What is Contract of Affreightment (COA)?

What is Contract of Affreightment (COA)?

Contract of Affreightment (COA) are used when a shipowner or ship operator agrees to transport a given quantity over a fixed period of time. Unlike other charterparties, no specific ship is named in the charterparty. It is up to the shipowner or ship operator to provide ships as needed for the project.

In tanker chartering, due to the sensitivity of port states regarding oil pollution, it is likely that the Contract of Affreightment (COA) will include specific requirements regarding the ships employed which would probably extend to the shipowner having to provide the charterer with a list of ships likely to be employed in the contract.

Contract of Affreightment (COA) gives the shipowner considerable freedom to manage the fleet to the best advantage. Furthermore, shipowner or ship operator charter in ships if his own fleet is engaged in more profitable employment elsewhere.

Contract of Affreightment (COA) is common with owners of small coasters employed in short voyages, as it saves having to charter a ship for each movement. Contracts of Affreightment (COA) is also used by government charterers for international trades.

There are several standard charter parties for Contract of Affreightment (COA) such as  Volcoa and Intercoa.

Standard charterparty forms are designed to be used in conjunction with voyage charter forms for each voyage which is undertaken under the Contract of Affreightment (COA).

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Contract of Affreightment (COA)

A Contract of Affreightment (COA) is a contractual agreement between a shipowner and a cargo owner or charterer for the transportation of goods by sea. Unlike a time charter or voyage charter, where a specific vessel is chartered for a particular voyage or period, a COA establishes a long-term commitment to transport a specified quantity of cargo over a series of voyages during a fixed period.

Under a COA, the shipowner agrees to provide the necessary vessel capacity to transport the agreed-upon cargo, while the cargo owner or charterer commits to providing the cargo for shipment. The COA typically specifies the cargo type, the total quantity to be transported, the loading and discharging ports, the frequency of shipments, the duration of the contract, and the freight rate.

Key features of a Contract of Affreightment (COA) include:

  1. Flexibility: COAs allow both parties to have flexibility in terms of shipment scheduling, as it is not tied to a specific vessel or a single voyage.
  2. Economies of scale: COAs enable cargo owners or charterers to negotiate more favorable freight rates due to the large quantities of cargo involved and the long-term nature of the agreement.
  3. Risk management: COAs allow both shipowners and cargo owners or charterers to better manage their respective risks, such as fluctuations in freight rates, vessel availability, and cargo supply.
  4. Performance measurement: COAs usually include performance criteria, such as laytime and demurrage provisions, to ensure the timely transportation of cargo and minimize potential disputes between parties.

COAs are commonly used in the bulk shipping industry, particularly for the transportation of commodities such as coal, iron ore, grains, and oil. To ensure a smooth and successful execution of a COA, both parties should have a clear and comprehensive agreement in place outlining their respective rights, obligations, and responsibilities throughout the duration of the contract.

 

COA (Contract of Affreightment) in Ship Chartering

The Contract of Affreightment (COA) was originally used to refer to contracts for the transportation of goods by sea, such as voyage charters and time charters. Some textbooks still use this term to refer to charters. However, charters are typically for a specific named ship carrying out one or more voyages, or for a ship that is let on hire or leased out for a period. In contrast, a COA comes into play when a contract is made to carry a large volume of cargo over a period of time between named ports or regions. In this case, the named ship may be unable to carry the cargo over the necessary number of consecutive voyages. If the ship were to do so, it would likely have to return to the loading place in ballast, thereby increasing the freight the owner would need to charge to make an acceptable return on investment.

