Source: https://www.scribd.com/document/70246747/Contracts-of-Affreightment
Timestamp: 2018-01-20 23:50:51
Document Index: 18433755

Matched Legal Cases: ['Art 55', 'Art 3', 'Art 9', 'Art 32', 'Art 24', 'sui generis', 'Art 2', 'Art 2', 'Art 1', 'Art 9', 'Art 4', 'Art 5', 'Arts 6', 'Art 11', 'Art 10', 'Art 20', 'Art 23', 'Art 5', 'Art 1', 'Art 9', 'Art 8', 'Arts 4', 'Art 55', 'Arts 11', 'Art 35', 'Arts 1', 'Art 29', 'Arts 18', 'Arts 22', 'Art 3', 'Art 26', 'Art 34', 'Art 31', 'Art 2', 'Art 2', 'Art 23', 'Art 1', 'Arts 39', 'Art 49', 'Art 33', 'Art 47', 'Art 32', 'Art 28', 'Art 23', 'Art 3', 'Art 9', 'Art 30', 'Art 17', 'Art 32', 'Art 34', 'Arts 34', 'Arts 8', 'Art 41', 'Art 18', 'Arts 4', 'Arts 7', 'Art 2', 'Art 58', 'Art 1', 'Art 4', 'Art 36', 'Art 27', 'Arts 40', 'Art 20', '§ 2', 'Art 16', 'EWCA ', 'EWCA ']

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In accordance with the terms of the international sale contract one of the parties to this sale contract will have to arrange for the carriage of the goods to the agreed destination. For example, under a contract based on ‘ex works’ or on ‘f terms’ the importing buyer must arrange for the carriage of the goods, whereas under ‘c terms’ or ‘d terms’ this duty falls on the exporting seller. This might be a single carriage by sea, air, road or rail (unimodal) or via a variety of means (multimodal or combined transport). Depending on the mode of transport, different legal rules apply. Due to the international character of the carriage, international conventions have been drawn up to unify the relevant laws as much as possible. Each international convention needs to be ratified by the country that wishes to give it effect. Thus, the first question is: which laws govern each particular transportation of goods? Subsequent questions are: are there any conventions and, if yes, do they apply to the specific scenario? Even if a country has not ratified the relevant convention, it may still be applicable if the parties chose to incorporate it into their carriage contract. At present, English law has given effect to the following carriage conventions. (a) In relation to sea carriage, the Hague Rules as amended by the Brussels Protocol 1968 (the Hague-Visby Rules) are incorporated into English law by the Carriage of Goods by Sea Act 1971. (b) The Warsaw Convention on Carriage by Air of 12 October 1929, as amended in The Hague on 28 September 1955, was incorporated into English law for air carriage of passengers and cargo by the Carriage by Air Act 1961 and the Carriage by Air (Supplementary Provisions) Act 1962. The new Montreal Convention for the Unification of Certain Rules for International Carriage by Air of 28 May 1999, which came into force on 4 November 2003, has been ratified by the United Kingdom: it is given effect by the Carriage by Air Act 1961 as amended and came into force on 28 June 2004. Between Convention States the Montreal Convention 1999 prevails over the Warsaw Convention (Montreal of the Convention 1999, Art 55). (c) Road carriage is governed by the Convention on International Carriage of Goods by Road of 19 May 1956 (CMR) which was incorporated into English law by the Carriage of Goods by Road Act 1965.
(d) In relation to rail carriage, the Convention concerning International Carriage of Goods by Rail of 9 May 1980 (COTIF 1980) has been given effect by virtue of the International Transport Conventions Act 1983. As part of this Convention in Annexe B the Uniform Rules concerning the Contract of International Carriage of Goods by Rail (CIM) are in force. An updated version of this Convention, COTIF 1999, is at the time of writing not yet in force. The main focus in this chapter will be on the carriage of goods by sea as more than 90% of the world’s trade (measured in weight) is carried by sea. Once the principles that can be deduced from the law on sea carriage have been learned and understood, this knowledge can be used to study the rules on carriage by air or land, thereby identifying the common as well as the differing issues.
The contract of carriage, to ship the goods from one port to another, is agreed between the shipper (our exporter or importer, as the case may be) and the carrier or charterer (the latter is a person who hires the whole vessel for a period of time or a voyage). However, both parties might use the services of an intermediary to arrange the contract. The shipper may instruct a forwarder to secure shipping space and the carrier may use a loading broker to arrange cargo for his ship. A contract of carriage so procured between a cif seller/exporter and the carrier may, for simplified example, be executed in the following simplified way: the shipowner/carrier directly or via his loading broker communicates the name of the ship, details of and closing date for loading to the forwarding agent or the shipper. A sailing card, which is a printed notice of these details, is often used for this purpose. When the shipper sends the goods to the docks he includes shipping instructions for the carrier (see Appendix to this book) and a shipping note for the superintendent of the docks (setting out the details of the goods and stating the vessel on which they are to be shipped; see Appendix to this book). Where and how the goods have to be delivered to the vessel depends on the contract or on the custom of the particular port. Unless the aforementioned clarify the matter, under common law, the place of delivery is alongside the ship or within reach of her tackle by the shipper at his expense. The goods are then inspected by tally clerks. They record the date of loading, note down the particulars and condition of the goods, the quantity (for example by counting the number of packages or taking the weight or other measurements), and any identification marks and state whether or not the goods or their packaging show any defects or markings. On this basis the mate’s receipt is issued, including all the remarks as to order and condition which the tally clerks have identified. The ship’s officer in charge signs the
mate’s receipt after loading is complete. The function of the mate’s receipt is twofold: it is an acknowledgement by the shipowner/carrier of having received the goods in the stated condition (therefore the goods are now in his possession and at his risk); and it is, even though not a document of title, prima facie evidence of the ownership of the goods. The holder of the mate’s receipt or the person named therein can demand the issue of the bill of lading. The shipowner/carrier is within his rights and duties under the contract of carriage in doing so, unless he has knowledge to the contrary. The signed mate’s receipt is taken to the shipowner’s/carrier’s clerks to be compared with the draft bill of lading. The latter is usually pre-prepared by the shipper or his agent in a set of two or three original bills, having obtained the required forms of bills of lading used by the shipping company from a stationer. Any qualifications on the mate’s receipt are added onto the bill of lading which is then signed on behalf of the shipowner/carrier and handed to the shipper. It is worth mentioning that the particulars of all bills of lading are entered on the ship’s manifest, which contains all the ship’s cargo and has to be produced to naval, port, consular and customs authorities. Thus it is a good document to remember when certain evidence is needed, for example if it is suspected that the bill of lading has been forged. However in modern liner practice (where consignments of goods are carried by a shipping line which operates a regular service between the specified ports) the mate’s receipt is often replaced. The goods delivered for shipment are accompanied by either a standard shipping note or a dangerous goods note. After shipment this note is signed to acknowledge receipt and passed back to the shipper. It is also common now for the carrier to prepare the bill of lading based on the details that were provided by the shipper when he booked the shipping space. Whilst the ship is on its journey, the bill of lading together with the other transport documents is transferred from the shipper/seller/exporter (who is called the consignor) to the buyer/importer (who is called the consignee) in accordance with the sale contract. At this point it will be of particular importance whether the bill of lading has been issued ‘clean’, that is, stating the goods to be in good order and condition, or ‘claused’, including qualifying remarks relating to their condition. Under a cif contract the buyer is only bound to accept clean documents. This means that the seller is at the buyer’s mercy if the bill is claused. If the tender of documents is conducted via a bank under a letter of credit the documents will be rejected, unless the buyer instructs the bank otherwise. If the seller cannot perform his obligation to tender clean documents, the buyer can use his strong position to renegotiate the contract price or buy the goods elsewhere and claim damages from the seller. The fact that clean transport documents are of such significance has led to dishonest business practices. But even if the carrier issues a clean transport document against a letter of indemnity from the shipper (promising to indemnify the carrier against any claims resulting from this action), this is illegal and risky. The carrier is liable towards any third party, holding the bill of lading and is bound by the statements on the bill. If the goods arrive damaged, but are said to have been shipped in good order and condition, the deterioration must have been taking place whilst in the custody of the carrier. Proof to the contrary is not admissible under English law (CoGSA 1992, s 4). Once the ship has arrived at its destination, the goods are handed over to the consignee on production of the bill of lading. Without particular agreement, or differing port
custom, the carrier has to deliver the goods over the ship’s rail to the consignee in order to discharge his duties. All costs incurred after that are to be borne by the consignee. Often delivery takes place to a dock company or appropriate warehouse and not directly into the physical custody of the consignee. It is the duty of the consignee to ascertain the arrival of the ship and its readiness to unload. The shipowner’s/carrier’s responsibility for the goods ceases once the goods have been delivered to the consignee according to the contract of carriage or custom or as stipulated by law. If he delivers goods for which a bill of lading has been issued without production of the bill, he does so at his own risk. Once one bill of the set has been accepted and delivery made, the others are void.
Liner and tramp services Depending on the amount and type of cargo, the transport arrangements will differ. Particularly with smaller consignments, the shipper can use a ‘liner vessel’ if a ship operator maintains a regular and scheduled transport line including the port of loading and discharge envisaged by the shipper. Where a liner vessel is not suitable, the goods must be booked onto a ‘tramp ship’ which does not operate under a regular schedule, but calls at any port where cargo can be obtained.
