Forward Contract

In the maritime context, a Forward Contract refers to a private agreement between two parties to buy or sell a specific quantity of a commodity, currency, or other financial instruments at a specified price, with delivery and payment to occur at a specified future date. The price agreed upon is called the delivery price, which is equal to the forward price at the time the contract is entered into. The main goal of a forward contract in the maritime industry is to hedge against the risk of price fluctuations in the market. For instance, a shipping company may enter into a forward contract to buy fuel at a fixed price to protect against potential future price increases. Similarly, a seafood exporter may enter into a forward contract to sell its catch at a fixed price to protect against potential future price decreases. Forward contracts are customized to the requirements of the parties involved, including the quantity, quality, and type of commodity, the specific delivery date, and the delivery location.