A logistics contract is a valid document signed between shippers (importers/exporters) and carriers (owners of ships, trucks and aircraft) or Shippers and Forwarders (Licensed/Customs Agents) to transport or transport goods to or from one part of the world to another, including the fulfillment of all regulatory formalities and delivery to an agreed destination in exchange for a fee. A typical logistics contract specifies the term of the agreement, termination conditions and penalties for non-compliance. Service Level Agreements (SLAs), Invoices, signed purchase orders (POS), invoices and approved prices are all forms of a logistics contract.
Even with all the legally significant components and built-in consequences of non-compliance usually contained in the terms of the contract, is it not surprising that the parties still do not fulfill the conditions to which they voluntarily agreed? This is one of the many questions that are often asked when logistics contracts go wrong, but first we need to study some factors that can lead to failures in the execution of a logistics contract:
Why Logistics Contracts Fail
Logistics contracts fail for the following reasons:
Cost pressure: Cost pressure on both logistics users and service providers can lead to disruption of contracts. Sometimes service providers may be too excited about the contract and may pay little or no attention to the details of potential cost elements. This can lead to costly pressure on the service provider, which will lead to non-compliance with the terms of the contract. For example, if the door-to-door freight forwarding agreement does not say anything about who bears the risk of downtime or how the risk is distributed when it eventually happens, subsequent arguments and counterarguments about who should pay can automatically lead to the termination of the contractual relationship between the shipper and the forwarder. Another example is that if the contract specifies a penalty for delayed delivery and does not specify statements that take into account possible force majeure circumstances, the freight forwarder will bear the costs of delayed delivery, even if it was caused by the forces of nature.