During the late 1960s and early 1970s, a party with control over a significant volume of specific cargo may have wanted it moved in multiple shipments over a prolonged period. To achieve this, the party would enter into a contract with another party, who did not have to be a shipowner, to carry the complete cargo or a substantial quantity of it within the agreed period. For example, a shipowner may agree to carry all logs produced for export by a timber mill operator between 1990 and 1992. The cargo interest would guarantee that there would be, for instance, 10 shipments each year, each of a specific quantity. Although the ports of loading and discharging need not be specified, it is likely that the cargo movement would occur between agreed ports. The ship used for the carriage does not need to be named, as long as it meets the general description specified by the cargo owner. As each shipment is made, a new voyage charter may be entered into between the two parties. If the original ship specified in the COA is unable to make the next voyage, the shipowner can charter-in tonnage from the spot market. This provides the shipowner with considerable flexibility.

There are two main types of standard-form COAs: VOLCOA and INTERCOA 80. The former refers to the “Standard Volume Contract of Affreightment for the Transportation of Bulk Dry Cargoes”, which was published by BIMCO in 1982. The latter refers to the “Tanker Contract of Affreightment,” which was published by INTERTANKO and adopted by BIMCO in 1980.

Although a COA is not a charter for a named ship, it can be considered a hybrid contract for carrying goods by sea. It is a relatively new development in shipping, and problems can arise because users are not entirely familiar with it. One issue that can occur is when individual charterparties are used for each shipment, but these charterparties may not cover the points contained in the COA.

Shipowners’ Responsibilities under COA (Contract of Affreightment)

A contract of affreightment is a legal agreement between a shipowner and a charterer, wherein the shipowner commits to deliver a defined number of cargoes to the charterer at a predetermined price over a fixed period of time. Irrespective of whether the items are ready for shipment or not, the charterer is obliged to pay for the shipping, and the shipowner provides cargo space for transporting the items on a specific journey or voyages. The freight charges, which are the fees paid by the charterer, are settled by them for the ready-to-ship freight at the agreed-upon time. Even if the items are not available for transport at a particular time as per the schedule, the charterer is required to pay the full price.

The shipowner bears the responsibility for the items carried on board until they are delivered to the specified destination on time. If the cargo fails to arrive at its destination on time, the shipowner will be held liable for any penalties incurred as a result of the delay. Both the shipowner and charterer have their respective duties and privileges under an affreightment contract, which aims to place the onus on the transporter to convey a specific quantity of goods within the timeframe specified in the contract. A bill of lading and a charter party are the two types of affreightment contracts used in business.

The shipowner is obliged to lease a vessel to the charterer for a predetermined period, during which they must handle the loading and management of the cargo entrusted to them in a safe and careful manner. The shipowner must comply with the authorized directions of the charterer, and carry out the contract, which entails transporting a predetermined amount of items for the charterer over a specified period of time during a given journey. The shipowner is responsible for following the route’s directions and overseeing the management, which includes the captain, crew, and the ship. It is the shipowner’s responsibility to ensure that the ship is in perfect condition and that the diesel tank is full to reach the destination.

 

Contract of Affreightment (COA) vs Time Charter

A Contract of Affreightment (CoA) and a Time Charter are both types of agreements used in the shipping industry, primarily for the transportation of goods and cargo. However, they differ in terms of their structure, scope, and purpose. Here’s a comparison between the two:

Contract of Affreightment (CoA):

  1. Definition: A Contract of Affreightment is a medium-to-long-term agreement between a shipowner and a charterer, wherein the shipowner agrees to transport a specified quantity of cargo (usually bulk or break-bulk) over a certain period of time. The CoA sets out the terms and conditions of the shipments, such as the type of cargo, the number of shipments, the loading and discharging ports, and the freight rates.
  2. Payment: The charterer pays the shipowner on a per-shipment basis, usually in the form of a freight rate per ton of cargo. This rate may be fixed or subject to market fluctuations.
  3. Control: The shipowner retains control over the vessel’s commercial and technical management. The charterer is responsible for providing the cargo and arranging loading and discharging operations at the ports.
  4. Flexibility: A CoA can provide flexibility to both parties. The charterer can spread their cargo shipments over time, while the shipowner has the opportunity to utilize their vessel’s capacity efficiently.

