Freight forwarding contract - commercial law

Freight forwarding is an activity that includes the shipment (forwarding) of goods and other operations related to the shipment of goods. Freight forwarding, as an activity, is carried out by a legal entity, which carries out the work of shipping goods in its own name and for its own account, organizing the transport of goods for the principal, but not providing the transport service. Any company registered in the Agency for Economic Registers that meets all the conditions prescribed by the Customs Law can engage in forwarding business. If international freight forwarding operations are performed, the legal entity engaged in goods shipping operations must be registered in the court register for international freight forwarding operations, and the provisions of the Law on Foreign Trade Operations are applied there.

Shipment of goods is carried out on the basis of a forwarding contract

A freight forwarding contract (shipment of goods) is a contract by which one foreign contracting party (shipper, freight forwarder) undertakes to ship or deliver goods on its own behalf and for the account of the other contracting party (customer, principal, whether domestic or foreign), as well as to perform all the necessary actions related to the shipment of goods (customs affairs, insurance of goods, storage of goods, conclusion of contracts on the transportation of goods and other contracts that are necessary for the execution of the transportation of goods, as well as to perform other usual tasks and actions related to forwarding), while the client obligates to pay a specific fee (forwarding commission) to the forwarder. If it is stipulated in the freight forwarding contract, the forwarder can conclude the transport contract and take other legal actions in the name and on behalf of the principal.

The freight forwarding contract can be terminated in several ways: by fulfillment (upon completion of the contracted work), impossibility of fulfilling the contract, termination or bankruptcy of the contracting parties, revocation of the order by the client or cancellation of the order by the freight forwarder.

Legal features of the forwarding contract:
• named contract (it is determined by the legal regulations of the Law on Obligations, the Customs Law, the Law on Foreign Trade Operations and all other laws depending on the type of goods and the type of shipment),
• onerous contract (the principal has the obligation to pay the forwarding fee),
• bilaterally binding contract (strictly defined obligations of the forwarder and the principal),
• formal contract (a written form is especially required for international forwarding),
• complex contract (existence of two legal relationships, where the first legal relationship is between the forwarder and the client, and the second legal relationship between the forwarder and third parties).

Types of forwarding contracts:
1. according to the territorial criterion, national and international (import forwarding, export forwarding and international forwarding),
2. according to the volume of freight forwarding operations, large, small, medium freight forwarding,
3. according to the characteristics of the contract: port, continental, border,
4. depending on the performance of the forwarder: independent performance of the forwarder, intermediate forwarder and sub-forwarder,
5. according to the type of transport, it is divided into fast, express, wagon, truck, sea, river, air,
6. according to the object of shipment, forwarding of wood, ore, bulk cargo, food products, etc.

The Law on Obligations also defines special cases of forwarding:
– shipping with a fixed fee (includes the shipping fee, the fee for transporting the goods and the fee for all other costs),
– collective shipment (shipment of goods to several customers).

The consignor (forwarder) and the client (principal) appear as contractual parties in the forwarding contract. In the role of freight forwarder, legal entities that have fulfilled the conditions for that appear, while natural or legal entities can appear on the side of the principal.

Obligations of the freight forwarder (shipper) based on the forwarding contract:
– execution of client’s orders,
– to protect the interests of the client by acting conscientiously and in accordance with the client’s order,
– receive goods from the client (or a third party) for shipment or delivery,
– keeps the goods,
– takes care of the selection of persons with whom it concludes contracts, such as the carrier, insurance company, warehouseman and other legal entities,
– concludes the necessary contracts,
– informs the client,
– settle with the client,
– determining the quality of the goods and taking samples, if this is provided for in the forwarding contract, that is agreed upon.
Based on the freight forwarding contract, the freight forwarder is guaranteed the following basic rights: the right to commission, the right to reimbursement of costs, the right to advance payment, the right to self-fulfilment, as well as the right to lien on items handed over for shipping and in connection with shipping in order to secure the collection of their claims based on forwarding contract.

The principal’s obligations under the freight forwarding contract are:
– payment of fees (commissions to the forwarder),
– payment of compensation for the necessary expenses incurred for the execution of the order on shipment of items,
– to inform the freight forwarder about the characteristics of things (goods) that may endanger the safety of persons or goods or cause damage.

Freight forwarding experts provide all the right advice regarding the freight forwarding business and legal regulations by which the business of shipping goods is defined by law, especially when it comes to international forwarding. Freight forwarding experts can also draw up a forwarding contract, as well as all accompanying documents related to the shipment of goods.

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