What is a Contract of Affreightment?
A Contract of Affreightment is an agreement between a Shipowner, Disponent Shipowner or Charterer (the “Carrier”) and Shipper for the carriage of goods by sea, usually evidenced by way of Charter party and/or Bills of Lading. These commercial documents outline the apportionment of risks that parties assume in respect of their duties, rights and liabilities, and generally feature, among other things, the vessel, price, freight, demurrage and indemnity. However, against the backdrop of unequal bargaining position between Carrier and Shipper and freedom of parties to negotiate their own terms, a commercially fair and balanced contract is often unattainable.
In Singapore, Contracts of Affreightment have been broadly provided for under the Merchant Shipping Act and the Carriage of Goods by Sea Act with an aim to safeguard the interests of the shipping community and ancillary industries (e.g. Insurers, P&I Clubs and Banks). Legislation seeks to provide a minimum degree of security by, among other things, (1) requiring parties to adopt certain expressed terms into their contracts but preserving parties’ self-determination in the management of their affairs, (2) defining the risks which must be borne by the Carrier, and (3) specifying the maximum protection one could claim from exclusion and limitation of liability clauses.
Implied Obligations in a Contract of Affreightment
Despite a long and rich history of Shipping law, disputes over Contracts of Affreightment in Courts and tribunals are common. Disagreements over interpretation of contracts and implication of customary law are fiercely contested especially when one’s legal position, if not watertight, can cost millions.
Here are some implied obligations that a Carrier should be mindful of: to provide a seaworthy vessel, ensure that the vessel is properly manned, equipped and supplied, ensure that the vessel is fit for the receipt, carriage and preservation of the cargo, be obliged with reasonable dispatch, to nominate a safe port, and not to deviate from the agreed route. Conversely, a shipper shall not carry dangerous goods without notice or consent of the Carrier. Be cautioned that implied obligations ordinarily derived from customary law are absolute and a breach of contract which relieves both parties from any future obligation, yet such effects may be lessened by applying the Hague Rules or exemption or liberty clauses, if applicable.
How DennisMathiew can help
If you’d like to consider your intentions and rights are sufficiently protected or if you intend to enter into a Contract of Affreightment but are unsure of the obligations it entails or if you are unsure of how to proceed, consider seeking advice from DennisMathiew. Founded by two commercial shipping lawyers Dennis Tan and Captain Mathiew Christophe Rajoo in 2005, the firm takes pride in its extensive knowledge and experience across various industries, including shipping, oil and gas, and global logistics. With its primary area of business being shipping, DennisMathiew is confident that its team of competent commercial lawyers can provide you with appropriate legal advice. Click on this link to get in touch with us and discover how our team can assist with your queries.