Time Charter:

  1. Definition: A Time Charter is an agreement between a shipowner and a charterer, in which the charterer hires the vessel for a specific period of time. The charterer assumes control of the vessel’s commercial operations, such as determining the routes, ports of call, and cargoes, while the shipowner remains responsible for the vessel’s technical management and crewing.
  2. Payment: The charterer pays the shipowner a daily rate, known as the “hire,” for the entire duration of the charter. This rate is usually fixed but can be subject to market fluctuations or negotiated adjustments.
  3. Control: Under a Time Charter, the charterer has greater control over the vessel’s commercial operations, while the shipowner remains responsible for the vessel’s technical management and crewing. The charterer must comply with the agreed-upon terms and conditions, such as speed and fuel consumption limits.
  4. Flexibility: Time Charters can offer charterers the flexibility to adjust their shipping operations according to market conditions, with the ability to carry different types of cargo and call at different ports. However, this flexibility may be limited by the vessel’s specifications and any restrictions imposed by the shipowner.

Contract of Affreightment (COA) focuses on the transportation of a specified quantity of cargo over a certain period, with the shipowner retaining control over the vessel’s operations. In contrast, a Time Charter is an agreement for the use of a vessel for a specific period, with the charterer assuming control of the vessel’s commercial operations while the shipowner remains responsible for its technical management.

 

What is the difference between Contract of Affreightment (COA) and Charter Party?

A Contract of Affreightment (CoA) and a Charter Party are both agreements used in the shipping industry for the transportation of goods and cargo. While a Contract of Affreightment is focused on the transportation of a specified quantity of cargo over a certain period, a Charter Party is a broader term that encompasses various types of charter agreements, including Time Charters and Voyage Charters. Here’s a comparison between the two:

Contract of Affreightment (CoA):

  1. Definition: A Contract of Affreightment is a medium-to-long-term agreement between a shipowner and a charterer, wherein the shipowner agrees to transport a specified quantity of cargo (usually bulk or break-bulk) over a certain period. The CoA sets out the terms and conditions of the shipments, such as the type of cargo, the number of shipments, the loading and discharging ports, and the freight rates.
  2. Scope: A CoA is focused on the transportation of a specified quantity of cargo over a series of shipments during an agreed period. It does not cover the hire or lease of the entire vessel for a specific period or voyage.
  3. Payment: The charterer pays the shipowner on a per-shipment basis, usually in the form of a freight rate per ton of cargo. This rate may be fixed or subject to market fluctuations.

Charter Party:

  1. Definition: A Charter Party is a general term used to describe a legally binding agreement between a shipowner and a charterer, where the charterer hires the vessel for a specific period (Time Charter) or for a specific voyage (Voyage Charter). The Charter Party sets out the terms and conditions of the agreement, such as the vessel’s description, hire or freight rate, loading and discharging ports, and other operational details.
  2. Scope: A Charter Party is a broader concept that includes various types of charter agreements. Under a Time Charter, the charterer hires the vessel for a specific period, while in a Voyage Charter, the charterer hires the vessel for a specific voyage. The charterer assumes control of the vessel’s commercial operations in both cases, while the shipowner remains responsible for the vessel’s technical management and crewing.
  3. Payment: In a Time Charter, the charterer pays the shipowner a daily rate or “hire” for the entire duration of the charter. In a Voyage Charter, the charterer pays the shipowner a freight rate based on the quantity of cargo carried or a lump-sum rate for the entire voyage.

In summary, a Contract of Affreightment is an agreement focused on the transportation of a specified quantity of cargo over a series of shipments, while a Charter Party is a broader term that includes various types of charter agreements, such as Time Charters and Voyage Charters, where the charterer hires the vessel for a specific period or voyage.

Is there any difference between Contract of Affreightment (COA) and the Contract of Carriage?

