Contract freight trades rate upside for stability. The carrier gives up the chance to charge more when the market spikes; in return it gets predictable volume and revenue, and does not have to find the load or negotiate it each time.
Contract rates are usually re-priced in an annual bid, with a fuel surcharge mechanism handling diesel movement in between. They sit above spot in a soft market (shippers are paying for reliability) and below spot in a tight one (carriers wish they had held out).
Most carriers run a mix. A base of contract freight covers fixed costs and keeps trucks moving; spot freight on top captures the upside and fills gaps.
Example
A shipper awards a carrier 5 loads a week on a lane at $2.00 per mile for the year, plus an indexed fuel surcharge. When spot on that lane jumps to $2.40 during a peak, the carrier still runs the contract loads at $2.00 — but it also still had them when spot later fell to $1.70.
Why it matters
The contract-to-spot mix determines how much a carrier’s revenue swings with the market. Too much spot is volatile; too much contract leaves money on the table in a strong market.