A Study Of Several Legal Issues Concerning Long-term Contracts Of Carriage Of Goods By Sea

Long-term contracts of carriage of goods by sea play an important role in maritime practices.In recent years,with the weakening influences of the economic crisis,the carriage of bulk and dry cargo becomes frequent worldwide.For instance,ship owners and cargo owners lock the trading opportunity by signing volume contracts or contracts of affreightment(COA),which best maximizes their interests.In practice,such long-term contracts may be called differently,such as “long-term carriage contract”,“cooperative framework” or “cooperative agreement”.The contents may differ accordingly,but all meet the standards of contract under PRC Contract Law.This article mainly discusses the following issues.What is the particularity of carriage contract compared with other contracts? What forms are there of framework contract of long-term carriage contract? What is the nature of long-term carriage contract? What is the responsibility for the breaching party if the long-term contract is violated? What are the exemptions? The discussion is divided into four parts as follows.Chapter One focuses on the concept and the legal relationship of carriage contracts,based on which long-term cargo carriage contract and its practices in maritime field are introduced.The parties enter into a carriage contract to aim at carrying the goods,based on meeting of minds.First,compared with ordinary contractual legal relation,the subject of carriage contract has its particularity.Whether it's carriage of road,of railway,of waterway,of sea or of air,as one party,the carrier needs to get certain kinds of qualifications and the authorization of competent authorities.Therefore,carriers are usually companies with strong strength.In contrast,the consignors or consignees are with low economic status,laying the foundation of another feature of carriage contract,that is the standard terms.Second,with cargo owners' strength growing stronger and the coordination of the intermediary,some emphasize the importance of free negotiation based on standard terms.Based on the duration of time and the times of carriage,carriage contracts are divided into long-term carriage contracts and short-term carriage contract.Long-term carriage contracts have the nature of cooperation,which may be in the form of B/L or in the form of charter party.Chapter Two studies the forms of long-term carriage contract.Long-term carriage contracts consist of framework agreement(contracts)and the following single voyage agreements(contracts).Framework contracts are the core of long-term carriage contracts,which meet the demands of contract under PRC Contract Law.But they only have general stipulations concerning the following single voyage contracts.First,as a legal system,the framework contracts in maritime field first appeared in US Ocean Shipping Reform Act 1998,which was called Ocean Liner Service Agreement.It was born in the background that America reformed its management system in ocean liner industry and that shipping policies become more free.Second,volume contract.The concept of volume was first seen in CMI Draft Instrument on Transport Law,developed in UNCITRAL Draft convention1 on the carriage of goods wholly or partly by sea,and finalized in Rotterdam Rules.Volume contracts highlight the freedom of contract as well as no government intervention.Third,COA.A COA specifies the total quantity of cargo and the duration of contract.But it does not stipulate the numbers of voyages or ships.COA is widely used in bulk and dry cargo transportation.There are standard terms such as VOLCOA,GENCOA and INTERCOA80.Contracts of carriage of goods by sea normally include contracts certified by B/L and C/P,which both are the forms of following single voyage contracts.Chapter Three mainly analyzes the legal nature of framework contracts and following single voyage contracts.Is a framework contract a letter of intent,a pre-contract or contract itself? Are there any differences in nature between different forms of following single voyage contracts?First,a letter of intent is an agreement where both parties negotiate the procedures or the contents of future contracts before the contract is officially concluded.It consists of substantial terms and procedural terms.Substantial terms do not include particular rights and obligations and lack basic elements of a contract required by PRC law.Moreover,the reason why the parties enter into a letter of intent instead of a formal contract is that they need to renegotiate the terms.Therefore,a letter of intent does not reflect the wills of the parties and accordingly is not binding.In contrast,a framework contract has relatively more clear and substantial contents.Thus,a framework contract is not a letter of intent.A pre-contract is an agreement made by parties to reach an agreement in the future.Its substantial contents are clear and certain.A framework contract is different compared with that.The purpose of a pre-contract is to reach a future agreement.The framework contract,in contrast,stresses the performance of following single voyages,not that parties shall conclude a contract in a certain period of time.What's more,framework contracts and following single voyage contracts depend on each other for existence.The former is the basis of the latter while the latter is a supplement of the former.Both together stipulate the rights and obligations.Thus,a framework contract is not a pre-contract.Following single voyages mainly demonstrate the legal relation of B/L contracts and the legal relation of contracts of voyage C/P.In carriage of goods where there exist no C/P,the carrier issues a bill of lading which regulates the rights and obligations of both parties,to the shipper.This bill of lading is the certification of all or part of the carriage contract.When the bearer of B/L is not a party to the original carriage contract,the B/L is considered as the contract itself.In carriage of goods where there exist C/P,the B/L is the certification of carriage contract or is the carriage contract itself,or neither of both.First situation,the charterer,who is not the cargo owner,issues B/L to the cargo owner on behalf of the leaser.Then B/L is the certification of carriage contract between the bearer and the carrier.Second situation,the charterer,who is not the cargo owner,issues B/L to the cargo owner in its own name as the contractual carrier.Then B/L is the certification of carriage contract between the bearer and the carrier.Third situation,the charterer is neither the cargo owner,nor the agent of the leaser,nor the contractual carrier.The captain issues B/L to the cargo owner.Then B/L is the certification of carriage contract between the bearer and the carrier.Last situation,the charterer is the cargo owner and the leaser issues B/L to the charterer.Under such circumstances,the B/L is neither the carriage contract itself nor the certification of carriage contract.Their legal relation is subject to the C/P.Under all the situations mentioned above,if the B/L is transferred to a third party,the B/L is then considered the carriage contract itself.In carriage of goods by sea,it is only when the B/L is the certification of the carriage contract(B/L contract or C/P)or the carriage contract itself that B/L demonstrates the legal relation of B/L contract.Under voyage C/P,when the charterer is the bearer of B/L,the legal relation between parties is subject to voyage C/P.Chapter Four discusses the legal responsibility for breaching the framework contracts as well as following single voyage contracts.Is it a liability for contracting fault,or an ordinary breach of contract? What kind of liability should be for breach of following single voyage contracts? Are there any exemptions?Liability for contracting fault is a liability that may be triggered before commercial subjects enter into a contract and it requires a prior-contract obligation.A framework contract is part of a long-term carriage contract and its signing means that part of the contract itself has been concluded.The breach of framework contracts is a breach of long-term carriage contracts.Therefore,after signing the framework contract,neither party is under a prior-contract obligation.Instead,the breaching party should be accused of breach of the contract itself.The legal relation of B/L is subject to mandatory norms.Out of the legislative intent of protecting relatively weak party,PRC Maritime Code stipulates mandatory rules such as the minimum obligation and the maximum right for the carrier,which are not allowed to be excluded in B/L.Meanwhile,to encourage carriers to push forward carriage of goods by sea,Maritime Code stipulates nautical fault and force majeure exemption clauses.Under voyage C/P,except the basic obligations for the carrier to be seaworthy and not to deviate,the parties are allowed to exclude any other clauses in Chapter Four of Maritime Code,which is in preference to Maritime Code stipulations.As for the liability and exemption,the parties are subject to voyage C/P in accordance with PRC Contract Law.