There are differences between a Contract of Affreightment (CoA) and a Contract of Carriage. Both agreements are used in the shipping industry for the transportation of goods and cargo, but they differ in terms of their scope, purpose, and the parties involved. Here’s a comparison between the two:

Contract of Affreightment (CoA):

  1. Definition: A Contract of Affreightment is a medium-to-long-term agreement between a shipowner and a charterer, wherein the shipowner agrees to transport a specified quantity of cargo (usually bulk or break-bulk) over a certain period. The CoA sets out the terms and conditions of the shipments, such as the type of cargo, the number of shipments, the loading and discharging ports, and the freight rates.
  2. Parties Involved: The CoA is an agreement between the shipowner and the charterer. The shipowner is responsible for providing the vessel and the crew, while the charterer is responsible for providing the cargo and arranging loading and discharging operations at the ports.
  3. Scope: A CoA is focused on the transportation of a specified quantity of cargo over a series of shipments during an agreed period. It does not cover the hire or lease of the entire vessel for a specific period or voyage.

Contract of Carriage:

  1. Definition: A Contract of Carriage is an agreement between a carrier (shipowner or shipping company) and a shipper (the party shipping the goods), wherein the carrier agrees to transport the shipper’s goods from one location to another. The contract sets out the terms and conditions of the transportation, such as the type of cargo, the loading and discharging ports, and the freight charges. It is usually evidenced by a Bill of Lading or other transport documents.
  2. Parties Involved: The Contract of Carriage is an agreement between the carrier (shipowner or shipping company) and the shipper. The carrier is responsible for providing the vessel, the crew, and the transportation services, while the shipper is responsible for providing the cargo and paying the freight charges.
  3. Scope: A Contract of Carriage covers the actual transportation of goods from one location to another. It is typically used for individual shipments, and it may involve multiple modes of transportation (e.g., sea, road, rail, or air) depending on the terms of the agreement.

Contract of Affreightment (COA) is a medium-to-long-term agreement between a shipowner and a charterer for the transportation of a specified quantity of cargo over a certain period, while a Contract of Carriage is an agreement between a carrier and a shipper for the transportation of goods from one location to another. The main differences lie in the parties involved and the scope of the agreements.

 

A Contract of Affreightment (COA) refers to an agreement between a ship-owner and a charterer, wherein the former undertakes to transport goods for the latter on the ship, or to allow the latter to utilize either the entire or a portion of the cargo-carrying capacity of the vessel, for the purpose of conveying merchandise on a designated voyage.

A Contract of Carriage of goods is a legal instrument that outlines the agreement between a carrier and a sender (shipper) for the transfer of goods from one location to another, using an appropriate mode of transportation, in exchange for compensation. For such a contract to be legally binding, it must incorporate certain fundamental and formal aspects.

 

 

Implied Obligations in a Contract of Affreightment (COA)

Implied obligations are those obligations that are not explicitly mentioned in a contract, but are understood to be present and binding on both parties by virtue of custom, practice, or the nature of the transaction itself. In the context of a contract of affreightment, there are several implied obligations that arise, such as the obligation of the ship-owner to ensure that the ship is seaworthy and fit for the intended purpose, the obligation of the charterer to provide a suitable cargo that can be safely transported on the vessel, and the obligation of both parties to act in good faith and deal fairly with each other. Additionally, both parties have a duty to cooperate and take necessary measures to prevent or mitigate any loss or damage to the goods during transit. These implied obligations play a crucial role in ensuring the smooth and efficient execution of the contract, and their violation may result in legal consequences for the defaulting party.

 

Advantages of Contract of Affreightment (COA)

Contracts of Affreightment are utilized when a shipowner or operator commits to transporting a specific quantity of cargo over a fixed period. Unlike other charter parties, no specific vessel is named in the agreement. It is the responsibility of the owner or operator to provide ships as required for the project. With tankers, due to the sensitivity of port states regarding oil pollution, the contract is likely to include specific requirements regarding the ships employed. This would probably extend to the owner having to provide the charterer with a list of ships likely to be employed in the contract.

Contracts of Affreightment offer the owner significant freedom to manage their fleet to their advantage, even to the extent of chartering in ships if their own fleet is engaged in more profitable employment elsewhere. These contracts are commonly used by owners of small coasters engaged in short voyages as it saves them from having to charter a ship for each movement. Government charterers for international trades also use Contracts of Affreightment.

