, fuel surcharge, customs organization, and additional delivery charges may also be linked to the freight relationship. Therefore, the scope of the freight cost should be clearly stated in the contract.

Parties to the Freight Contract

The primary parties to a freight contract are the carrier and the recipient of the transportation service. The recipient of the transportation service may be the consignor, shipper, consignee, importer, exporter, or freight forwarder. In some cases, the identity of the freight debtor may become disputed.

For example, the seller of the goods may have arranged the transportation, but the freight may be agreed upon to be paid by the buyer. Sometimes, the freight forwarder is indebted to the carrier for the freight while also collecting a separate transportation fee from their client. In maritime transport, the relationships between the shipping agent, the carrier, the shipper, and the bill of lading holder are also considered separately.

Therefore, the freight contract should clearly state who will pay the freight charges, the payment schedule, and who will be responsible for any additional costs. Leaving the freight debtor unclear can create problems for the carrier or logistics company in collecting the payment.

Provisions that must be included in the Freight Contract

The freight contract must clearly specify the subject of the transportation, the type, quantity, weight, and volume of the goods to be transported, the loading and unloading locations, the delivery address, the type of transportation, the freight charge, the payment schedule, the currency, additional charges, default interest, and liability provisions.

The contract should also include provisions for damage, loss, late delivery, incorrect delivery, waiting, port charges, demurrage, detention, storage, and insurance that may occur during transport. In international transport, the Incoterms delivery method, applicable law, competent court, or arbitration clause are also important.

If a freight contract is drawn up as merely a short offer stating the transportation cost, it may be incomplete in the event of a dispute. Therefore, freight offers should be considered together with the terms of transportation and general service conditions.

How is freight cost determined?

Freight charges can be freely agreed upon between the parties. However, it must be clear which services are included in the agreed fee. Does the freight only cover the main transportation cost, or does it also include loading, unloading, holding, insurance, customs organization, and port charges? This should be clarified in the contract.

Freight rates can be fixed or dependent on various factors. Increases in fuel prices, exchange rates, port charges, waiting times, route changes, or additional delivery points can all affect freight rates.

Especially in international shipments, it should be specified in which currency the freight charge will be paid and how exchange rate differences will be applied. Otherwise, exchange rate disputes may arise between the parties when payment is due.

Creation of Freight Receivable

The timing of the due date for freight charges is determined by the contract of carriage. In some contracts, freight charges become due upon commencement of the carriage service. In others, completion of delivery or issuance of an invoice may be a condition for payment.

Whether freight can be claimed before the carriage is completed depends on the terms of the contract and the nature of the carriage. If the carrier has not fulfilled its carriage obligation at all, it may not be able to claim freight. However, if the carriage could not be completed due to the fault of the sender or the consignee, the carrier may be entitled to claim freight or expenses.

To prove that a freight claim has arisen, the following documents are important: transport instructions, consignment note, CMR document, bill of lading, delivery receipt, invoice, current account statement, and correspondence. An invoice alone may not always suffice; it must be supported by documentation proving that the transportation service was actually provided.

Freight Payment Terms and Default

The payment terms must be clearly defined in the freight contract. Payment can be made in advance, on the loading date, on the delivery date, within a specified number of days from the invoice date, or according to the current accounting period.

If a payment period has been specified, the debtor may default at the end of that period. The contract may include provisions regarding default interest, commercial interest, exchange rate differences, collection costs, and suspension of service in case of delay.

If freight charges are not paid on time, the carrier or logistics company may resort to enforcement proceedings, debt collection lawsuits, appeals against objections, or commercial litigation. In commercial disputes, mediation may be a requirement before filing a lawsuit.

Freight Claim Lawsuit

A freight claim is a lawsuit filed when freight charges have not been paid despite transportation services having been provided. In this lawsuit, the carrier or logistics company must prove that they provided the transportation service, that the freight charges were agreed upon, and that payment was not made.

In freight debt collection cases, invoices, transport instructions, delivery receipts, shipping documents, CMR documents, bills of lading, email correspondence, current account statements, and payment reconciliations are important evidence. The debtor, on the other hand, may claim that the service was not provided, that the freight cost was excessive, that the goods were damaged or delivered late, or that the debt has been paid.

Therefore, in freight claim cases, not only the invoice but the entire transportation file must be prepared. The consistency between the documents directly affects the outcome of the case.

Enforcement Proceedings for Freight Receivables

If freight charges are not paid, the carrier or logistics company can initiate debt collection proceedings. If the debtor objects to the debt collection proceedings, the proceedings are suspended, and the creditor may need to file a lawsuit to overturn the objection. If the debt is documented and liquid, compensation for denial of execution may also be claimed.

Before initiating debt collection proceedings, the supporting documents for the debt must be examined. The freight invoice, transport document, and delivery documents must support each other. Proceedings with incomplete documents can complicate the collection process if the debtor objects.

In freight receivables, if the debtor's assets are suitable and the conditions are met, the possibility of precautionary attachment can also be considered. Especially in high-value international transportation receivables, swift legal intervention is crucial.

Demurrage, Detention and its Relationship to Storage

Freight contracts cover not only the main transportation fee but also any additional costs that may arise during the transportation process. Demurrage and detention charges are frequently encountered in maritime and container shipping. Demurrage is the fee incurred when a container exceeds its free time in the port. Detention, on the other hand, arises when a container is not returned within the specified time after it has been removed from the port.