Bill of lading contract (bol) If a lesser quantity of goods or individually packaged goods are shipped along with other cargo this is mostly done under a bill of lading or similar carriage document, which evidences the contract of carriage. For ease of reference, in the following these contracts are called ‘bill of lading contracts’. However, it needs to be noted that the ‘bill of lading contract’ is concluded prior to the issue of the bill of lading. As between the shipper and the carrier, this initial contract of carriage will prevail. The bill of lading only evidences the terms of this contract that has already been partly performed by loading the goods. Thus, a special term agreed in the contract, whether oral or in writing, may override the general clause printed on the bill of lading. This had been decided with respect to an oral agreement for direct shipment between the parties, even though the bill of lading provided for liberty regarding the route, as well as direct or indirect shipment (Ardennes (Cargo Owners) v Ardennes (Owners) (The Ardennes), KBD).
However, as between the carrier and a third party which has become the lawful holder of the bill of lading, the bill of lading will constitute the contract of carriage (see Fig 4.2). The reason being that the third party holder may well be unaware of the terms arranged between the original shipper and the carrier, if they are not included in the bill of lading. As he steps into the shipper’s rights and liabilities of the contract of carriage, he will not be bound by any terms other than those expressed in the bill of lading.
3).2. incorporating chp terms Shipowner/ carrier Buyer/consignee/ lawful holder of bill of lading Fig 4. Under a charterparty. however. Clauses such as ‘all terms. In a case of inconsistency of the terms sought to be incorporated and the remaining clauses of the bill of lading. the latter will prevail. HL the consignees had to pay freight as specified in the bill of lading which also incorporated the terms of the charterparty with the following clause: ‘all other conditions as per charterparty dated the 18th day of December. it is called a ‘charterparty bill of lading’ (see Fig 4. Any incorporation must be made in clear and unambiguous words.3 Charterparty bill of lading carriage where cif seller is the charterer 4. As a last requirement of incorporation.4). However. unless the term is classed as part of the main purpose of the contract of carriage.1.QXD 11/21/05 3:09 PM Page 104 Understanding International Trade Law Charterparty bill of lading If such a bill of lading. 104 . the rights and duties are mainly governed by common law. which are apt to describe the charterparty clause that is intended to be included. provisions and exceptions contained in which charter are herewith incorporated and form part hereof. the relevant terms must not conflict with the Hague-Visby Rules or any express terms of the bill of lading.’ It was held that the charterparty term providing the carrier with a lien on the cargo for charterparty dead freight was validly incorporated in the bill of lading contract. Charterparty terms providing for liens for charterparty freight or demurrage have also been held to be incorporated. conditions and exceptions as per charterparty’ are not sufficient. for example arbitration or choice of jurisdiction clauses. different rules of law apply (as illustrated at Fig 4. For example in Kish v Taylor. refers to the charterparty and incorporates some of its clauses. Only in this case will the clauses of the charterparty be relevant to a third party holder/indorsee of the bill and only in so far as they have been validly incorporated.04_CH04. QBD (Comm) and Federal Bulk Carriers v C Itoh & Co (The Federal Bulker). all the terms. will only be validly included where specific reference is made to them (see Siboti K/S v BP France SA. CA). clauses that are classed as only ancillary to the main purpose of the contract of carriage. Exporter/seller/ shipper/charterer Contract of carriage: Charterparty Chp terms incorporated into Sale contract Tender of bill of lading Bill of lading as contract of carriage. Please have a look at the standard form contract for a charterparty bill of lading in the appendices to this book. 1907.3 Which legal rules apply? Depending on the type of carriage contract.
(b) The Hague Rules were revised by the Brussels Protocol of 23 February 1968 (the Protocol to amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading signed at Brussels on 25 August 1924). However. The rights and duties of the parties to the carriage contract are defined by these legal rules and any variation is subject to strict limitations safeguarding certain minimum rights of the shipper. Thereafter the UK repealed the CoGSA 1924. Under a bill of lading contract the shipper consigning a significantly smaller amount is in a less strong bargaining position than a charterer wishing to hire an entire ship. entering into force on 23 June 1977. (c) In 1978 revision. in the UK. (d) In 2002 UNCITRAL began deliberations on a Draft Instrument on the Carriage of Goods [Wholly or Partly] [by Sea] which in its current state is a combination of the approaches taken in the Hague and Hamburg Rules. following ‘Working Group III’. again took place. which are also commonly referred to as the Hague Rules as amended by the Brussels Protocol 1968. (a) The International Convention for the Unification of Certain Rules Relating to Bills of Lading of 25 August 1924 (done in Brussels). The Hamburg Rules came into force on 1 November 1992.QXD 11/21/05 3:09 PM Page 105 Chapter 4 Contracts of affreightment unless the parties have agreed to incorporate the rules of an international convention. as of September 2005. 105 . By this action it seems clear that the UK no longer wants to be bound by the Hague Rules. In order to stop the carrier abuse this power imbalance. The Hague-Visby Rules were incorporated into English law by the Carriage of Goods by Sea Act (CoGSA) 1971. is done by Act of Parliament).org/uncitral/en/index. The lack of support for the Hamburg Rules by the big shipping nations is most likely due to their emphasis in favour of the shipper. The United Nations Convention on the Carriage of Goods by Sea 1978. known as the Hamburg Rules. only have 30 parties. this time fundamental. compared with the strict common law position. the Hague-Visby Rules still apply by virtue of the CoGSA 1971. these contracts are generally governed by international conventions incorporated into the different legal systems (which. but still. known as the Hague Rules (HR).04_CH04. In turn the carrier’s liability is reduced.html by accessing the link to ‘Commissions & Working Groups’. Thus the contract terms are of major significance with the rules of common law filling the gaps. but only by the Hague-Visby Rules. The result is known as the HagueVisby Rules (HVR). whereas the Hague and Hague-Visby Rules afford substantial limitation of liability to the carrier. It was incorporated into English law by the Carriage of Goods by Sea Act (CoGSA) 1924. The following international conventions relating to bills of lading have been developed for this purpose. was adopted by a United Nations Conference on 30 March 1978 in Hamburg. The common law provides for strict liability of the carrier for the goods in his charge. The progress of the draft instrument can be reviewed at http://www.uncitral. In order not to be bound by the Hague Rules internationally the UK also denounced its ratification of the Hague Rules and repeated the denunciation each time a protocol amending the Hague Rules was ratified. most of which are not major seafaring countries. the parties are free to negotiate their rights and duties in detail and the carrier is free to limit his liability. The United Kingdom has not ratified the Hamburg Rules.
the laws of some States (for example the United States of America) only provide for the application of the Hague Rules.04_CH04.html. but does not qualify as ‘contracting State’ to any of the above). Both the Hague and Hague-Visby Rules have been signed at Brussels and are deposited with the Belgian Government. the HVR have been given effect in the UK by virtue of the CoGSA 1971.asp. In addition there are countries which have not adopted any of the aforementioned rules. 4. the Hague Rules. implementing the HagueVisby Rules (HVR). following the link to ‘UNCITRAL Texts & Status’. Chapter 14). depending on which law governs the parties’ contract of carriage. Their status and the identity of the contracting States can be researched by accessing http://www. Thus. Thus.QXD 11/21/05 3:09 PM Page 106 Understanding International Trade Law Which legal rules apply to the contract of carriage? Charterparties (a) Contractual terms (b) Complemented by the applicable law. The contracting States to the Hamburg Rules.org/uncitral/en/index.4 When are the Hague-Visby Rules applicable? It is assumed in the following that English law is the applicable law. The intended harmonisation of the law relating to sea carriage had been quite well achieved by the first set of rules. and the laws of yet other States provide for the application of the Hamburg Rules (for example Austria or Egypt). but have developed and apply their own (for example Australia has used the conventions as a basis for its Carriage of Goods By Sea Act 1991. You can find this order inter alia in Halsbury’s Laws of England (Shipping and Navigations Volume 43(2).4 Relevant legal rules for a contract of carriage Like the United Kingdom. ‘Her Majesty by Order in Council certifies’ the contracting States to the HVR and this order shall be conclusive evidence of the matters so certified.be/en/treaties/default. As we have seen. The first steps therefore must be to determine the law applicable to the carriage contract in order to define the rights and duties of the parties and to determine the contracting States to any convention which might be applicable. many of the countries that adopted the Hague Rules have not ratified all or even any of the revised rules. having been adopted by UNCITRAL. (b) Hague-Visby Rules (implemented in UK) or (c) Hamburg Rules Fig 4. for the time being. in England common law Bill of lading contracts Mostly governed by international conventions as incorporated into the relevant legal system: (a) Hague Rules. When are these Rules 106 .uncitral. the laws of other States (for example the United Kingdom) incorporate the Hague-Visby Rules. a variety of regimes applies across the world. According to s 2 of the CoGSA 1971. However that harmonisation has been fractured by the attempts to improve the provisions. To prevent further fragmentation work has begun on the new UNCITRAL Draft Instrument on the Carriage of Goods.1. can be determined by accessing the website at http://www.diplomatie.2.
