Contract of carriage

What it means

A contract of carriage of goods is an agreement under which a carrier undertakes to the sender to move a consignment from a set place of dispatch to a set destination, and the sender undertakes to pay the freight. Domestic business relationships are governed by the Commercial Code, international road transport by the CMR convention, and other modes of transport by specific international rules.

Unlike a freight forwarding contract, where the forwarder only arranges transport, the carrier performs the carriage itself or through its subcontractors. It is responsible for the consignment from acceptance until delivery to the consignee and for keeping to the agreed transit time. The consignee acquires rights under the contract when the goods reach the destination.

The carrier's liability for loss, damage or delay in international transport is limited. The CMR convention sets a compensation cap based on the weight of the consignment, which often does not cover the loss for valuable goods. The carrier is released from liability if it proves that the damage was caused by circumstances it could not avoid or by defects in the packaging or goods.

How it works in practice

Before transport, the place and time of loading and unloading, the vehicle type, how the load is secured and the freight should be agreed with the carrier. Who books the transport and who bears the risk is determined by the Incoterms agreed in the sales contract. For international carriage a CMR consignment note is issued as evidence that the goods were accepted.

Because the carrier's liability is limited, for valuable goods we recommend cargo insurance or declaring a higher value in the consignment note for a surcharge. For regular shipments a framework contract with a carrier or a 3PL logistics partner, setting prices, transit times and the claims procedure, is worthwhile.

On receipt, the consignee must check the condition of the consignment and note visible damage on the consignment note. Hidden damage must be notified to the carrier in writing within short deadlines after delivery. Claims against carriers in international transport become time-barred relatively quickly, so it is important to act without delay.

What to watch out for

The most common mistake is accepting a damaged consignment without reservation. If the consignee signs the consignment note without comment, it is later hard to prove the damage occurred in transit. Check the goods at least visually before signing, and if in doubt take photos and note a reservation.

Watch out for incorrectly completed documents. A faulty CMR note can cause problems not only with damage claims but also in proving transport for VAT on an exempt supply to another EU member state. Transport documents should be archived together with the invoice and proof of receipt.