Deadfreight — Payment and Security

What it does

This clause addresses the payment and security side of deadfreight, the compensation an owner claims when the charterer ships less than the agreed minimum cargo. Where the deadfreight entitlement itself defines when a shortfall gives rise to a claim, the payment provisions deal with when the deadfreight sum falls due, how it is calculated and documented, and how the owner secures it if it is not paid.

In practice deadfreight is commonly treated alongside freight for payment and security purposes, so that the owner's lien for freight extends to deadfreight and the sum is payable on similar terms. The clause therefore links the deadfreight entitlement to the freight, lien, and currency provisions, turning a right to compensation for unused capacity into a defined, payable, and secured obligation.

Commercial effect

By fixing when and how deadfreight is paid and secured, the clause makes the owner's entitlement enforceable rather than merely theoretical. Treating deadfreight like freight for lien purposes gives the owner recourse to the cargo if the charterer does not pay, which materially improves its position when a charterer has loaded short and disputes the amount owed.

For the charterer the payment terms determine its exposure and cash-flow timing on a deadfreight claim, and the documentation requirements affect how readily the owner can establish the sum. The clause is read with the deadfreight entitlement and the intake quantity terms, which set how the shortfall and the amount are measured, and with the lien, which provides the security.

Owner's perspective

The owner wants deadfreight to be payable on clear terms and secured by the same lien that covers freight, so that a charterer which loads short cannot leave the owner without recourse. It wants the timing of payment defined and the calculation documented, so that the deadfreight claim is straightforward to assert and to enforce against the cargo if necessary.

The owner is conscious that deadfreight disputes often turn on quantity and calculation, so it wants the payment clause to dovetail with the intake quantity and deadfreight entitlement provisions. Aligning these ensures that, once a shortfall is established, the route to payment and security is clear rather than mired in argument about how and when the sum becomes due.

Charterer's perspective

The charterer wants the deadfreight payment terms to reflect only a genuine, properly calculated shortfall, with credit for any costs the owner saved, so that it is not exposed to an inflated or premature claim. It is wary of the lien extending to deadfreight in a way that lets the owner hold cargo over a disputed amount, and it wants the secured sum confined to what is clearly owed.

The charterer also wants the timing and documentation to be fair, so that it has a proper basis on which to check the claim before paying. It negotiates the deadfreight payment and security terms together with the intake quantity and entitlement provisions, so that its exposure is limited to real short-loading and is not turned into leverage over the cargo on a contested figure.

Negotiation points

• When the deadfreight sum falls due and how it is documented.
• Whether the owner's lien extends to deadfreight as it does to freight.
• The basis of calculation, including credit for costs the owner saved.
• The interaction with the deadfreight entitlement and intake quantity provisions.

Common variations

• Deadfreight payable on the same terms and secured by the same lien as freight.
• Deadfreight payable on presentation of a calculated statement of the shortfall.
• A clause confining the lien to clearly established deadfreight sums.
• Deadfreight payment tied to the intake quantity and entitlement provisions.