When is Freight Payable?

When is Freight Payable?

Freight is payable on delivery of cargo, right and true delivery. This is the usual position in tanker charterparties, charterers will pay freight on delivery of the cargo.

Sometimes it will be agreed, that the payment will be made within a certain number of days of completion of discharge.

Typically, this will be when currency control regulations in the country of discharge, require that a number of documents are submitted by the charterer to authorise the freight payment in a foreign currency. 90% on (4 days after) signing releasing bills of lading.

In this case, common in the dry cargo trades, a large percentage of the freight (90%) will be paid on releasing the bills of lading, after they have been signed by the master or agents on his behalf. The balance 10% is not paid until the cargo is delivered and will probably be paid net of any despatch money due, if any.

Before Breaking Bulk (BBB): Typically when the charterers are not known to the shipowner, because they are new, inexperienced without a track record of fixing ships, the owner will seek the comfort of having the freight paid, before the discharge operation commences.

The idea being, that if the freight is not paid, the owner still has custody and control of the cargo, as an effective means of ensuring freight is paid.

In the most extreme cases the owner may be able to secure an injunction, authorising the sale of the cargo to recover the freight and any damages incurred with the balance of monies being left in the custody of the court.

Freight Prepaid: Beware, where Freight Prepaid is agreed, it is common practice that the bills of lading will be stamped ‘Freight Prepaid’. A third party bill of lading holder, will thus be able to claim the cargo at the delivery port, without the necessity of paying freight. It follows therefore that the carrier must ensure freight has been received before issuing such Bill of Ladings (B/Ls) to the shipper.