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COA

Contracts of affreightment (COA)

A contract of affreightment (COA) is a promise to carry a total quantity of cargo between agreed ports over an agreed period, at an agreed freight. It does not name a ship. Each shipment is carried as its own voyage, and the owner chooses which ship to send each time. For a charterer with a steady flow of cargo, it fixes the freight cost for a year or more. For an owner, it is assured employment for the fleet.

What a COA fixes, and what it leaves open

When the COA is signed, the parties agree:

What is left open is the detail of each shipment: the exact laycan (the dates the ship can start loading), the exact quantity within the tolerance, and the ship. These are set later by nominations.

How a shipment is nominated

The usual sequence has two steps:

  1. The charterer nominates the cargo. Quantity, load port, discharge port and laycan, a set number of days before the laycan starts.
  2. The owner nominates the ship. Name, particulars and expected arrival, again by a set deadline. The owner may later substitute a similar ship if the contract allows it.

The owner's promise is to carry the cargo, not to use one particular ship. That is the main difference from a time charter.

A nomination is binding once it is sent. In an English case from 2008, the charterer nominated a laycan for the fifth of six shipments and then could not supply the cargo in time. It tried to move the laycan. The court held that the nomination became part of the contract when it was given, that the charterer could not keep some of its terms and drop others, and that the failure to perform was a serious breach. Check every nomination before it is sent.

Deadlines need exact wording. If the COA says "within one working day", a nomination sent after business hours is usually treated as received the next day. Define the working day, and write the time each nomination is sent into the record.

Spreading the shipments

A charterer would like to ship when its cargo is ready. An owner would like to know a year in advance where its ships will be. The spread clause balances the two. Words like "fairly evenly spread" cause disputes, because nobody agrees what fair means in a month with two holidays and a port closure. It is better to state a number of shipments per quarter or per month, and to say what happens to a shipment that is missed: carried forward, cancelled, or paid for as deadfreight.

A worked example

COA, illustrative figures only.

  Total quantity     600,000 mt coal, 10% more or less in charterers' option
  Allowed range      540,000 to 660,000 mt
  Period             12 months
  Shipment size      about 55,000 mt, 10% more or less in owners' option
  Shipment range     49,500 to 60,500 mt

  Shipments needed   600,000 / 55,000 = about 11
  Spread             3 per quarter, the last quarter 2

Two tolerances sit on top of each other: the charterer chooses the total, the owner chooses the size of each cargo. If the owner lifts the maximum every time and the charterer wants the minimum total, the programme may finish a shipment early. If the last remaining quantity is too small to fill a ship, the contract should say whether it is shipped as a part cargo, added to the previous shipment or settled in money.

COA, consecutive voyages and time charter

COAConsecutive voyagesTime charter
ShipOwner chooses each timeOne named shipOne named ship
Paid byTonne carriedTonne carriedDay of hire
Who runs the shipOwnerOwnerCharterer gives employment orders
Risk of delay at seaOwnerOwnerCharterer
Who pays for fuel and portsOwnerOwnerCharterer

A COA is therefore a set of voyage charters under one umbrella. Laytime, demurrage and freight payment work as on any voyage charter. What the COA adds is the scheduling and the obligation to keep supplying cargo and ships.

The standard forms

BIMCO published its first standard COA for dry bulk, VOLCOA, in 1982. It was followed by GENCOA in 2004. In 2023 BIMCO replaced GENCOA with two forms:

BIMCO's reason for a dedicated form is practical: parties who adapt a single voyage charter for a COA can end up cancelling the whole programme when they meant to cancel one shipment. Many large COAs, especially in tankers and in long term industrial trades, are still written on the parties' own terms. See charterparty forms.

The risks on each side

For the owner:

For the charterer:

For both: a long contract runs into changes nobody priced: new emission rules, canal closures, sanctions. Clauses for force majeure, sanctions and cost changes matter more on a COA than on a single voyage, because there is more time for something to happen.

References

Voyage charter vs time charterHow the two main charter types split the risk, what each side pays for, and which terms exist in only one of them. Charterparty formsNobody writes a charterparty from a blank page. People name a printed form, change it, and then disagree about which part of the document applies. Laycan: laydays and cancellingTwo dates with opposite jobs: the earliest date a charterer must accept the ship, and the latest date after which they may refuse it. How to charter a ship for your cargoThe order the work goes in when you have a cargo and need a ship, from the first enquiry to the signed charterparty. Liens, cesser and deadfreightProving the claim is the easier part. These clauses decide whether an owner can actually collect the money. Freight markets and the Baltic indicesThe BDI is a panel of brokers' judgement on set routes, not a price anyone paid. What it is for, and what it cannot tell you about your ship.

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