Contract Rate

What Is a Contract Rate?

A contract rate is a pre-negotiated freight rate that a shipper and carrier agree to for a fixed period, typically covering a defined lane, volume commitment, and service level.

How Does a Contract Rate Work?

Shippers and carriers negotiate contract rates (often annually) based on projected volume, historical rates, and market conditions, and the rate remains fixed for the contract term regardless of short-term market fluctuations. In exchange for rate stability, shippers often commit to a minimum volume, and carriers commit to prioritizing that shipper's freight within agreed capacity.

Contract Rate vs Spot Rate

A contract rate is fixed and predictable over the contract term, while a spot rate fluctuates with real-time market supply and demand and is negotiated shipment-by-shipment. Shippers often use a mix: contract rates for predictable base volume, spot rates for overflow or short-notice shipments.

Why Contract Rates Matter

Contract rates give shippers budget predictability and protection from market rate spikes, while giving carriers reliable, committed volume. The trade-off is that when spot rates drop below the contract rate, shippers may end up paying more than the current market price.