Several standard charter parties exist for Contracts of Affreightment, such as Volcoa and Intercoa, both of which are designed to be used in conjunction with voyage charter forms for each voyage that is undertaken under the COA.

The primary purpose of a Contract of Affreightment is to oblige a carrier to lift a fixed or determinable quantity of cargo of a specified type over a given period. Typically, the COA is not limited to a particular vessel but instead operates as a series of voyage charters. Freight is payable on the quantity of cargo transported, and the carrier bears the risk of delay en route.

Given the long-term nature of the contract, COAs are almost always tailor-made to meet the specific needs of the parties involved. These parties are the shipper or buyer of the cargo, who is often motivated by requiring certainty for transportation costs, and the ship-owner, who is concerned with providing assured long-term employment and flexibility for their owned or chartered-in tonnage. COAs enable ship-owners to be flexible, allowing vessels to be fitted into a pattern of trade that maximizes laden as against ballast distances, resulting in very competitive rates of freight.

As a result, COAs contain very few standardized terms other than the individual voyage charter terms that govern each lifting once the vessel has been tendered for loading. The least standardized part of the contract is the shipping program and nomination provisions, and these provisions are the most contested or abused over the period of a lengthy COA.

 

What are the main characteristics of Contract of Affreightment (COA)?

A contract of affreightment (COA) is a legal agreement between a shipper and a carrier, outlining the terms and conditions for the transportation of goods by sea. The main characteristics of a contract of affreightment include:

  1. Parties involved: The contract is usually between the shipper (or cargo owner) and the carrier (or ship owner). Both parties have specific rights and obligations under the contract.
  2. Goods description: The contract should contain a clear and detailed description of the goods to be transported, including their nature, quantity, weight, and any special handling requirements.
  3. Freight rate: The contract will specify the freight rate, which is the price charged by the carrier for transporting the goods. This can be a fixed rate or a variable rate, depending on the agreement between the parties.
  4. Voyage or time-based contract: A COA can either be a voyage-based contract, where the carrier agrees to transport the goods for a specific voyage or a series of voyages, or a time-based contract, where the carrier agrees to provide its services for a fixed period.
  5. Loading and discharge ports: The contract should specify the loading and discharge ports, as well as any intermediate ports where the goods may be transshipped.
  6. Laytime and demurrage: Laytime is the time allowed for loading and unloading the cargo. Demurrage is the compensation paid by the shipper to the carrier if the loading or unloading exceeds the agreed laytime. These terms are often included in the contract.
  7. Bills of lading: A bill of lading is a document issued by the carrier as a receipt for the goods and evidence of the contract of carriage. The terms and conditions of the COA are typically incorporated into the bill of lading.
  8. Liability and insurance: The contract will outline the carrier’s liability for loss, damage, or delay of the cargo, as well as any insurance coverage provided by the carrier.
  9. Force majeure: A force majeure clause may be included in the contract, allowing either party to be excused from their obligations under certain circumstances beyond their control, such as natural disasters, war, or labor strikes.
  10. Dispute resolution: The contract should include provisions for resolving disputes between the parties, such as arbitration or litigation, and the applicable law governing the contract.

It is essential for both the shipper and the carrier to understand these main characteristics and ensure that the contract of affreightment is comprehensive and clearly defines their rights and obligations to avoid potential disputes or misunderstandings.

 

 

 

 

What is VOLCOA in ship chartering?

 

VOLCOA is a commonly used abbreviation in ship chartering that stands for “Standard Volume Contract of Affreightment for the Transportation of Bulk Dry Cargoes”. It is a standard-form Contract of Affreightment (COA) that was published by the Baltic and International Maritime Council (BIMCO) in 1982. The VOLCOA is primarily used for the transportation of dry bulk commodities, such as grains, coal, and iron ore, and it specifies the terms and conditions under which the cargo will be transported over a specified period of time between named ports or regions. The VOLCOA is a flexible and versatile contract that can be used for a wide range of bulk cargo shipments, and it provides a framework for negotiations between the shipowner and the cargo owner.

