marine engineering

Home page||Ship employment ||


Defining various chaterparty freight clauses- How they are calculated

What is a frieght clause ? “Freight” is the remuneration payable by the charterers to the owners for the performance of the contract . It may be called charter party freight in the contract.

Frieght clause specifies the freight rate, how freight will be calculated, when it must be paid, and the arrangements for payment. Details of bank accounts may be in a separate document annexed to the charter party.

“Freight” is normally payable in US dollars in the deep-sea trades, but may be payable in local currency in short-sea trades. It must be paid, under common law, and in the absence of any term to the contrary, on delivery of the cargo to the consignee or his receiver at the agreed destination. It is normally payable in accordance with the terms of a Freight Clause which stipulates the amount of freight, the time for payment and the method of payment.

“Freight” is often payable under charter party terms partially in advance, e.g. on loading, or on the issue of bills of lading. It may depend in amount on the intaken weight of cargo, or (less commonly) on the outturn weight, the cargo volume, cargo value, or on some other stipulated basis. It is not payable unless the entire cargo reaches the agreed destination, even if not the carrier’s fault, e.g. if the voyage is abandoned after a General Average act. (The owners usually protect themselves by insuring against possible loss of freight, so that in a case of General Average the loss of freight insurers become a party to the “common maritime adventure”).

“Freight” is not payable where the owners have breached the contract. When cargo is delivered damaged, however, full freight is normally payable and a separate claim is presented by the cargo owners for the damage.



Freight if payable in advance, is collected by the agent at the loading port before issue of bills of lading marked “FREIGHT PAID” or “FREIGHT PRE-PAID”. And if payable on delivery of the goods, is collected from the consignee or his receiver by the port agent on the first presentation of an original bill of lading.

Freight is not payable on delivery if the goods have lost their “specie”, i.e. changed their physical nature.

Freight may be of the following kinds:

Ordinary or charter party freight

“Freight” is the remuneration payable by the charterers to the owners for the performance of the contract . It may be called charter party freight in the contract. Frieght clause specifies the freight rate, how freight will be calculated, when it must be paid, and the arrangements for payment. Details of bank accounts may be in a separate document annexed to the charter party.



Pro-rata freight

Pro-rata freight is payable in common law where only part of the voyage has been completed, e.g. when the voyage is abandoned following an outbreak of war or an accident, and the cargo is discharged at an intermediate port, or if the vessel had to leave port because of the onset of ice. It is not “freight” in the normal sense, but the shipowner’s compensation for carrying the goods at least part-way to their destination.

Advance or pre-paid freight

Advance or pre-paid freight is often demanded by carriers of dry cargoes, and is the usual type of freight in the liner trades. It may be the total freight or an agreed proportion of it, payable in advance at the loading port, the balance being payable on delivery of the cargo. Freight is deemed to be earned as the cargo is loaded and is not refundable if the vessel and cargo are lost (albeit that the owners may be liable for damages to the charterer). Is commonly required where cargo is shipped under a negotiable bill of lading, as buyers of goods covered by a bill of lading often require a “freight paid” bill of lading.

Pre-paid freight is not often seen in tanker charter parties, since tanker charterers are usually in a stronger bargaining position than dry cargo charterers, and tanker owners would have problems in storing large quantities of oil when exercising their lien for unpaid freight.


Back freight

Back freight paid by a shipper for the return carriage of goods not delivered to or not accepted by their receiver or consignee.

It is normally not mentioned in charter party terms. If the non-delivery or non-acceptance was the vessel’s fault (e.g. due to over-carrying), no back-freight will be payable.



Defining Ad valorem freight

Ad valorem freight is charged at a rate stated as a percentage of the value of a shipment, usually of high-value goods, e.g. bullion. It is not normally used in voyage charter parties, generally being confined to liner shipments.

An ad valorem bill of lading is one on which the value of the cargo is recorded and under which the carrier waives his right to limit his liability to the goods owner under the package limitation provisions in the contract, usually in return for the higher ad valorem freight.

P&I clubs do not normally cover owners for liabilities in connection with high-value cargoes, and owners must usually make other insurance arrangements.

Dead freight

“Dead Freight” is not genuine freight, but owners’ compensation for lost freight, payable by the charterers on a quantity of cargo short-shipped, i.e. a quantity which he agreed, but failed, to load. E.g., if the charter party agreement was that the charterers would load 50,000 tonnes of wheat, but he loaded only 40,000 tonnes, the shipowner will claim deadfreight on 10,000 tonnes at the agreed rate of freight. (Some shipowners place deadfreight claim forms on board, on which the master quantifies the amount short-shipped.)

Lumpsum freight

Lumpsum freight is a fixed sum payable irrespective of the amount of cargo carried, the owners usually guaranteeing a specified cargo capacity for the charterer’s use. It is useful in “mixed cargo” charters where cargoes are of varying densities. And is more common in the tanker trades than in dry cargo trades.





Related articles