when it put into an English port. Art I(a)). Thus. whether as a ‘matter of law’ or as a ‘matter of contract’. KBD). the Rules do not apply to non-negotiable transport documents. CA. even if orally. by virtue of s 1(6)(b) of the CoGSA 1971. or similar transport documents which only acknowledge the receipt of the goods. it suffices that the parties contemplated the issue of a bill of lading (Parsons Corporation v CV Scheepvaartonderneming Happy Ranger (The Happy Ranger). The bill of lading provided for jurisdiction of the Dutch courts and the application of the law of the Netherlands. data freight receipts. which have been confirmed to be a document of title and to be within the meaning of Art I(b) of the HVR (see JI MacWilliam Co Inc v Mediterranean Shipping Co SA (The Rafaela S). affirmed by HL). Any clauses limiting the liability of the carrier below the threshold of the Rules will be null and void in such a case. the parties can choose to give the Rules ‘the force of law’ if they mark the receipt as a non-negotiable document and expressly opt for the application of the Rules ‘as if the receipt were a bill of lading’. The HVR apply if the following criteria are fulfilled. however in the UK. (The Morviken). It does not matter if a damaging event occurred on loading and thus that no bill was issued.04_CH04. Art I(b)) whether or not the bill of lading has already been issued. As the CoGSA 1971 gives the force of law to this convention. which incorporated the Hague Rules. However please note that the provisions of the CoGSA only apply in the United Kingdom. Art III(8) of the HVR is applied in an uncompromising manner. For the Rules to be applicable. based on the sailing announcements of the carrier and the negotiations between the parties. Where the parties have given the Rules ‘the force of law’ all the provisions of the Rules apply and the parties cannot reduce the liability of the carrier below the accepted limit. This view is consistent with the understanding that the bill of lading contract has already been concluded before the issue of the bill (Ardennes (Cargo Owners) v Ardennes (Owners). ie the CoGSA 1971 and the HVR which are appended as a Schedule to the Act. CA). they are not part of the HVR as such. Once a bill of lading contract is concluded.QXD 11/21/05 3:09 PM Page 107 Chapter 4 Contracts of affreightment applicable? Here we need to look at both. The contract is normally concluded orally. If the HVR have the force of law. The claimant arrested The Hollandia. Cargo was shipped by the claimants on a Dutch vessel from Scotland to the Dutch West Indies with carrier D. such as sea waybills. as for all other conventions and treaties. the implementing legislation of an international convention must always be consulted. In a discussion of the convention and its implementing national legislation you can easily identify which piece of legislation is referred to by looking at the citation: the provisions of an English Act of Parliament are expressed in sections and the provisions of the HVR. Documentary application The HVR apply to contracts of carriage covered by a bill of lading or similar document of title (CoGSA 1971. in articles. one of D’s vessels. s 1(4) and HVR. The wide scope of Art III(8) of the HVR is well illustrated in Owners of Cargo on Board the Morviken v Owners of the Hollandia (The Hollandia). This also includes non-negotiable bills of lading. it is a contract ‘of carriage covered by a bill of lading’ (see HVR. Based on the 107 . HL. it has the potential to modify its application for the UK. According to the provisions of the HVR. Where the parties chose to incorporate the Rules voluntarily into their contract it is crucial to establish to what extent they wanted the Rules to govern the relationship.
The consequence would be that the carrier could escape some of the liability if the jurisdiction clause were given effect. because they had not incorporated the Rules by using the words ‘as if it were a bill of lading’. However. the jurisdiction clause was invalid in accordance with Art III(8) of the HVR. which otherwise would not be applicable and they have only given contractual application to the HVR. or in connection with the goods…or lessening such liability otherwise than as provided in these Rules shall be null and void and of no effect’. Steyn J’s decision is contrary to the earlier decision by Lloyd J in McCarren & Co Ltd v Humber International Transport Ltd and Truckline Ferries (Poole) Ltd (The Vechscroon). PC (New Zealand) a similar question arose: however it was outside the scope of the UK CoGSA 1971. Korea and New Zealand respectively. Lloyd J argued that there was no reason why Parliament should have intended to draw a distinction between incorporating the Rules into a non-negotiable receipt and incorporating the Rules ‘as if it were a bill of lading’. These conflicting decisions show that it is of utmost importance for the parties to state clearly which effect is intended by the incorporation.QXD 11/21/05 3:09 PM Page 108 Understanding International Trade Law bill of lading clauses D applied for a stay of action in England invoking the jurisdiction of the courts in the Netherlands. held that 108 . which provides that any ‘clause. The Hague-Visby Rules scheduled to the CoGSA 1971. The cargo was damaged and the cargo claimants argued that the limitation of liability would fall foul of Art 3(8) and Art 9 of the Hague Rules.04_CH04. despite these words not being used. however. had to be treated as if they were part of directly enacted statute law in the UK. QBD (Comm)). If the courts of the Netherlands were to hear the case they would apply the Hague Rules as part of the applicable law. QBD (Comm)). However the House of Lords upheld the decision of the Court of Appeal holding that the jurisdiction clause was ineffective. Thus. where it was held that the Rules applied with ‘the force of law’. The bill of lading contract was neither governed by any international convention nor by the national law of the load or discharge ports. The liability regime of the Hague Rules however was below the threshold of the Hague-Visby Rules applicable in the UK. This was assumed by Steyn J in a case where the sea waybill expressly incorporated the Rules. the consequences of incorporation seem not to be as drastic. Section 1(6) of the CoGSA 1971 only conferred a statutory force on a voluntary tie if these exact words were used (see Browner International Transport Ltd v Monarch SS Co Ltd (The European Enterprise). but still to allow for alterations of the regime by varying some of the provisions. but also provided for limitations of liability below the threshold of the Rules. Where the intention of the parties was purely to restate the position under the Rules as a basis. However the Court of Appeal. but with the additional clause that the limitation of liability under the Hague Rules was deemed to be £100 Sterling per package or unit. He held that the parties had not intended to give the Rules the ‘force of law’ as set out in s 1(6) of the CoGSA 1971. The contract incorporated the Hague Rules. All the requirements for statutory application of the HVR were fulfilled. any such variation of liability would be valid. in the given circumstances. Article 9 of the Hague Rules provides that the monetary units under the Hague Rules are to be gold value. In Dairy Containers Ltd v Tasman Orient Line CV (The Tasmanian Discoverer). covenant or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to. Where the parties on the other hand have chosen to incorporate the HVR. as affirmed by the Privy Council. which made a big difference.
Neither do the Rules apply to live animals and deck cargo (HVR. On the other hand.QXD 11/21/05 3:09 PM Page 109 Chapter 4 Contracts of affreightment the issue was a matter of the construction of the contract. (7) of the CoGSA 1971 as if Art I(c) of the HVR did not exclude them. and the goods must in fact be so carried. HL). Despite the initial scope of the Rules. but only entitles the carrier to choose whether to do so. 109 . the parties of a charterparty are free to opt for the application of the Rules. Art I(c)). Art V). where a ship under a charterparty issues bills of lading they must comply with the terms as set out in the Rules (HVR. This often is done via a so-called ‘clause paramount’.04_CH04. Such liberty clauses have been held to be insufficient to exclude the application of the Rules (see Svenska Tractor Aktiebolaget v Maritime Agencies (Southampton). Often the contract of carriage will only give the carrier the option to carry the goods on deck. it may not be enough to choose ‘English law’ in order for the HVR to apply. In Dairy Containers the wording was clear as to the incorporation of the Rules to this limited extent. QBD). a choice of the parties to apply the Rules to deck cargo is given effect by s 1(6). However. English law in this respect comprises common law and the HVR (by virtue of the CoGSA 1971). CA). However. Thus the claimant’s argument failed and the liability of the carrier was limited to £100 Sterling per package. the Rules are paramount and thus override any contradicting contractual clauses (see Adamastos Shipping Co Ltd v Anglo Saxon Petroleum Co Ltd. but only once they have been transferred to a third party holder. as the HVR had not been incorporated and their statutory application requirements were not fulfilled in this case it was held that the HVR did not apply. from which the Court of Appeal inferred that they had intended English law to apply. The parties can indirectly opt for the application of the Rules by contractually providing for a governing law which gives effect to them. From Art I(b) of the HVR it is clear that the Rules do not apply to charterparties. However. However they will apply to bills of lading issued under a charterparty as soon as. This ensures compliance of any bill of lading with the Rules. In order to be classified as deck cargo for this purpose two criteria must be fulfilled: the contract of carriage must state that the goods are carried on deck. In the Komninos S the bill of lading had provided for jurisdiction of the ‘British courts’. Territorial application By virtue of Art X of the HVR the Rules apply for the carriage of goods between the ports of two different States where: (a) the bill of lading has been issued in a contracting State. or (b) the goods have been loaded in a contracting State. If the parties want to apply the HVR outside their initial territorial application. This is done by way of a so-called ‘liberty clause’. This clause means that regardless of any wide exceptions used in the carriage contract. or (c) the parties have chosen the Rules’ application either directly or indirectly. Article V of the HVR affirms that the provisions of the Rules do not apply to charterparties. This clause does not state that the goods are or will be carried on deck. they should express this directly by specifically choosing the application of the HVR and not just generally the use of English law (see Hellenic Steel Co v Svolmar Shipping Co Ltd (The Komninos S).