 

Where can I find a VOLCOA Contract of Affreightment (COA) Form?

We kindly suggest that you visit the web page of BIMCO (Baltic and International Maritime Council) to obtain the original VOLCOA and other Charter Party Forms and documents. www.bimco.org

 

What is GENCOA A in ship chartering?

GENCOA is a standard contract of affreightment for dry bulk cargoes, meticulously formulated by BIMCO. Essentially, a contract of affreightment is a legally-binding agreement entered into between the owner of the cargo and the charterer, stipulating the transport of a certain amount and type of goods between specified ports over a predetermined period of time. It is noteworthy that this kind of agreement is not bound to a specific ship but rather functions as a series of voyage charter parties. While it is adaptable to any dry cargo charter party, BIMCO would highly recommend the use of GENCON, COAL-OREVOY or GRAINCON in conjunction with the GENCOA contract. The most current version of this agreement is GENCOA, with the year of publication being 2004.

GENCOA A Contract of Affreightment (COA) Form

A Contract of Affreightment (COA) is a legal agreement between a shipowner (or carrier) and a charterer for the transport of cargo by sea. The COA outlines the terms and conditions under which a series of shipments will be carried out over a specified period of time, using either specific or unspecified vessels.

General outline of what a COA form may include:

  1. Title: A clear title specifying that the document is a Contract of Affreightment.
  2. Parties: The names and contact information of the shipowner (or carrier) and the charterer.
  3. Effective date: The date when the COA comes into effect.
  4. Duration: The term or duration of the COA, including any options for extension or termination.
  5. Cargo description: A detailed description of the cargo to be transported, including its type, quantity, and any special handling requirements.
  6. Loading and discharging ports: The agreed-upon loading and discharging ports for the cargo, as well as any specific berthing or anchorage requirements.
  7. Freight rate: The agreed-upon freight rate for the cargo, which can be expressed as a lump sum, per ton, or on another basis.
  8. Payment terms: The terms and conditions for payment of freight, including any discounts, demurrage, or despatch.
  9. Laytime and demurrage: The allowed time for loading and discharging the cargo, as well as any penalties for exceeding the allotted laytime.
  10. Notice of readiness (NOR): The process and timeline for the vessel to provide a NOR, indicating its readiness to load or discharge the cargo.
  11. Vessel nomination: The process and timeline for nominating vessels to perform the shipments, including any requirements for vessel specifications, age, or inspections.
  12. Force majeure: A clause addressing circumstances beyond the control of the parties that may affect the performance of the COA, such as natural disasters, strikes, or government actions.
  13. Dispute resolution: The agreed-upon method for resolving disputes arising under the COA, such as arbitration or litigation, and the governing law and jurisdiction.
  14. Miscellaneous provisions: Any additional clauses or provisions specific to the agreement, such as insurance, indemnification, or confidentiality.
  15. Signatures: The signatures of the authorized representatives of the shipowner (or carrier) and the charterer, along with the date and place of signing.

It’s essential to consult with legal counsel when drafting or reviewing a COA to ensure that it complies with the applicable laws and regulations and protects the interests of both parties. Additionally, industry organizations such as BIMCO provide standard COA forms and clauses that can be used as a starting point for drafting a custom agreement.

 

What is GENCOA B in ship chartering?

GENCOA B represents an “all-inclusive” contract that amalgamates all customary provisions and terms observed in a contract of affreightment. Inclusive of the terms present in GENCOA A, as well as the charter party terms that typically attach to GENCOA A for a voyage charter.

 

Where can I find a Contract of Affreightment (COA) Form?

We kindly suggest that you visit the web page of BIMCO (Baltic and International Maritime Council) to obtain the original GENCOA A and GENCOA B Charter Party Forms and documents. www.bimco.org