The overwhelming majority of the international movement of goods still passes by sea today. The legal counterpart of this volume consists of the contracts concluded between the carrier and the shipper which determine the mutual obligations of the parties. A contract of affreightment is a type of contract for consideration, imposing obligations on both parties, by which the carrier undertakes to carry goods by sea and the shipper undertakes to pay a sum in return.
In practice the contract of affreightment is not a single mould but a general heading. All contracts whose subject matter is the carriage of goods by sea in return for payment are known by that name; they include arrangements under which a part of the vessel is allocated to the shipper as well as arrangements under which only the carriage of a particular parcel is undertaken. Which type a contract falls within directly alters the regime to which the parties are subject as regards the notice of readiness, the waiting period and demurrage.
In this briefing note we examine the definition and the mandatory elements of the contract of affreightment, the capacities involved in the contractual relationship, the two basic types laid down in the Code, the way in which the contract is formed, and the stages of performance extending from the loading port to the discharging port, within the framework of the provisions of the Turkish Commercial Code No. 6102.
Definition and Elements of the Contract of Affreightment
A contract of affreightment denotes contracts concluded for the purpose of carrying goods by sea. On one side of the relationship stands the carrier, who undertakes the carriage, and on the other the shipper, who undertakes to pay the counter-performance. The sum paid under the contract bears the name freight, and it is this payment that gives the contract its name.
The elements which a contract must possess in order to be regarded as a contract of affreightment may be listed as follows:
- An undertaking to carry goods must have been given by the carrier.
- It must have been agreed that the carriage is to be performed by sea.
- The carriage must be conducted by a vessel; the vessel used must have the character both of a seagoing vessel and of a merchant vessel.
- The carrier is required to have obtained possession of the goods.
- The carriage must be performed in return for freight. The amount may be freely agreed by the parties; if no amount has been fixed in the contract, the freight current at the time and at the place of loading is paid.
Parties to the Contract of Affreightment
The Shipper
The shipper is the person who concludes the contract of affreightment with the carrier in person, or on whose behalf that contract is concluded. The obligation to pay the freight in return for the carrier’s undertaking to carry belongs to this party. It is not a condition that the shipper be the owner of the cargo to be carried; a person may be in the position of shipper without holding the capacity of owner.
The Carrier
The carrier is the person who undertakes to carry goods by sea. For this capacity to arise it is sufficient that an undertaking to carry has been given. It is not required that the carrier be at the same time the shipowner or the operator of the vessel; the contractual undertaking is on its own decisive.
The Actual Carrier
The carrier may leave the performance of the carriage which it has undertaken under the contract concluded with the shipper, in whole or in part, to another person. The person to whom the carriage is in fact transferred is called the actual carrier.
The Loader and the Consignee
The person who delivers the goods forming the subject of the contract of affreightment to the vessel on which they are to be carried, or to the carrier or to the carrier’s representative, is the loader. This capacity may be combined in the shipper itself, or it may belong to a third party. The relationship between the loader and the shipper may rest on different bases, such as commission, agency or sub-carriage. That said, this internal relationship between a loader in the position of a third party and the shipper is of no decisive importance for the purposes of the contract of affreightment.
The consignee, for its part, is the person entitled to take delivery of the cargo in its own name at the port of arrival. The right of that person to take delivery may arise from a stipulation in favour of a third party added to the contract of affreightment, or it may rest on a bill of lading which has been issued.
Types of Contract of Affreightment
Article 1138, which appears in the Third Chapter headed Contract of Affreightment of the Turkish Commercial Code No. 6102, divides the contract of affreightment into two types:
Turkish Commercial Code No. 6102, Art. 1138
“The carrier undertakes, in return for freight;
a) in a voyage charter contract, to carry the goods by sea by allocating to the shipper the whole of the vessel or a part of it or a specified space in it;
b) in a general cargo contract, to carry ascertained goods by sea”
Under that provision, contracts of affreightment are regulated under two headings: the voyage charter contract and the general cargo contract.
The Voyage Charter Contract
Charter contracts are one manifestation of space-allocation contracts. In a voyage charter contract the carrier undertakes to carry goods by sea in return for freight by allocating to the shipper the whole of the vessel, a part of it or a specified space in it.
Where the undertaking to carry has been constituted in the form of the whole of the vessel being set aside for the shipper’s goods, there is a full voyage charter contract. Where, by contrast, the carriage has been undertaken by allocating to the shipper’s goods not the whole of the vessel but half of it or a specified space in it, the contract is characterised as a partial voyage charter contract.