3 and 4. the common law rules apply. First we want to concentrate on more general issues. The fulfilment of the requirement set out in Art X of the HVR that carriage must be between ports of two different States is not necessary in so far as shipment takes place in UK coastal waters. So what exactly is covered by the Hague-Visby Rules? The HVR were developed to ensure that the shipper had at least a minimum protection against a carrier who was likely to attempt to exclude any liability for the cargo. in turn. updating and repealing the Bill of Lading Act 1855. afford him and his servants exceptions (HVR.QXD 11/21/05 3:09 PM Page 110 Understanding International Trade Law According to s 1(3) of the CoGSA 1971 the application of the HVR also includes UK coastal waters.5 Application test for the HVR Territorial requirements Art X of the HVR + s 1(3) of the CoGSA 1971: (a) bill issued in a contracting state. but.4. Art III(6) for a one year limit to bringing claims against the carrier). (7) of the CoGSA 1971: (a) bill of lading or similar document of title. The application requirements of the Hague-Visby Rules are illustrated at Fig 4. acquires rights of suit and liabilities as if it were a party to the contract. Where the contract of carriage is not governed by the HVR.2. 110 . (b) not covering deck cargo or live animals. The HVR also provide for the shipper’s liability if he ships dangerous cargo without prior permission of the carrier. By virtue of the CoGSA 1992. The latter could be classed as a misnomer because it is not an updated version of the 1971 Act. It covers a different area altogether. The HVR burden the carrier with a certain level of liability from which he cannot escape (HVR.5. or (b) carriage from a contracting state.04_CH04. a third party to which delivery under the transport document has to be made. Fig 4. Art III(8)). Are the Hague-Visby Rules as incorporated into English law applicable? Documentary requirements Art I of the HVR + s 1(6). neither by legal implication nor by contractual agreement.2. Art IV and Art IV bis) and limitations of his liability (HVR. The details in relation to the rights and liabilities of the carrier and the shipper under these rules will be discussed at 4. or (c) contract provides for the application of the Rules. nor is it in conflict with the CoGSA 1971. Common law also applies to any issues beyond the ambit of the Rules. for example with regard to freight or the shipowner’s lien. Art IV(5) for a limitation in value calculated per package and HVR. The CoGSA 1971 giving the Hague-Visby Rules the force of law in the UK must not be confused with the CoGSA 1992. who is not privy to the carriage contract between the shipper and the carrier.
6 Functions of the bill of lading Document of title A document of title is a document recognised by law. 4. Bill of lading functions Document of title whether bill is negotiable or nonnegotiable Receipt of the goods for quantity and apparent order and condition Evidence of the contract of carriage for shipper Contract of carriage for third party consignee Fig 4. the goods are represented by the bill of lading to enable the parties to meet their business needs. which has long been recognised by law (see the House of Lords decision of 1793 in Lickbarrow v Mason).6). Transfer of such a document vests in the transferee the right to possession of the goods and possibly also the property in them.2 Bill of lading Functions of the bill of lading We touched upon the three major functions of the bill of lading at 2.1 (see also Fig 4.1 Mate’s receipt As we have seen at 4. Even though the mate’s receipt is not usually a document of title.2. it is prima facie evidence of the ownership of the goods. Based on the markings in the mate’s receipt the bill of lading is issued.2.1.2.1 above. The carrier is in his rights to issue bills of lading to the holder of (or the person named in) the mate’s receipt.2. which represents the goods for which it is issued. Particularly in international trade where the goods are usually in transit for a long time. or the buyer may want to use the goods as security for obtaining credit. 111 .QXD 11/21/05 3:09 PM Page 111 Chapter 4 Contracts of affreightment 4. Thus. 4.5. the mate’s receipt is signed when the goods are loaded on board ship.4.2. PC). It is an acknowledgement by the carrier of having received the goods into his custody in the condition stated therein. Mercantile custom has developed such a function for the bill of lading.2. the parties’ interests are likely to be as follows: the seller will want to get paid as soon as possible. the buyer may have an interest in selling the goods on before they arrive. Until that time the goods are held by the carrier subject to the exceptions and conditions of his usual bill of lading unless the parties have agreed on other conditions in the carriage contract.2 Types and nature of carriage documents In this section we are going to examine the nature and functions of different carriage documents and in particular those of the bill of lading. unless the carrier has knowledge of the fact that another person is the owner of the goods (see Nippon Yusen Kaisha v Ramjiban Serowgee.04_CH04.
Transfer of property is only effected if and when the parties to the sale contract intend this to happen. may dispute their obligation or may be insolvent. only transfers the same rights to the transferee as were vested in the transferor. the buyer is entitled to a negotiable bill of lading unless the parties have agreed otherwise (see Soproma SpA v Marine & Animal By-Products Corporation. Property might be intended to pass together with the transfer of the bill. but this is still very risky. Transfer of the bill of lading to an agent at the port of destination usually aims at enabling him to take delivery from the carrier. negotiable instruments.3 above). QBD (Comm)). It is a bit of a misnomer. The consignee or his bank. A carrier who delivers the goods without insisting on production of the bill of lading does so at his own risk. so that he can consequently fulfil the seller’s obligations towards the buyer.4. they are transferred by mere delivery and thus provide little security to the purchaser. To show its negotiability an order bill needs to include such words as ‘or order or assigns’ (Henderson & Co v The Comptoir d’Escompte de Paris. Only in the limited situations set out in ss 21–25 of the SoGA 1979 can a defect in title of a seller be overcome by means of transfer of the document of title to the goods.2. It is still a document of title within the scope of the Hague-Visby Rules (see JI MacWilliam Co Inc v Mediterranean Shipping Co SA (The Rafaela S). Only a person holding the bill of lading can claim delivery of the goods.7). depending on the form. the word ‘order’ in the consignee box. Where the bill of lading is a straight consigned bill it is non-negotiable (International Air and Sea Cargo GmbH v Owners of the Chitral (The Chitral). Bills of exchange are. 112 . still has to be produced in order to obtain delivery. Kuwait Petroleum Corporation v I & D Oil Carriers (The Houda). usually under an express or implied term. Transfer of the bill to a bank is usually done in order to create a pledge on the goods rather than to transfer property. there are negotiable and non-negotiable bills of lading (see also Fig 4. as the bill of lading is not a negotiable instrument. QBD (Comm) and Henderson & Co v The Comptoir d’Escompte de Paris. however. CA and HL). Please compare the standard forms for negotiable and non-negotiable transport documents in this respect. A bill of lading.QXD 11/21/05 3:09 PM Page 112 Understanding International Trade Law Transfer of the bill of lading transfers possession of the goods. such a bill. however it can also be dependent on other events. whether under common law or under Incoterms 2000. giving a holder in due course an indefeasible title regardless of any prior defects (see 3. This ‘negotiability’ refers to the bill’s transferability. adding the name of the consignee as notify party. such as payment of the purchase price. which are appended to this book. In practice he may want to do so only against a letter of indemnity by the consignee. however. PC (Hong Kong)) beside the name of the consignee or. PC (Hong Kong) for the common law position). The carrier is then left to compensate the loss caused to his contract partner without necessarily being backed by a solvent consignee or whilst having to incur further cost in order to obtain a judgment in his favour against the consignee or his bank.1 above. However. Under a normal cif or c & f contract. PC (Singapore).5. CA and SA Sucre Export v Northern River Shipping (The Sormovskiy 3068). having given the indemnity. ‘Bearer bills’ which are made out to the bearer are seldom used. as the carrier is responsible for the damage caused by his breach of contract (see Sze Hai Tong Bank v Rambler Cycle Co Ltd.04_CH04. QBD (Admlty)). As we have seen at 2.
the letter of credit (if applicable) and obviously the carriage contract. the date of shipment and particularly the goods’ order and condition are essential with respect to three separate contracts: the sale contract. Otherwise the seller has to find a different buyer for his goods and will be liable for any damages caused to the buyer due to non-delivery. The statements regarding the description of the goods. allowing for the insertion of details such as their weight. The buyer has no means of checking the goods before they arrive. Under the sale contract the buyer can reject the bill of lading if it does not correspond with the goods sold or if it is claused (see 2. Thus. In the latter event. he needs to be able to rely on the transport document to describe the goods accurately in quantity. unless comments to the contrary are inserted into the bill.1 above as well as 2. The bills also describe the goods to be in apparent good order and condition.9.04_CH04. If the seller cannot present a clean bill of lading showing the date of shipment as stipulated in the credit. If this is so.5.7 Illustration of negotiability of bills of lading Receipt for the goods As you can verify by looking at the transport documents included in the appendices. by which time he has usually paid for the goods.4. the buyer will advise the bank to pay regardless of the discrepancies. marks or number of packages.1). The sale contract invariably calls for a clean bill of lading. With respect to the carriage contract there is a need to distinguish between two different relationships: that between the carrier and the shipper and that between the carrier and 113 . but will most likely first renegotiate the price with the seller.QXD 11/21/05 3:09 PM Page 113 Chapter 4 Contracts of affreightment Bill of lading as document of title Non-negotiable bill Straight consigned bill stating the name of consignee which is not ‘to order’ and requires presentation on delivery of goods Negotiable bill of lading (a) Bearer bill Gives rights to any holder of the bill (b) Order bill Named consignee or ‘to his order’ Needs to be indorsed to be transferred Fig 4. the bank will reject the documents and the seller will not get paid. The only way to avoid deadlock is for the seller to contact the buyer to see whether he still wants the goods even in the condition as described by the carriage document. the bills of lading and other carriage documents all bear a section for the quantity and description of the goods. the bill is then called ‘claused’ as opposed to a ‘clean’ bill without qualifying remarks as to the goods’ quality and condition. The letter of credit also requires a clean transport document (Art 32(b) of the UCP 500) unless the parties have varied this requirement. quality and shipment date.
