Freight Payable

Almost always the time charterer has the same liberties as the ship owner to make contract terms with shippers and this means that “prepaid”, “freight payable” or “received for shipment” bills may be issued as well as through bills of lading that impose more liabilities on the issuer and the ship owner. While relationships between the charterer and the ship owner are good, very few problems will arise but in cases where the owner has contracted with an unsubstantial or unethical charterer there are many potential pitfalls for the owner. The worst scenario is if the charterer defaults on paying hire money. Then the ship owner will most probably withdraw the vessel from the charter and take over the running of it himself. If the vessel has cargo on board at such a time the owner will need to determine what types of bill of lading have been issued. He will also need to establish what payments, if any, the shipper has paid over to the charterer. If “freight payable at destination” bills have been issued, then the ship owner can demand the freight from the shipper before delivering the cargo. Where the bills are “freight payable as per c/p” or call for payment within a certain period after loading, the owner may be fortunate enough to discover that payment had not yet been made – in which case he can demand the freight – or unfortunate to find that the shipper had sent the money to the time charterer. When “freight prepaid” bills have been issued the owner will be unlikely to recover any of the freight for the cargo. However he is legally obliged to continue the voyage and deliver the cargo to a bill of lading holder at the port of discharge, even if this involves a voyage of thousands of miles, expensive port costs and the bunkers necessary to make the voyage. He can claim these costs back from the time charterer but of course if the charterer was not in a position to pay hire, he will hardly be able to settle the owners claim.