What is a Freight Forwarding Agreement?

What is a Freight Forwarding Agreement?

Freight forwarding involves preparing and coordinating freight movement internationally. A freight forwarding agreement exists between shippers and freight forwarders and combines the terms and conditions of the arrangement into one legally binding document.

Shippers will often arrange that international freight forwarders act as intermediaries between themselves and transport companies. Freight forwarders are responsible for planning and organising things such as cargo insurance, warehousing, shipment scheduling, and tracking on their behalf. Freight forwarders are sought out as they are experts in the freight and shipment industry and have knowledge regarding international shipment customs and protocols.

What is a freight forwarding agreement?

Freight forwarding agreements are legally enforceable documents existing between shippers and freight forwarders. These agreements identify all key terms of the arrangement and cover specifics such as:

  • Services
  • Payment details
  • Damage
  • Delays

Services 

These agreements are required to be explicit as to what services are being offered by the freight forwards. Ensuring the agreement has a services clause is an efficient way to manage client expectations and to avoid potential disputes.

Payment details

Payment clauses specify factors such as payment regularity and form. These agreements will identify whether parties agree to contract, spot rate, or project pricing. It is also common for forwarders to take liens over the freight involved as a form of security in the instance that the shipper fails to fulfil their payment obligations, this would be mentioned in the payment clause.

Damage

As freight forwarders are responsible for managing the storage and movement of goods, if damage arises under their care they are often liable. However, it is common for agreements to also have clauses limiting the liability of freight forwarders in instances where damage occurring was out of their control. Parties would need to specify their desires regarding liability, damage, and compensation in this section of the agreement.

Delays

Freight forwarding agreements often have clauses regarding potential delays, as international importing and exporting can be an unpredictable industry. Forwarders will be liable pursuant to this clause if a delayed delivery results in loss, and the delay was foreseeable and avoidable.

These agreements notably cover a wider variety of elements that mentioned above which will not be covered by this article. Please find OpenLegal’s contact details at the end of this article if you require elaboration regarding what these agreements cover.

Benefits of having a freight forwarding agreement

Freight forwarding agreements are beneficial in that they combat some of the volatility of pricing in the import/export industry. It also strengthens business relationships between shippers and freight forwarders, as it is common for agreements to be continual. Having an official freight forwarding agreement is generally recommended as it legally expresses and provides protections on agreed terms and conditions. 

Key takeaways

Ensuring you have a freight forwarding agreement is perhaps one of the most essential elements of a freight forwarding arrangement. These agreements can be complex and cover a wide range of elements. Significantly, these agreements must identify the services, costs, rights and liabilities of the parties involved.

If you require advice or assistance regarding a freight forwarding agreement, our OpenLegal lawyers are available to assist you. Feel free to reach out to us on 1300 337 997.

About Alana Halliday

Alana works as an OpenLegal paralegal. She is currently in her penultimate year at UTS, studying a double degree in Business and Law. Alana is excited by Employment Law and Building, Construction and Infrastructure law.