CA.04_CH04. marked in a manner which remains legible until arrival of the goods. 114 . as furnished by the shipper. however. quantity or weight which he suspects not to be accurately representing the goods or which he has no reasonable means of checking (HVR. in favour of the consignee or indorsee of the bill of lading the bill is conclusive evidence (see HVR. if the carrier states the quantity without any qualifications the bill is prima facie evidence in favour of the shipper (Smith v Bedouin. Unusually he already completes the bill of lading and sends it to the carrier who signs it if the particulars are found to be correct.QXD 11/21/05 3:09 PM Page 114 Understanding International Trade Law the third party lawful holder of the bill of lading (the consignee or indorsee of the bill). is deemed to have guaranteed the accuracy of the information provided in respect of quantity and marks (but not condition). HL) and conclusive evidence in favour of the third party lawful holder of the bill of lading (CoGSA 1992. Under the Hague-Visby Rules the carrier is bound to issue a bill of lading on demand of the shipper including statements as to: (a) the leading marks necessary for identification of the goods. Representations as to leading marks on the bill of lading at common law were not taken to be conclusive evidence at least as long as these marks were not material to the description of the goods (see Parsons v New Zealand Shipping Co. Proof of the contrary is admissible (see HVR. nor any means of checking whether the content is correct. KBD). Otherwise the bill is at least prepared on the basis of the shipping details and instructions as provided by the shipper. but with the addition that the quantity is ‘unknown to the carrier’ or it is ‘as provided by the shipper’. In favour of the shipper. In such a case the carrier is in fact not making any representation at all (New Chinese Antimony Co Ltd v Ocean Steamship Co Ltd. On the other hand. also on this point but under the Hague Rules see Noble Resources Ltd v Cavalier Shipping Corporation (The Atlas). If the carrier relies on this information and incurs liability towards a third party (usually the third party consignee) the shipper has to compensate for the loss of the carrier (HVR. Often the quantity is stated. the bill is only prima facie evidence of the receipt of the goods as described. which brings bills of lading governed by common law in line with the position of a bill under the HVR). However. Art III(5)). However the carrier is not bound to show any marks. The shipper or his forwarding agent provides all the information to be included in the bill of lading. QBD (Comm)). either by weight. The third party holder of a bill of lading on the other hand has no influence on the statements in the bill. The shipper. who has usually provided the information on the bill of lading to the carrier. At common law the carrier need not make any representations about quantity in the bill of lading. Art III(4)). s 4. Art III(3)). The carrier does not guarantee that the goods are perfect or that they are in anyway fulfilling the condition required by the sale contract. Art III(4)). number. and (c) the apparent order and condition of the goods. The statement with respect to order and condition only covers their apparent state or apparent defects. (b) the quantity of the goods. CA and Compania Importadora de Arroces Collette y Kamp SA v P & O Steam Navigation Co. number of packages or pieces.
Agrosin Pty Ltd v Highway Shipping Co Ltd (The Mata K). for which he had not authority. is illegal and completely worthless for the carrier if both parties.2. However. Such an indemnity. QBD (Comm). CA).2 above. know that the bill should have never been issued clean. the exporter and the carrier. in cases where he was required to make such representations. the bill of lading evidences the carriage contract which was concluded between the shipper and the carrier long before the bill of lading was issued (Ardennes (Cargo Owners) v Ardennes (Owners) (The Ardennes). for example where the shipper demanded the statements as set out in Art III(3) of the HVR. Jenkinson & Co Ltd v Percy Dalton (London) Ltd. Types of bills of lading Most types of bills of lading have already been discussed: (a) negotiable or non-negotiable bills of lading in the first part of this section (ie at 4. the carrier is at times approached by the shipper to issue a clean bill contrary to the facts. if the carrier clearly marks the quantity ‘unknown’ he does not make a statement which can be held against him (see Noble Resources Ltd v Cavalier Shipping Corporation (The Atlas). His arguments were not upheld: the bill was effective and gave conclusive evidence of the contract. QBD (Comm) and New Chinese Antimony Co Ltd v Ocean Steamship Co Ltd. Qualifying clauses as to ‘condition unknown’ cannot be used to nullify the statement on the bill that the goods have been received in apparent good order and condition. but also without inconveniencing his client (the shipper). CA). Any arrangements between the shipper and the carrier which have not been entered into the bill of lading cannot be relied upon. 115 . In order to be able to issue bills of lading without becoming liable for misrepresentations. carriers use certain innocent qualifying remarks such as ‘quantity unknown’. However the carrier cannot negate specific statements made on the bill with the qualifying clause that they are unknown. often against a letter of indemnity. where the goods on loading showed apparent defects (see The Skarp. However. QBD (Comm) the ship owner alleged that the bill was not effective and thus gave no title to sue to the holder because the agent had backdated the bill of lading.04_CH04. In Alimport v Soubert Shipping Co Ltd. In such a case the qualifying clause is ineffective. but see also Rederi AB Gustav Erikson v Dr Fawzi Ahmed Abou Ismail (The Herroe and The Askoe). but also of the binding effect of the bill. QBD (Comm). PD & A). ‘condition unknown’.1. the bill of lading constitutes the contract of carriage. as between the carrier and a bona fide transferee.QXD 11/21/05 3:09 PM Page 115 Chapter 4 Contracts of affreightment Due to the importance of a clean bill of lading to the sale contract and the letter of credit.2 above).2. Evidence of the contract of carriage As discussed at 4. Detailed analysis of the relevant case law is necessary for each individual case to determine whether a specific qualifying clause is effective. ‘quality unknown’. however.2. By virtue of s 4 of the CoGSA 1992 the bill of lading is conclusive evidence in favour of a person having become the lawful holder of the bill with respect to the shipment of the goods. because they conspire fraudulently to induce the consignee to accept the bill and pay the purchase price which he otherwise would not (see Brown. KBD).
1. in the following. or where the sea transport is divided into separate legs. the details of the cargo and /or shipment or the name and address of the shipper.2. (d) clean or claused bills of lading earlier in this section (ie at 4. Container bills of lading Container bills of lading are issued by container shipping lines for multimodal transport of goods in containers. The principal contract of sea carriage is superimposed upon the other contracts for the on-carriage. It is a genuine bill of lading to which the Hague or Hague-Visby Rules apply in so far as the sea carriage is concerned. The switch bills include certain alterations of the terms of the bill. In such an event the shipper can sue the second carrier only in bailment. There are plenty of commercial reasons why certain alterations may be useful. charging an inclusive freight and undertaking to arrange for the transhipment with the on-carriers. as the carrier acknowledges the receipt of the goods inland.1 above and.2. The delivery of the goods at their destination will be by the last on-carrier against one part of the original through bill of lading. Otherwise plenty of legal problems can be the result.QXD 11/21/05 3:09 PM Page 116 Understanding International Trade Law (b) charterparty bills of lading at 4. The shipper only deals with the carrier who signs the through bill. The container bill thus is mostly a ‘received for shipment’ bill and not a ‘shipped on board’ bill.5.04_CH04. the CoGSA 1971 incorporating the Hague-Visby Rules applies where the bill was issued in a contracting State or the goods shipped from a port of a contracting State. 116 . the respective compulsory rules of national law or international conventions will also apply. In addition he acts as freight forwarder to select with reasonable care the second carrier for the on-journey. Based on this one through bill of lading. Great care needs to be taken to ensure that the original bills are surrendered and that the switch bills are issued with the authority of the carrier and that the terms of the bills are identical. we are only going to touch upon those types not yet introduced: Through bills of lading These are used when the goods are transported by more than one means of transport and the sea carriage is only one part of it. With respect to the other parts of the carriage.2 above. The goods are usually dispatched from a container freight station inland to their place of destination. Therefore. However under a ‘false through bill’ the contracting carrier only takes responsibility for the part of the voyage performed by him. Whether the shipper can sue the on-carrier directly under the contract will depend on whether the main carrier had contracted solely with the shipper only using the on-carriers as servants or sub-contractors.2. such as not to disclose the source of the cargo (see for example Noble Resources Ltd v Cavalier Shipping Corp. because there is no privity of contract between them. Rather than having to take out several carriage contracts the shipper can take out one ‘through bill’ for the whole journey.4. (The Atlas). (c) shipped and received for shipment bills of lading at 2. QBD (Comm)). even after transhipment of the goods in a foreign port. but such a practice also lends itself to fraudulent practices.2 above). Switch bills of lading Switch bills of lading are bills which are issued in return for the surrender of the original set of bills under which the cargo was shipped. or whether he acted as agent for the on-carriers in contracting with the shipper.