The General Cargo Contract
In a general cargo contract there is no allocation of the whole of the vessel or of a specified space in it to the goods to be carried; the performance undertaken by the carrier is merely the carriage of ascertained goods by sea. The expression “ascertained goods” used in the Code has been employed as the counterpart of specified goods having the character of individual parcels. It is therefore sufficient, for the goods to be regarded as ascertained, that they have been determined as to kind and quantity.
The key point of the distinction between the two types is the element of allocation: the fact that the carriage of goods alone is undertaken, without any allocation of the vessel to the cargo, is the feature which separates the general cargo contract from the voyage charter.
Formation of the Contract of Affreightment
The Code lays down no requirement as to form for the formation of the contract of affreightment. Nevertheless, in practice almost all of these contracts are drawn up in writing.
In respect of the voyage charter contract, the Code has additionally granted a right to request a document:
Turkish Commercial Code No. 6102, Art. 1139
“Where a voyage charter contract has been concluded, each of the parties may, upon meeting its cost, request that a voyage charterparty containing the terms of the contract be drawn up and delivered to it.”
The point to be underlined here is that the voyage charterparty does not have the character of a document of title. The document is no more than a means facilitating proof.
In general cargo contracts, although it is possible for a document evidencing the contract to be prepared by the will of the parties, there is no right of the kind recognised in the voyage charter to request that a charterparty be drawn up and delivered.
Despite the freedom as to form, the Code has imposed on the carrier an obligation to issue and deliver a bill of lading upon the loader’s request once the goods have been delivered for carriage. In this way, alongside the voyage charterparty, a bill of lading representing the cargo may also be issued after delivery as a negotiable instrument.
Performance of the Contract of Affreightment
Use of a Vessel for Loading and Carriage
As stated in the section on the elements of the contract, the carriage must be performed by a vessel which is both a seagoing vessel and a merchant vessel. It is not compulsory for the vessel to be identified by name in the contract; where, however, the vessel by which the carriage is to be performed has been agreed in the contract of affreightment, the goods must be loaded on that vessel and carried by it. Where the vessel has been identified in the contract and nothing to the contrary has been agreed, the carrier may not load the cargo on another vessel without the shipper’s permission; if it acts contrary to this, it is held liable for the losses which arise.
By contrast, where it has been agreed in the contract that the carrier may load the cargo on another vessel and perform the carriage without obtaining the shipper’s permission, the carriage may be performed by another suitable vessel in the event of the loss of the vessel by which it was to be performed.
Preparing the Vessel for the Sea, the Voyage and the Cargo
One of the carrier’s weightiest obligations is to ensure that the vessel is in a fit condition:
Turkish Commercial Code No. 6102, Art. 1141
“In every contract of affreightment the carrier is obliged to ensure that the vessel is in a condition fit for the sea, for the voyage and for the cargo.”
Seaworthiness means that the vessel, as regards its essential parts such as the hull, the general equipment, the machinery and the boilers, is in a condition to withstand the perils of the sea on the voyage it is to make, abnormal perils excepted.
Fitness for the voyage means that a seaworthy vessel additionally possesses the qualities enabling it to withstand the perils of the voyage, abnormal perils excepted, as regards its organisation, its loading condition, its fuel and provisions and the competence and number of the crew.
Cargoworthiness, for its part, means that the parts of the vessel used in the carriage of goods, including the refrigeration installations, are suitable for the reception, the carriage and the preservation of the goods.
Presence of the Vessel at the Loading Port on the Agreed Date
In contracts of affreightment the date on which the vessel is to be present at the loading port is as a rule determined in the form of a period falling between the earliest and the latest dates. The last date by which the carrier must have the vessel ready for loading at the loading port is referred to in practice as the cancelling date.
If the vessel is not held ready on the cancelling date, the shipper acquires the power to terminate the contract without any need to serve a warning or to allow a period of time, and moreover without any requirement of fault on the part of the carrier. Where no definite day has been agreed on which the vessel is to be held ready at the port, the shipper must allow the carrier a reasonable period before it can exercise its right of termination.
Loading on Board
Under Art. 1142 of the Turkish Commercial Code No. 6102, when the master reaches the loading port he berths the vessel at the place agreed in the contract for the loading of the cargo. If only the port or the area in which loading is to take place has been determined in the contract, the vessel waits, in the waiting area set aside for that port or area, for the loading place to be designated. The loading stage comes to an end when the cargo which the carrier has undertaken to carry is loaded within the loading period on to the vessel held ready.
