Contract of Affreightment

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What is a Contract of Affreightment? 

A Contract of Affreightment (COA) is a legally binding contract between a charterer and a shipowner. Under this agreement, the shipowner is bound to deliver a set number of orders within a specified period of time. The shipowner is responsible for the products carried on board until it reaches their destination. 

What is the Significance of Contract of Affreightment in E-Commerce? 

A contract of affreightment carries all information about the duties and liabilities of both parties. Whether the shipment is ready to be moved or not, the charterer has to pay the shipowner the money. A contract of affreightment is essential if a business wants to move goods via the sea. 

  • A business can enter a legally binding contract of affreightment with a shipowner when they want to export their goods or move them via the sea. 
  • The contract can be created for only one shipment, but usually, they are designed for a more extended period and include multiple shipments. It helps businesses move goods to other countries over time. 

Prerequisites of Contract of Affreightment 

Here are some of the prerequisites of a COA:

  • A contract of affreightment is legally binding, and even if the goods are not ready to ship out, the charterer still has to pay the shipowner. 
  • The COA usually carries all the important information like the charterer’s details, owner’s details, range of shipment, type and quantity of cargo, etc. If a business wants to get into a COA with a shipowner, it should read the conditions of the agreement carefully. 

Use Case with Contract of Affreightment 

Contracts of affreightment are valuable documents when a business wants to export goods or ship them via the sea. This way, a company can save money because it will not have to rent a ship for each shipment. If a business wants to export its products to another country and continue selling them there, it can use a contract of affreightment.

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