However.org/uncitral/en/index.QXD 11/21/05 3:09 PM Page 117 Chapter 4 Contracts of affreightment Electronic bills of lading An in-depth discussion of electronic bills of lading and e-commerce is beyond the scope of this introductory book. An electronic bill should be suitable as receipt for the cargo and evidence of the contract of carriage. but so far no regulations have appeared.04_CH04. only the draft UNCITRAL instrument includes specific provisions for electronic commerce. problems arise with the function of a document of title.html or found in an international trade law statute book. it could be left for the Secretary of State to make provision by regulations once the paperless transactions became common. Bolero is designed not just for single transactions but also 117 . Under this system the shipper as the original holder irrevocably informs the carrier of the new holder using a ‘private key’. The Law Commission’s Report ‘Rights of Suit in Respect of Carriage of Goods by Sea’ (HC 250. These recommendations have been implemented by s 1(5) and (6) of the CoGSA 1992. the ‘Through Transport Mutual Insurance Association Ltd’. the buyer and the banks.org/cmidocs/rules_idx. some information is included in order to inspire you to undertake your own further research.comitemaritime. The texts of these model laws can be accessed on UNCITRAL’s website via the ‘UNCITRAL Texts & Status’ link at http://www. Various attempts have been made to facilitate electronic commerce and also to introduce a secure electronic replacement for the paper bill of lading. A step in the development of trade by using electronic bills of lading was taken with the Bolero project. The Comité Maritime International (CMI) predicted the importance of electronic bills of lading and in 1990 adopted the CMI Uniform Rules for Electronic Bills of Lading. In the age of electronic commerce the logical question is whether the traditional paper bill of lading can be replaced by an electronic bill. recommending the enactment of the CoGSA 1992. In order to achieve the same aim as the paper bill of lading an electronic bill must fulfil the three functions of the traditional bill of lading. The Uniform Rules can be found in a statute book or at the CMI website at http://www. The report briefly highlights the technical and legal problems that still need to be overcome to eliminate the physical transfer and suggests that instead of dealing with the issues within the CoGSA 1992. one of the main challenges is that the bill of lading as document of title is transferred by (indorsement and) delivery. the ‘Society for Worldwide Interbank Financial Transmission’ and TT Club. requiring possession of the bill. Another issue is whether the CoGSA 1971 and the CoGSA 1992 would apply to an electronic bill as both Acts require a bill of lading or similar ‘document’ which seems to assume a paper form. which requires physical possession. Similar questions as to applicability arise for any of the international carriage conventions. Bolero standing for ‘Bill of Lading Electronic Registry Organisation’. the transfer of it and the security the bill is supposed to provide for the unpaid seller. 1991).html. which is a unique combination of numbers and/or letters to secure the transaction. The UNCITRAL Model Law on Electronic Commerce 1996 (as amended in 1998) and the UNCITRAL Model Law on Electronic Signatures adopted in 2001 aim to provide solutions for many issues affecting the legal effects of electronic documents and signatures. However.uncitral. On the practical side. It was initiated by the International Chamber of Commerce and was initially sponsored by SWIFT. Part VI of the Report briefly touches on documents forming part of an electronic record.
org/cmidocs/rules_idx. but can be notated once the goods are loaded on board. there are others.net/decision/legal/ may also be of interest.2. encryption technology and reliance on third parties as registers. in particular Electronic Commerce. Further information can be found on the ICC’s website at http://www. but it is not a document of title. Information about Bolero Association Ltd and Bolero International Ltd can be found at http://www.net in February 2000. A legal framework is provided inter alia in the UK by the Electronic Communications Act 2000 that deals with electronic signatures.boleroassociation.org/. which may be voluntarily incorporated into the contract of carriage. the non-negotiable bill of lading is still a bill of lading within the meaning of the CoGSA 118 . Apart from replacing the paper bill with an electronic bill it provides a registry where the ‘indorsement’ is monitored and recorded.bolero. A sea waybill is sufficient as a transport document if the buyer does not intend to sell the goods while in transit.04_CH04. Its production by the consignee is not necessary. The UK Act is consistent with the UNCITRAL Model Law on Electronic Commerce. a sea waybill can even be acceptable under a letter of credit arrangement (see UCP 500. 4.2. The Bolero Rulebook. The eUCP are only just one example of the development work undertaken by the ICC. but the Rules can be expressly incorporated into the contract. Even though a straight consigned bill of lading is a non-negotiable transport document.html. It is not a good tender instead of a bill of lading but.iccwbo. The Hague-Visby Rules do not apply to a sea waybill. in the Internal Market (EU Directive on Electronic Commerce) of 8 June 2000 ([2000] OJ L178/1) covers various legal aspects of information society services and is worth consulting.boleroassociation. if the parties so provide. The sea waybill is mostly issued in a ‘received for shipment’ form. which is the agreement between the users of the service and Bolero Association Ltd as well as Bolero International Ltd can be accessed at http://www.pdf or it can be found in Paul Todd Cases & Materials Book on International Trade Law (2003). Additionally. in this case to enable the presentation of electronic records as tender of documents under a letter of credit. The EU Directive 2000/31/EC on Certain Aspects of Information Society Services.net/respectively. The system was launched in September 1999 and its first live transaction was carried out via Bolero. such as the non-negotiable bill of lading or a mere receipt by the carrier. delivery is obtained on satisfactory identification. It is a receipt of the goods by the carrier and it evidences the carriage contract.org/downloads/rulebook1. These Rules can be found via the CMI’s documents site at http://www. The advantage of a sea waybill is that delivery of the goods is not delayed by a slow transmission of the transport documents to the consignee. The ‘Bolero legal guides’ at http://www.org/ and http://www.bolero. as may happen in case of a bill of lading. To further the development of e-commerce the International Chamber of Commerce is also developing strategies and tools to provide secure online contracting. there are the CMI Uniform Rules for Sea Waybills adopted by the CMI in 1990.QXD 11/21/05 3:09 PM Page 118 Understanding International Trade Law to be able to cope with an entire chain sale transaction on-line.comitemaritime.3 Sea waybill A sea waybill is a non-negotiable transport document. Art 24). The sea waybill is not the only non-negotiable transport document.
s 29(4)). both systems cover common duties which we will examine below. s 3(1). Thus. ordering delivery of the goods to the holder of the document (see Comptoir d’Achat et de Vente du Boerenbond Belge SA v Luis de Ridder Limitada (The Julia). The CoGSA 1992. Delivery orders can be used to divide a whole consignment into different parts to fulfil the obligations in respect of these individual buyers.3 Duties and liabilities of the carrier under the contract of carriage The liabilities of the carrier will depend on whether the regime for the carriage contract is common law or the Hague-Visby Rules. even if the consignment was initially covered by only one bill of lading. QBD (Comm)): (a) Ship’s delivery order The ship’s delivery order is an order directed to the carrier to deliver the goods to the holder. The main difference is that common law implies three undertakings of the carrier into the carriage contract: the seaworthiness of the ship. but not to the sea waybill. which need to be distinguished (see Peter Cremer GmbH v General Carriers SA (The Dona Mari). such as the carrier or the agent of the shipper. 4. particularly in case of bulk cargo. the HVR apply to the straight consigned bill of lading. (2)). However. This is not the case for a merchant’s delivery order (see The Dona Mari). In the latter case the seller’s obligation under the sale contract to deliver the goods is only fulfilled once the custodian has ‘attorned’ to the buyer. (b) Merchant’s delivery order A merchant’s delivery order is issued by the shipper/seller undertaking to deliver to his buyer. but in turn also incurs liabilities (see CoGSA 1992. not to 119 . In order to qualify as a bill of lading under this Act.2. meaning he confirms holding the goods for him (see SoGA 1979. It is issued by or on behalf of the carrier or by the shipper. to deliver the goods to the holder of the order or to hold the goods for him.4 Delivery order A whole consignment on board a vessel. s 1(2)(a) and s 1(3) which ought to be read: ‘References to this Act to a sea waybill are references to any documents which is not a [transferable] bill of lading [in the sense of s 1(2) above] but…’). the bill must be negotiable (see CoGSA 1992.04_CH04. may have been sold in parts to separate buyers. because only the holder of a ship’s delivery order has a right of suit against the carrier (see CoGSA 1992. Generally. The difference between these documents is important. Where the goods are consigned to the freight forwarder or agent of the shipper at the place of destination it is directed to this agent. applies to both these categories and also any ship’s delivery order. However it treats the non-negotiable bill of lading in the same category as a sea waybill. which governs the rights and liabilities between the carrier and the third party entitled to delivery of the goods under the relevant transport document.2.QXD 11/21/05 3:09 PM Page 119 Chapter 4 Contracts of affreightment 1971 and the Hague-Visby Rules (dealing with the shipper–carrier relationship and the carrier’s liabilities for the cargo). HL). 4. a delivery order is an order addressed by the owner of the goods to the custodian of the goods.2. ss 1(4) and 2(3)). There are two different forms of delivery orders.