Storage costs are the fees incurred due to goods waiting in a warehouse, port, or bonded warehouse. Who is responsible for these costs is determined according to the freight contract or the delivery method specified in the sales contract.

Failure to clearly specify additional costs in the contract can create serious disputes between the parties. Therefore, free periods, waiting fees, port charges, container return times, and additional service fees should be detailed in the freight contract.

Will freight be paid in case of damaged delivery?

If goods are damaged during transport, whether or not the freight charges should be paid is assessed on a case-by-case basis. If the carrier has performed the transport service but the goods are delivered damaged, the carrier's freight claim may conflict with the owner's claim for compensation.

In some cases, the debtor may avoid paying the freight charges by raising a claim for damages as a defense. However, a claim for damages does not automatically extinguish the freight debt. Whether the damage was caused by the carrier's fault and the amount of the damage must be determined separately.

In such disputes, the parties' claims for receivables and compensation may be subject to set-off, counterclaims, or separate lawsuits. Therefore, the freight contract should regulate the payment and compensation procedure in case of damage.

Freight Disputes in Case of Late Delivery

In the event of late delivery of goods, the consignee or sender may request a reduction in the freight cost or claim damages for the delay. However, late delivery does not automatically eliminate the freight cost.

The carrier's liability must be limited if the delay is caused by the carrier, the delivery time is specified in the contract, and there is tangible damage as a result of the delay. If the delay is due to customs procedures, missing documents, the consignee's refusal to accept delivery, or force majeure, the carrier's liability may be limited.

Disputes can be resolved more easily if freight contracts include provisions for penalties, fare reductions, additional costs, and compensation in case of delay.

The Relationship Between Freight and Incoterms

In international sales contracts, the Incoterms delivery term affects who pays the freight. For example, in delivery terms such as CIF, CFR, CPT, or CIP, the seller may bear certain transportation costs. In delivery terms such as EXW or FOB, the transportation organization and freight obligations are determined differently.

However, Incoterms should not be confused with a freight contract. Incoterms define the sharing of risks and costs between the seller and the buyer. A freight contract, on the other hand, regulates the relationship between the carrier and the freight payer regarding the transportation cost.

Therefore, in import and export transactions, both the sales contract and the freight contract should be considered together. Otherwise, disputes may arise regarding who is responsible for the transportation costs.

Freight in Sea Freight Transportation

Freight contracts are of particular importance in maritime transport. Container shipping, bulk cargo shipping, charter party agreements, and bill of lading relationships are frequently encountered in maritime freight disputes.

Sea freight contracts must clearly state the loading and unloading ports, freight cost, free periods, demurrage, dispatch, loading and unloading responsibilities, bill of lading requirements, and the carrier's liability.

In maritime transport, port charges and delays can incur high costs, making detailed preparation of the freight contract essential. Seeking expert legal assistance is particularly important in charter party relationships.

Freight in Road Transport

In road transport, freight rates are generally determined based on vehicle type, mileage, load type, or partial load basis. In international road transport, the CMR document and transport instructions are important evidence.

In road freight disputes, proof must be provided that the transportation service was rendered, the cargo was delivered, and the freight cost was agreed upon. Invoices, CMR documents, delivery notes, delivery receipts, vehicle license plate information, and correspondence are important evidence.

In road transport, waiting charges, second delivery charges, customs detention charges, return freight charges, and cancellation fees are frequent sources of disputes. These costs should be clearly regulated in the contract.

Freight Forwarder and Freight Receivables

Freight forwarders may charge their clients for freight or service fees in exchange for organizing transportation. A forwarder may have already paid the actual carrier but has not yet received payment from the client. In this case, the forwarder's claim must be proven with contracts and documentation.

The fact that the forwarder issued an invoice in its own name, provided a transportation quote to the customer, and organized the transportation process can support a claim for payment. However, the customer can argue that the forwarder did not properly perform the transportation service.

Therefore, forwarding companies need to keep organized records of freight quotes, customer confirmations, transportation documents, sub-carrier invoices, and delivery documents.

Legal Support in Freight Contracts

Freight contracts require a technical legal assessment in terms of debt collection and liability. The contract must clearly define the freight rate, payment terms, additional costs, delay, damage, insurance, competent court, and applicable law.

Freight contracts prepared with the assistance of a lawyer secure the receivables of the carrier or logistics company. They also clarify, from the customer's perspective, which costs they are liable for.

When freight charges are not paid, a lawyer initiates legal proceedings such as issuing a warning notice, mediation, enforcement proceedings, challenging the objection, filing a debt claim, or initiating a precautionary attachment. If there is a claim of damage or delay, a defense and compensation assessment is conducted.

Conclusion

Freight contracts are crucial agreements that regulate the cost of transportation services and the financial obligations of the parties during the transportation process. The scope of the freight cost, payment terms, additional charges, demurrage, detention, storage, damage, delay, and insurance provisions must be clearly defined.

Incomplete or unclear freight contracts can make it difficult to collect transportation fees and lead to high-value disputes between the parties. Therefore, carriers, logistics companies, freight forwarders, importers, and exporters should carefully prepare freight contracts.

Seeking assistance from a lawyer experienced in logistics law regarding issues such as freight receivables, transportation cost disputes, demurrage, or additional expense claims prevents loss of rights and ensures the process is handled effectively.