On the ops desk, contract rates come out of a tender, with rates and capacity negotiated with the carrier for the period ahead, while spot freight is booked shipment by shipment at whatever the market quotes that day. The decision the term drives is allocation: which lanes carry enough steady volume to tender on contract, and when to go to the spot market instead. The confusion to avoid is treating them as separate markets; the same lane prices both ways at once and the two diverge, with spot falling below contract when the market is soft and climbing above it in a peak, when carriers may even prioritise higher-paying spot cargo over contracted freight.
Glossary
Spot vs Contract Rate
The distinction between the two ways ocean freight is priced: a spot rate is bought per shipment at the market's current price, while a contract rate is agreed between a shipper or forwarder and a carrier for an extended period, often a year, locking in rate and capacity.