However the UK has not become party to them. The obligation of seaworthiness does not just encompass the physical state of the vessel as in the case of a defective engine (see Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha. carry and discharge the cargo. On the other hand. should they wish to do so. and this has led to the use of elaborate standard contracts by carriers excluding most of their liability. however. Only a contract partner with great bargaining power had the chance to change the terms of the contract to accommodate his needs. QBD (Admlty) and Cheikh Boutros Selim El-Khoury v Ceylon Shipping Lines (The Madeleine). In turn. Unfortunately the regime drawn up by the Hague Rules and the Hague-Visby Rules was developed by looking at the common exclusions used so far in practice and thus its system of liabilities and immunities of the carrier is rather diverse.04_CH04. QBD (Comm)).QXD 11/21/05 3:09 PM Page 120 Understanding International Trade Law deviate from the route. the parties are free to increase the carrier’s liabilities contractually. the parties to the contract are free to alter the position. CA and Standard Oil Co of New York v Clan Line Steamers Ltd. having regard to the nature and probable circumstances of the specific voyage. HL) or a defective compass (see Paterson Steamships Ltd v Robin Hood Mills (The Thordoc). amongst other reasons. KBD). Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea). fit to encounter the ordinary perils of the sea during the voyage. lacking a common basis. Seaworthiness also includes cargoworthiness. Owners of Cargo Lately Laden on Board the Makedonia v Owners of the Makedonia (The Makedonia). Thus. PC (Canada)). requiring that the vessel is able to carry the particular cargo safely to the port of destination. and to proceed without undue delay. Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha. However. QBD (Comm). If the ship has a defect which a prudent owner would remedy before sending the vessel to sea. 4. in the following we shall concentrate on common law and the Hague-Visby Rules. This is not the case where the holds need to be fumigated before being in a fit state to receive the cargo (see Tattersall v National Steamship Co. but also requires full competence and adequacy of the crew (see Papera Traders Co Ltd v Hyundai Merchant Marine Co Ltd (The Eurasian Dream) (No 1).3. QBD (Admlty)). The Hamburg Rules were developed.2. The test is the standard of an ordinarily careful and prudent owner sending his ship to sea. unlike for example the absolute duty to provide a seaworthy vessel under common law. The carrier’s liability is limited. First under the Hague Rules and now under the Hague-Visby Rules in force in the UK. CA and Union of India v NV Reederij Amsterdam (The Amstelslot). store. the bill of lading contracts are subject to a statutory scheme of liability of the carrier. for example it needs adequate facilities for the carriage and storage of the cargo. to remedy this lack of a single basis for liability. HL) and correct mapping for the voyage (Owners of Cargo Lately Laden on Board the Torepo v Owners of the Torepo (The Torepo).1 Seaworthiness The duty to provide a seaworthy ship means the vessel must in all respects be fit to load. the ship is not seaworthy (see McFadden & Co v Blue Star Line. QBD and Compania de Naveira Nedelka SA v Tradex Internacional SA (The 120 . HL and The Friso. these liabilities cannot be reduced and the shipper can hold the carrier responsible to at least a certain minimum level. QBD (Comm). PD&A. or in the case of instability of the vessel due to cargo stowage (see Kish v Taylor.
but these clauses can only be successfully invoked if the carrier has observed his due diligence obligation at the beginning of the voyage to make the ship seaworthy (HVR. Under the Hague-Visby Rules (Art III(1)) the carrier only has to exercise due diligence to make the ship seaworthy (see also CoGSA 1971. Art III(8)). HL). The mere acceptance of the chartered vessel does not amount to a waiver of the right to claim damages or to treat the contract as repudiated. However. CA) or where the contract provides for the shipment of frozen meat. CA). the shipper under a bill of lading can still claim against the carrier for any damages caused by the unseaworthiness of the vessel. The result of such repudiation is that the carrier can no longer rely on any of the contract clauses. 397 and Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha. the contractual freight is no longer due. where the issue arose under a charterparty. HL). some reasonable payment will have to be made where the goods arrive safely despite the unseaworthiness. He is also liable if his servants or agents fail to observe due diligence and even if independent contractors repairing the ship act negligently (see Riverstone Meat Co Pty Ltd v Lancashire Shipping Co Ltd (The Muncaster Castle). Where the breach is serious enough. CA). but of less interest under a bill of lading contract where the relevant Rules govern the liability of the carrier by force of law. The consequences of unseaworthiness differ. not before and not after (see McFadden & Co v Blue Star Line. s 3). where unseaworthiness has not been discovered until after the ship has set sail (Marbienes Compania Naviera SA v Ferrostaal AG (The Democritos). At common law the carrier is under an absolute obligation to provide a seaworthy ship. In order for such an exclusion clause to be effective and upheld by the courts it must be expressed clearly and unambiguously (see Nelson Line (Liverpool) Ltd v James Nelson & Sons Ltd. This is of particular interest in cases of charterparty contracts where the parties can allocate the risks and liabilities freely. the difference in outcome is not too dissimilar as the duty to exercise due diligence to make the ship seaworthy is not restricted merely to personal diligence of the carrier. KBD). In Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha. Only if the breach of the term is so serious as to frustrate the commercial purpose of the contract and cannot be rectified within a reasonable time can the charterer treat the contract as repudiated (see also Stanton v Richardson.04_CH04. CA. The duty as to seaworthiness under the Hague-Visby Rules cannot be excluded or reduced (HVR. This duty attaches at the time when the ship sails. Also. the beginning of the voyage. if the immediate cause of the loss is unseaworthiness rather than the peril (see Standard Oil of New York v Clan Line 121 . but the ship’s refrigerating system is defective (Cargo per Maori King v Hughes. this absolute duty under common law can be excluded by express provision in the contract. just that under the latter it is an absolute duty. QBD (Comm) [1975] 1 Lloyd’s Rep 386. the contract can be repudiated even after the commencement of the performance or voyage. however. Thus. However.QXD 11/21/05 3:09 PM Page 121 Chapter 4 Contracts of affreightment Tres Flores). the carrier cannot rely on an excepted peril of the sea. seaworthiness was classed as an innominate term. Otherwise he is left only being able to claim damages. Art IV(1)). Article IV of the HVR stipulates a list of events in which the carrier’s liability is excluded. Ex Ch). However. The details as to seaworthiness required by Art III(1) of the HVR are in effect the same as under common law.
Examples where the courts have assumed liability based on Art III(2) of the HVR are cases where damage was caused by bad stowage (see Ministry of Food v Lamport & Holt Line Ltd. care for. The Hague-Visby Rules had been incorporated into the 122 . the carrier cannot claim indemnity in accordance with Art IV(6) of the HVR. Liability was also accepted for the loss of a tractor. QBD). Thus. QBD).2.QXD 11/21/05 3:09 PM Page 122 Understanding International Trade Law Steamers. Article IV(2)(a) of the HVR alleviates the carrier from liability for act. neglect or fault of the master or his servants in the navigation or management of the ship. irrespective of his fault (see McFadden & Co v Blue Star Line. where the unseaworthiness caused the dangerous cargo to react resulting in damage. carry. but not independent contractors. QBD). PC Canada and Robin Hood Flour Mills Ltd v NM Paterson & Sons Ltd (The Farrandoc).) Article IV(2)(a) of the HVR includes two separate exclusions: fault of neglect in navigation. stow. particularly Arts III and IV. to adopt a system which is sound in relation to the circumstances of which the carrier has or ought to have knowledge and in relation to what is general practice in the carriage of goods by sea (see Albacora SRL v Westcott & Laurance Line Ltd (The Maltasian).2 Care for the cargo and excepted perils At common law the carrier is liable for the loss or damage to the goods in his custody. (Please note that the servants or agents of the carrier. HL). In Kawasaki Kisen Kaisha Ltd v Whistler International Ltd (The Hill Harmony). Only particular issues of some exceptions will be raised in the following. Art IV bis (2)) if a claim is made against them directly. which was not securely fastened and was washed overboard (Svenska Tractor Aktiebolaget v Maritime Agencies (Southampton) Ltd. They include the exceptions which are also accepted under common law. The parties can alter this position and long exclusion clauses are often inserted into contracts which are not subject to the Rules.3. HL) the navigation exclusion was invoked to cover the master’s decision to sail a different route from that ordered by the charterer. KBD). The seaworthiness obligation of Art III(1) of the HVR is an overriding duty even with respect to the shipper’s duty of Art IV(6) of the HVR not to ship dangerous cargo without the carrier’s prior consent (see Mediterranean Freight Services Ltd v BP Oil International Ltd (The Fiona). act of the Queen’s enemies or inherent vice he is not liable. The exceptions provided for in Art IV of the HVR are plenty and will not be duplicated in this text. Please take a moment to read the HVR. Under the Hague-Visby Rules (Art III(2)) ‘the carrier shall properly and carefully load. and negligent management of the vessel. handle. HL. because the damage would not have occurred had the carrier not breached his duty to provide a seaworthy ship. or during loading operations by the negligence of the carrier’s servants (see Pyrene Co Ltd v Scindia Navigation Co Ltd. and discharge the goods carried’: this duty is subject to the exclusions enumerated in Art IV of the HVR. The duty to care for the cargo is a continuous obligation from the time of loading until discharge. Ex Ct (Canada)). Maxine Footware Ltd v Canadian Government Merchant Marine. are entitled to the same defences as the carrier (HVR.04_CH04. However in the event of damage or loss caused by act of God. 4. The duty is to take reasonable care. carried on deck without an agreement to do so. CA). keep.
