Understanding Dead Freight Claims: A Practical Conversation

Let’s break down the concept of dead freight and what it means for your business. Dead freight is essentially a charge that compensates the shipowner when a charterer fails to load the full cargo quantity as agreed in the charter party. This isn’t just a hypothetical situation—it happens more often than you might think, and it can lead to significant disputes if not handled properly.

What Exactly Is Dead Freight?

Picture this: we agree to ship 10,000 metric tons of cargo. The vessel arrives, and for whatever reason—whether it’s a delay in cargo readiness or an operational issue—you only manage to load 8,000 tons. That 2,000-ton shortfall? That’s what dead freight covers. You’re essentially paying for the space you booked but didn’t use.

The important thing to remember here is that dead freight isn’t a penalty. It’s about ensuring the shipowner is compensated for the revenue they would have earned if the full cargo had been loaded.

Let’s Look at Some Real-Life Examples

1. The "Archimidis" Case (AIC Ltd v. Marine Pilot Ltd, 2008)

Here’s an interesting case. The charterer agreed to load a minimum of 90,000 metric tons of cargo but only managed 67,058 metric tons. The shipowner, understandably, claimed dead freight for the difference.

The court ruled in favor of the shipowner. Why? Because the charter party explicitly stated the minimum cargo requirement. The charterer argued that external factors prevented them from loading more, but the court didn’t buy it. The contract was clear, and they had to pay for the unused space.

Insight: If your charter party specifies a minimum cargo quantity, it’s non-negotiable unless both parties agree otherwise.

2. Hellenic Lines Ltd. v. Commodities Bagging & Shipping, Inc.

In this case, the charterer failed to provide cargo on time, and the vessel sailed without it. The shipowner claimed dead freight, and the court sided with them.

The reason? The charterer’s delay directly impacted the shipowner’s revenue. The agreement was breached, and the shipowner had every right to be compensated.

Lesson: Timely cargo readiness is crucial. Any delays can lead to dead freight liability.

3. Asia Ocean Services, Inc. v. Belair Fabrication Ltd.

This one’s a bit different. The booking agreement had a dead freight clause, clearly stating that full freight was payable if the cargo wasn’t ready. When Belair didn’t deliver the cargo, the shipowner claimed dead freight—and the court enforced it.

Observation: A well-drafted dead freight clause can save a lot of headaches. It leaves no room for interpretation.

What Does This Mean for You?

Here’s the bottom line: dead freight claims are all about the specifics of your agreement. If your charter party clearly outlines the minimum cargo and freight obligations, you’re protected. But if those details are vague, disputes can arise—and that’s where things get complicated.

To avoid issues:

1. Be Clear in Your Agreements: Make sure your charter party spells out cargo requirements and dead freight terms.

2. Stay on Top of Documentation: Keep accurate records of what’s loaded and what’s not.

3. Communicate Early: If there’s a potential shortfall, notify the shipowner or charterer as soon as possible to discuss solutions.

Final Thoughts

Dead freight isn’t something to fear—it’s something to manage. By understanding your obligations and ensuring your agreements are crystal clear, you can minimize disputes and keep your operations running smoothly. And remember, if you ever find yourself facing a dead freight claim, it’s not the end of the world. The key is to address it head-on, backed by solid documentation and a clear understanding of your contract.