How to Write a Strong Shipping Contract

A weak shipping contract is an open door: unpaid freight, damaged cargo, delays, and no clear way to make the other side pay. A strong one shuts that door before trouble starts.

This is a straight, practical guide to writing a shipping contract that actually protects you – whether you own ships, book cargo, or run a small logistics outfit.

1. Start With the Basics: Who, What, Where, When

First, lock down the skeleton of the deal. No fluff, no guessing.

• Parties: Full legal names, company numbers, and addresses. Not “Bob’s Shipping”, but the registered entity behind it.
• Role: Make it crystal clear who is:
  • Carrier (or Owner)
  • Shipper
  • Charterer / Freight forwarder (if any)
• Scope of service: What exactly are you doing?
  • Port-to-port carriage?
  • Door-to-door logistics?
  • Charter of whole vessel or just space?
• Geography: Named load and discharge ports, any allowed ranges, and any ports you refuse (war zones, sanction risk, unsafe ports).
• Time: Laycan (earliest and latest loading dates), transit windows, delivery windows, and cut-off times for cargo and documents.

2. Define the Cargo and Volume Clearly

Arguments usually start with “That’s not what we agreed to ship.” Fix that on day one.

• Cargo type: bulk, liquid, containers, project cargo, hazardous materials, perishable, etc.
• Quantity/volume: MT, m³, TEU, or units. Set tolerances (+/- 5% or fixed).
• Packaging and stowage: Who packs, who stows, who secures. State if cargo must be containerized, palletized, lashed, etc.
• Special handling: temperature control, ventilation, deck cargo, heavy lifts, dangerous goods codes.
• Cargo information: Shipper must give correct description, weights, and any dangerous properties in writing.

3. Freight, Surcharges, and Payment Terms

Money first. Always.

• Freight rate: fixed amount, per tonne, per container, per voyage, or time charter hire. Write the actual numbers.
• Surcharges: bunker adjustment, war risk, congestion, canal dues, extra port costs. Say:
  • Which surcharges apply, and
  • Who pays them.
• Currency: USD, EUR, GBP, etc. Avoid “equivalent of…”.
• Payment terms: when (before sailing, on delivery, 30 days from invoice), how (bank transfer only), and late payment interest.
• Security: deposits, bank guarantees, letters of credit if deal is big or risky.

Make late payment hurt: add interest and the right to suspend services or exercise a lien over cargo if the other side doesn’t pay.

4. Laytime, Demurrage, and Waiting

Time is money. If your vessel waits, someone should pay.

• Laytime: free time allowed for loading/unloading (e.g. “5 weather working days” or “24 hours per call”).
• Demurrage: daily rate if laytime is exceeded. Make it clear:
  • How it is calculated, and
  • Who pays (usually the charterer or cargo interest).
• Dispatch (optional): bonus for finishing early.
• Waiting for berth: whether time counts as laytime or not when the vessel waits at anchorage.

5. Risk, Title, and Delivery Point

Decide exactly when the cargo becomes “their problem”, not yours.

• Risk transfer: Use clear triggers:
  • “Risk passes to Carrier when cargo crosses ship’s rail at load port.”
  • “Risk passes back to Receiver when cargo leaves ship’s rail at discharge port.”
• Incoterms: If used (FOB, CIF, DAP, etc.), match them with the shipping contract so they don’t clash.
• Delivery point: on board, on quay, at warehouse, door delivery, etc.

6. Liability, COGSA, and Limits

Here’s where the lawyers like to play games. Don’t let them.

• Applicable regime: State which liability rules apply (for sea carriage, usually Hague/Hague-Visby Rules or U.S. Carriage of Goods by Sea Act (COGSA)).
• Liability limits: Many regimes allow limits:
  • Under COGSA-type rules: often $500 per package or unit, unless a higher value is declared.
  • Under Hague-Visby: usually SDR per kilo/ package.

  Say so plainly, or say you contract out and raise or lower them if allowed.

• Declaration of value: Give shippers a clear option to declare higher value (with higher freight) to break low limits.
• Exclusions: Standard defenses (act of God, perils of the sea, war, inherent vice, packaging defects) should be listed, not hidden.
• Indirect/consequential loss: Usually excluded (loss of profit, loss of market) unless you agree otherwise in writing.

7. Insurance: Who Covers What

Liability and insurance are not the same thing. Spell out both.

• Carrier/Owner: hull & machinery, P&I, pollution, collision.
• Cargo interests: cargo insurance (all risks or named risks), war risk, political risk if relevant.
• Proof: right to request certificates of insurance and confirmation of cover.
• Subrogation: state that insurers can step in and claim in your name once they pay.

8. Documents: Bills of Lading, Receipts, LOIs

A shipping contract lives and dies on paper. Get the documents straight.

• Bill of lading (B/L):
  • Who issues it (carrier, master, agent).
  • Number of originals.
  • Whether it must be “clean on board” or can show remarks.
  • Whether the B/L terms are part of the contract (they should be).
• Sea waybills / delivery orders: when they’re used instead of full B/Ls.
• Letters of Indemnity (LOI): for:
  • Club LOIs only, or any LOI template?
  • Delivery without original B/L.
  • Switching B/Ls, on-deck carriage, etc.
• Statements of facts (SoF): used to calculate laytime and demurrage.

9. Performance, Safety, and Compliance

Protect yourself against bad operations and regulatory trouble.

• Seaworthiness / due diligence: carrier must exercise due diligence to provide a seaworthy vessel at the start of the voyage.
• Safety standards: compliance with SOLAS, MARPOL, ISM, ISPS, and any local rules.
• Sanctions and trade controls: no party is allowed to route cargo or vessels in breach of sanctions. Give yourself a right to refuse such orders.
• Anti-bribery and corruption: basic clause that both sides comply with anti-corruption laws, and you can terminate if they drag you into bribery.

10. Claims, Notice, and Time Limits

When something goes wrong, the contract should tell both sides exactly what to do.

• Notice of damage: how and when (e.g. written, within 3 days of delivery, with photos and documents).
• Survey procedure: joint surveys for damaged cargo, joint inspections for alleged machinery or hull damage.
• Time bars: clear deadlines for:
  • Cargo claims (often 1 year from delivery under sea regimes).
  • Freight/hire/demurrage claims.

11. Governing Law and Dispute Resolution

Never leave this blank. If you do, you’re buying a mystery.

• Governing law: choose one legal system (e.g. English law, New York law) that is predictable for shipping.
• Jurisdiction or arbitration:
  • Court jurisdiction – name the courts (e.g. High Court in London, federal court in a specific U.S. district).
  • Arbitration – institution (LMAA, ICC, LCIA), seat, and number of arbitrators.
• Language: contract and dispute language (usually English).

Pick a place where judges or arbitrators actually understand maritime law. Cheap but clueless courts are expensive in the end.

12. Termination and Exit Routes

Plan for the relationship to end. You’ll avoid drama when it does.

• For cause: right to terminate if:
  • Serious breach that isn’t fixed in a stated cure period.
  • Repeated late payments.
  • Sanctions violations, fraud, corruption.
  • Insolvency or bankruptcy.
• For convenience: maybe allowed in long-term framework agreements, with a notice period.
• Effect of termination: freight/hire due up to termination, return of documents, handling of cargo already shipped.

This article is practical guidance, not formal legal advice. For big-ticket deals, get a maritime lawyer to review your draft before you sign.