Loading Costs
Under Article 1143 of the Turkish Commercial Code No. 6102, headed Loading Costs, unless otherwise provided by the contract of affreightment, by the regulations of the loading port and, where these are absent, by local custom, the cost relating to the carriage of the goods up to the vessel falls on the shipper, while the cost relating to the loading of the goods on board falls on the carrier. Nevertheless, by means of a FIOS (free in and out, stowed) clause inserted in the contract, the loading, stowage and discharge costs may be assumed by the shipper.
The Goods to Be Loaded
Where the goods to be carried have not been specifically ascertained, under Art. 1144 of the Turkish Commercial Code No. 6102, if the shipper wishes to have other goods loaded on board for the same port of arrival, an obligation arises for the carrier to accept the carriage of those goods provided that its position is not thereby made more onerous.
The obligation of the shipper and the loader to give the carrier full and accurate information about the goods to be loaded and carried is regulated in Art. 1145 of the Turkish Commercial Code No. 6102. Under that provision, the shipper and the loader are liable towards the carrier for the loss arising from the inaccuracy of their declarations; towards the other persons who suffer loss on that account, however, they assume liability only if they are at fault. As regards the civil liability which arises in situations of this kind, our study entitled Civil Liability in Vessel Casualties may also be consulted.
Other situations relating to the goods to be loaded are likewise dealt with separately in the Code: loading together with goods whose loading and carriage are not permitted is regulated in Art. 1146 of the Turkish Commercial Code No. 6102, goods loaded on board without the master’s knowledge in Art. 1147, and dangerous goods to be carried in Art. 1148.
Loading the Cargo on Another Vessel and Transhipment
By virtue of Art. 1150 of the Turkish Commercial Code No. 6102, the carrier may as a rule not load the goods on another vessel without the shipper’s permission. Where loading of this kind is carried out without permission, the carrier is liable for the losses which arise. However, if the loss would certainly have occurred even had the goods been loaded on the agreed vessel, the loss falls on the shipper.
Carriage of Goods on Deck
It is as a rule not possible for the carrier to carry the goods on the deck of the vessel or to hang them on the rail. Nevertheless, there may be a commercial custom or a statutory provision requiring certain goods to be carried on deck by reason of their nature, and it is likewise possible for the parties to agree to that effect.
That said, where the shipper and the carrier have agreed that the goods are to be carried in the hold, which is the enclosed part of the vessel, no agreement may be made between the loader and the carrier for the goods to be carried on deck. Where the carrier has agreed with the loader that the goods are or may be carried on deck, it is bound to enter in the transport document a clause showing that agreement. In the absence of such a clause, the burden of proving the existence of the agreement rests on the carrier.
Periods Relating to Loading
Notice of readiness and the loading period in the voyage charter contract. If the day on which loading is to begin has not been agreed, under Art. 1152 of the Turkish Commercial Code No. 6102 the notice of readiness known as the NOR (Notice of Readiness) is given when the vessel arrives at the loading and berthing place. Under Art. 1153 of the Turkish Commercial Code No. 6102, the loading period begins to run from midnight of the first calendar day following the receipt of the notice of readiness by its addressee, or, where loading has in fact begun, from that moment. If the loading period has not been fixed by the contract, under the same article the period which would be needed if loading were carried out by twenty-four hours of uninterrupted work is deemed to be the loading period.
Demurrage period and demurrage payment. Under Art. 1154 of the Turkish Commercial Code No. 6102, the waiting period exceeding the loading period is called the demurrage period; where this period has not been agreed in the contract of affreightment, it is applied as ten days. The demurrage period begins to run upon the expiry of the loading period without any need for notice. Under Art. 1155 of the Turkish Commercial Code No. 6102, a demurrage payment is made to the carrier for this period. If the amount of the demurrage payment has not been agreed in the contract, the necessary and useful expenses incurred by the carrier by reason of the waiting exceeding the loading period may be claimed from the shipper as demurrage.
Periods in the general cargo contract. Under Art. 1163 of the Turkish Commercial Code No. 6102, no time for a notice of readiness and no waiting period are laid down by law in general cargo contracts. The shipper is obliged to load the goods on board without delay upon the call of the carrier or of its authorised representative. Where the shipper is late in loading, the carrier is not bound to wait for delivery of the goods; the voyage may begin without the cargo having been taken over, and even in that case the shipper remains obliged to pay the full freight.
