When drafting the contracts for the transport of property, depending on the parties’ positions within the contract, they will choose provisions that are beneficial and ensure their interests. Some of the provisions include rights and obligations of the parties, force majeure, penalties for violations, and compensation for damages. In this article, TNTP will analyze the contents that the parties need to consider when drafting the contracts for the transport of property for the above terms.
1. Rights and obligations of the parties
The parties shall agree in the contract regarding the rights and obligations of each party based on legal regulations. The parties can refer to the rights and obligations of the carrier, the customer, and the recipient of property as follows:
1.1. Rights and obligations of the carrier
• Rights: Check the authenticity of the property and the bill of lading or equivalent source document of transport; Refuse to transport property which is different from that agreed in the contract; Demand the full and timely payment of the freight charges by the customer; Refuse to transport property if the carrier knows or should know that the transacting of such property is prohibited or the property is of a dangerous or toxic nature.
• Obligations: Transport the property in its entirety and safely to the agreed destination at the agreed time; Deliver the property to the person entitled to receive it; Bear all costs related to the transport of the property; Purchase civil liability insurance as required by law; Compensate the customer for damage where the loss of or damage to the property is caused by the fault of the carrier.
1.2. Rights and obligations of the customer
• Rights: Demand the carrier to transport the property to the agreed destination at the agreed time; Receive directly the property which has been transported, or appoint a third person to receive it.
The customer needs to agree on whether the carrier shall transport directly the property or may delegate the transportation to a third party. This is of significant importance because if the carrier delegates the transportation to a third party, and that third party delegates it to another party, the transportation time is affected, and the property may be damaged as it passes through multiple transportation entities. Particularly, when issues arise related to the property such as damage, the customer will face difficulties in holding the carrier accountable due to the involvement of multiple carriers and the complexity of determining the specific faults of each party involved.
• Obligations: Pay in full the freight charges to the carrier, at the time and by the method of payment as agreed; Provide necessary information related to the transported property to ensure its safety; Take care of the property during transport if so agreed. Where the customer takes care of the property and it is lost or damaged, the customer shall not be entitled to compensation.
1.3. Rights and obligations of recipients of property
• Rights: Verify the quantity and quality of the delivered property; Receive the delivered property; Require the carrier to reimburse reasonable costs incurred due to any delay by the carrier in delivering the property; Require the carrier to compensate for the loss of or damage to the property.
• Obligations: Produce to the carrier the bill of lading or other equivalent source documents of transport, and receive the property at the agreed time and place; Bear the costs for loading and unloading the transported property, unless otherwise agreed or otherwise provided by law; Reimburse the carrier for reasonable costs incurred due to late acceptance of the property; Notify the customer of the acceptance of the property and provide other necessary information required by the customer if the recipient is a third party appointed by the customer.
2. Force majeure
According to the provisions of Clause 1, Article 156 of the Civil Code 2015, force majeure is an event which occurs in an objective manner which is not able to be foreseen and which is not able to be remedied by all possible necessary and admissible measures being taken. According to Clause 2, Article 351 of the Civil Code 2015, where an obligor is not able to perform a civil obligation due to the event of force majeure, it shall not have civil liability, unless otherwise agreed or otherwise provided by law.
On the other hand, according to Article 294 of the Commercial Law 2005, force majeure is one of the cases where liability for contractual breaches is exempted. However, the party in breach must promptly notify in writing the aggrieved party. The breaching party must pay damages if it fails to notify or notifies the other party not in a prompt manner.
In practice, the smoothness of property transportation depends on various factors. Sometimes, due to the occurrence of force majeure, the parties are unable to fulfil their obligations. And force majeure is one of the cases where liability is exempted for contractual breaches. However, the parties should stipulate the force majeure in the contract. They can even agree on sharing the risks among the parties in the event of the force majeure occurrence, rather than completely exempting the carrier from all responsibilities.
3. Penalties for violations
Penalties for violations are an agreement between the parties in the contract, whereby the violating party is obliged to pay a fine to the aggrieved party (Clause 1 Article 418 of the Civil Code 2015). On the other hand, according to Article 300 of the Commercial Law, a penalty for violation means a remedy whereby the aggrieved party requests the breaching party to pay an amount of fine for its breach of a contract if so agreed in the contract, except for cases of liability exemption under the provisions of the Law.
Penalties for violations will only be applicable when agreed upon by the parties. Therefore, the parties should stipulate this term in the contract if necessary, such as fines for delivery of property on time, late payment, etc.
4. Liability to compensate for damages
The customer shall pay special attention to and stipulate this provision in the contract to ensure the interest when the carrier loses or damages the property. Specifically, the customer shall provide in detail the transported property, the value, and the compensation level in case of loss or damage to the property. It should also specify the method of determining the extent of damage to the property, the payment of compensation, etc. For example, in the case of lost property, compensation should be based on the value of the property specified in the contract; for damaged property, compensation should be based on the difference between the value of the property specified in the contract and the remaining value of the property.
The carrier should agree that the customer must compensate for damages to the carrier and third parties for damages caused by dangerous properties that were not properly packaged or ensured during the transportation process.
In addition to the aforesaid clauses, when drafting the contracts for the transport of property, the parties may agree on additional provisions regarding the transportation method, unilateral termination of the contract, dispute resolution, etc.
It can be seen that during the drafting the contracts for the transport of property, the parties need to pay attention to and consider various aspects. The above is the content of the article “Drafting terms of penalties for violations and compensation for damages in the contracts for the transport of property” sent to readers by TNTP. If any issues require assistance, please do not hesitate to contact TNTP for the best support.