The Voyage of the Vessel and Discharge of the Cargo
The carrier which has undertaken the carriage is bound to set out without delay. In addition, keeping the goods in safe custody until they are delivered at the port of arrival, not departing from the designated route without just cause, and bringing the cargo to the agreed port of arrival are also among the carrier’s obligations.
Under Art. 1166 of the Turkish Commercial Code No. 6102, the master berths the vessel at the place agreed in the contract in order to discharge the goods. If nothing beyond the port or the area in which discharge is to take place has been agreed in the contract, the vessel waits, in the waiting area allocated for that port or area, for the discharging place to be designated.
Discharge Costs
Under Article 1167 of the Turkish Commercial Code No. 6102, side-headed Discharge costs, unless otherwise provided by the contract, by the regulations of the discharging port and, in their absence, by local custom, the cost relating to the removal of the goods from the vessel falls on the carrier, while the remaining discharge costs fall on the consignee.
With the arrival at the port of destination, the discharge of the cargo and its delivery to the consignee, performance of the contract of affreightment is completed.
Periods Relating to Discharge
Notice of readiness and the discharging period in the voyage charter contract. If the day on which discharge is to begin has not been determined, under Art. 1168 of the Turkish Commercial Code No. 6102 the carrier or its authorised representative gives the consignee a notice of readiness when the vessel arrives at the berthing place. Under Art. 1169 of the Turkish Commercial Code No. 6102, the discharging period begins to run from the first calendar day following the receipt of the notice of readiness by its addressee, or, where discharge has in fact begun, from that moment. If the discharging period has not been fixed by the contract, the period needed if discharge were carried out by twenty-four hours of uninterrupted work is accepted as the discharging period. In making this calculation, the port at which discharge is to take place, the vessel performing the carriage, the discharging installations and equipment and the nature of the goods are taken into account, together with the regulations of the discharging port and local custom. Under Art. 1172 of the Turkish Commercial Code No. 6102 the discharging period is calculated without interruption according to the calendar.
Demurrage period and demurrage payment. Under Art. 1170 of the Turkish Commercial Code No. 6102, where it has been agreed in the contract, the carrier is bound to wait beyond the discharging period. This additional waiting time is called the demurrage period and, where it is not specified in the contract, is applied as ten days. The period begins to run upon the expiry of the discharging period without any further need for notice. Under Art. 1171 of the Turkish Commercial Code No. 6102 a demurrage payment is made to the carrier in return for this period; where the amount has not been agreed in the contract, the necessary and useful expenses incurred by the carrier by reason of the waiting exceeding the discharging period may be claimed.
Periods in the general cargo contract. Under Art. 1176 of the Turkish Commercial Code No. 6102, in general cargo contracts the consignee is obliged to take delivery of the goods without delay upon the notice given to it. Where the consignee is not known, the notice is given by public announcement in accordance with local custom.
Independent Legal Assessment
A significant proportion of freight disputes arises not from the carriage itself but from the characterisation of the contract and the calculation of periods. The distinction between the voyage charter and the general cargo contract is not merely a theoretical classification; whether a notice of readiness is required, when the waiting period begins and from what date the demurrage payment accrues all depend on it. A failure to construct the element of allocation clearly in the text of the contract can later turn into a serious argument over cost between the parties.
The second critical area is the allocation of costs and liability. Since the statutory allocation of the loading and discharge costs is not mandatory, clauses of the FIOS type can entirely alter the burden borne by the parties; the obligation relating to the fitness of the vessel, by contrast, continues to rest on the carrier.
When a concrete freight relationship is being constructed, or a dispute assessed, the following headings should be brought to the fore in particular:
- Clarifying from the text of the contract whether it is a voyage charter or a general cargo contract
- Expressly regulating the cancelling date and the conditions of termination in the contract
- Documenting the moments at which the loading and discharging periods begin and the fact that the notice of readiness was given in due form
- Agreeing the demurrage period and the demurrage payment as an amount, and bearing in mind that the statutory period of ten days will otherwise come into play
- Determining the allocation of costs clearly by means of clauses such as FIOS
- Where carriage on deck is envisaged, ensuring without fail that the corresponding clause is entered in the transport document
Independent Legal provides advisory and litigation services throughout the entire process in disputes arising from maritime commercial law, from the drafting of contracts of affreightment to the pursuit of demurrage and cargo damage claims.