falls within the scope of the management exception (see the Canadian case of Kalamazoo Paper Co v CPR Co. However an overlap of the duties to manage the ship and to care for the cargo can cause problems. This was classed as lack of care for the cargo resulting in liability of the carrier as the hatch covers were designed to protect the cargo. The opinions in relation to who bears the burden of proof are conflicting: (a) whether it is the cargo owner who has to prove the unseaworthiness because this would support his claim. For example in Gosse Millerd Ltd v Canadian Government Merchant Marine Ltd. QBD (Comm)). The exclusion for negligent management of the ship does not extend to the care for the cargo. However. and so the exception was not applicable. However the carrier is expected to exercise the degree of care the goods require.04_CH04.QXD 11/21/05 3:09 PM Page 123 Chapter 4 Contracts of affreightment charterparty. The cargo was held to have been damaged by a peril of the sea. or 123 . HL a case at common law). HL).2. Art IV(2)(m)) is also alleged). by ‘something which could not be foreseen as one of the necessary incidents of the adventure’ (as per Lord Herschell in The Xantho. 4. HL cargo stored in a hold had been damaged due to the fact that not all hatch covers had been replaced by repairers. dangers and accidents of the sea’ (HVR. but is not responsible for damage to the cargo caused by the inherent moisture content of it (Jahn (t/a CF Otto Weber) v Turnbull Scott Shipping Co Ltd (The Flowergate). Any deterioration caused despite these precautions falls within the exclusion of inherent vice (see Albacora SRL v Westcott & Laurance Line Ltd (The Maltasian). Where so required. In Canada Rice Mills Ltd v Union Marine and General Insurance Co Ltd. however. the carrier must refrigerate the goods. Frequently the immunity of ‘inherent defect’ of the cargo (HVR. In this case ventilators and hatches had been repeatedly closed during severe weather to prevent the incursion of seawater and the closure had caused heat damage to the cargo. this argument was rejected as it was held that the choice between two safe routes was an issue of employment of the vessel and not of navigation. The nature of perishable goods to deteriorate falls within this exception. Within that limit he is generally permitted to keep to the shipper’s instructions. Supreme Court of Canada). A situation where the primary objective of the negligent conduct. He must keep the cargo dry. whether it was due to the unseaworthiness of the vessel or due to an excepted peril.3 Burden of proof In practice one of the decisive issues is the burden of proof. Art IV(2)(c)) the carrier must show that the damage was caused by something beyond the normal action of the sea and waves. However. To avail himself successfully of the exclusion clause ‘perils. the Privy Council agreed that the accidental entry of seawater caused by a severe storm was classed as having resulted from a peril of the sea just as was any action taken to prevent such incursion of seawater. It can be very difficult to prove exactly how the damage to the cargo was caused. This is a separate duty.3. was the safety of the vessel which in turn damaged the cargo. he only needs to apply a system which is sound in the light of the knowledge which he had or ought to have had of the nature of the goods.
rather than the excepted peril.04_CH04. (b) of the HVR the exception specifically allows for negligence. Based on this practice. (a) The cargo owner can raise a prima facie case by proving loss or damage to his cargo. (e) Once this is established the carrier can still escape his liability under the HVR if he can prove that he observed due diligence to make the ship seaworthy. 124 . leading marks and their apparent order and condition. Art III(4) and (5) and CoGSA 1992. Liability for such a peril can be excluded either due to stipulations in the contract.4 Duty to issue a bill of lading Under a charterparty the shipowner is normally required by express contractual terms to issue a bill of lading. Where the Hague Rules or the HVR apply. 4. or (c) in case of the Hague-Visby Rules. common law or the Rules (depending which regime is applicable). It is normal practice that bills of lading are issued to the charterer. the burden of proof can look as in the The Hellenic Dolphin. if he wants to rely on it.QXD 11/21/05 3:09 PM Page 124 Understanding International Trade Law (b) whether it is for the carrier to show that the ship was seaworthy at the outset of the journey. The bill of lading is usually issued either by the master of the ship or by any other agent of the shipowner. (d) Where the carrier has successfully proved an excepted peril the cargo owner must prove that the damage was caused due to the unseaworthiness of the vessel at the beginning of the voyage. naturally not having all the facts and details about the vessel’s condition and maintenance at hand. There seems to be a majority view that the burden rests with the cargo owner to establish the vessel’s unseaworthiness and that this in fact caused the damage or loss. The latter may wish to trade with the goods whilst in transit and thus needs the bill of lading to be potentially able to transfer property and/or possession to a buyer. QBD (Admiralty) (see also HVR. (a) Once a bill of lading is issued the content is prima facie evidence of receipt of the goods. Please note that this is the very stage where common law and the Rules differ: under common law the duty to provide a seaworthy vessel is absolute. Art IV(1)). their quantity. Rule 3 entitles the shipper to demand a ‘received for shipment’ bill and Rule 7 a ‘shipped’ bill. s 4). the cargo owner may be able to prove the carrier’s negligence in order to disengage the exception unless. as in Art IV(2)(a). Please note however that if the carrier wants to avail himself of the exception of ‘any other cause without fault or privity of the carrier’ under Art IV(2)(q) of the HVR he additionally needs to prove that he did not act negligently. The issue and content of the bill of lading is of particular importance due to the consequences connected with it (please reread HVR. (c) For all other exceptions. (b) The carrier must prove an excepted peril. This puts the cargo owner in a very difficult position.2. whether he observed due diligence in this respect. the shipper can demand the issue of a bill of lading from the carrier under Art III(3) and (7) of the HVR.3. even where the shipper is the charterer. This has often led to a readiness of the courts to treat the presence of seawater in a hold as prima facie evidence of the unseaworthiness of the ship.
or otherwise to the direct route. including the terms of the contract and the interests of all parties concerned. KBD). A breach of the latter duty. the voyage must be carried out without undue delay. What are the consequences of a voluntary and unjustified deviation? Under the traditional view it constituted a fundamental breach of the contract of carriage which entitled the shipper to a choice of whether to: (a) treat the contract as repudiated with the consequence that the future contractual obligations ceased (including the obligation to pay freight) and the carrier lost the benefit of all his contractual immunities and exceptions under the Rules.04_CH04. Also. (c) However. This is not the case where the ship is blown off course in a storm. This is in line with the provision of s 4 of the CoGSA 1992. clear and unambiguous terms. Mango & Co Ltd. departure from the proper route is permissible if there are good grounds for doing so. Thus the Rules take a more relaxed approach than the common law.2. By virtue of Art IV(4) of the HVR ‘any deviation in saving or attempting to save life or property at sea or any reasonable deviation’ is allowed and does not constitute a breach of the Rules nor of the contract of carriage. 4. that is in order to save human life or to avoid danger to the ship or cargo. Only in a very few reported English cases has a shipowner been able to rely successfully on this exception. When is a deviation reasonable within the meaning of Art IV(4) of the HVR? Whether a deviation is reasonable is a question of fact that has been interpreted narrowly. However. which states that the bill of lading in the hands of a lawful holder is conclusive evidence of the fact that the goods have either been shipped or received for shipment by the carrier. or 125 . however. Besides saving life they also permit deviation merely for the purpose of saving property at sea and where otherwise ‘reasonable’. Lord Atkin in Stag Line Ltd v Foscolo. 343–4 summarised as follows: the true test seems to be what departure from the contract voyage might a prudent person controlling the voyage at the time make and maintain. the shipper who furnishes the carrier with the particulars of the goods on the bill of lading is liable towards the carrier if the latter incurs any liability due to inaccuracy of the statements furnished (HVR.5 Deviation and delay At common law there is an implied undertaking not to deviate unreasonably from the agreed route. Any exclusion of this undertaking must be in express. HL [1932] AC 328. Only where the deviation is voluntary and unjustified will it constitute a breach of this duty (see Rio Tinto Co v Seed Shipping Co. will mostly also be a breach of the duty not to deviate. Art III(4)). and also under a charterparty where the deviation is necessary because of some default on the part of the charterer. evidence to the contrary is not permissible (HVR. having in mind all the relevant circumstances existing at the time.3.QXD 11/21/05 3:09 PM Page 125 Chapter 4 Contracts of affreightment (b) Once the bill has been transferred to a third party. If no route is agreed the carrier has to stick to the usual route. Art III(5)). but without obligation to consider the interests of any one as conclusive.
however. To illustrate the application of Art III(8) of the HVR. The effect is that the consequences of the breach will depend on the terms of the contract. The approach in Suisse Atlantique and in Photo Production v Securicor was adopted in Kenya Railways v Antares Co Pte Ltd (The Antares) (No 1).04_CH04. 550). HL). (The Institute Cargo Clauses are commonly used in cargo insurance to determine and allocate the agreed extent of cover. B and C provides that cargo insurance shall remain in force during any deviation. there was no reason for judicial intervention and the parties should be left to apportion the risks as they saw fit (see Photo Production Ltd v Securicor Transport Ltd. HL (also known as The Morviken). which mainly protects the consumer. HL and Photo Production Ltd v Securicor Transport Ltd. In so far as the application of the Hague Rules would lead to a reduced protection of the 126 . 4. where it was claimed that the carrier who had breached the contract of carriage by unauthorised deck carriage would no longer be able to rely on the HVR time bar due to fundamental breach.3.QXD 11/21/05 3:09 PM Page 126 Understanding International Trade Law (b) waive the breach (affirm the contract) and only claim damages for loss due to instances which are not covered by any of the exceptions. That meant that in the commercial field. Rather it is suggested solving the issues arising out of a breach by use of the normal principles of contract law (see Suisse Atlantique Société D’Armement SA v NV Rotterdamsche Kolen Centrale. The parliamentary choice not to regulate over the whole field of contract had to be accepted. where parties were not of unequal bargaining power and where risks could be protected by insurance. The contract of carriage included a choice of forum clause in favour of the Netherlands’ courts and a clause choosing Dutch law as the applicable law. Consequently the carrier could rely on the time bar of Art III(6) of the HVR. but it cannot be reduced. ie that the carrier cannot contract out of his duties imposed by the HVR.) Thus the modern view with respect to deviation might be more appropriate. HL) or by considering deviation as a category sui generis (as per Lord Wilberforce in Photo Production Ltd v Securicor Transport Ltd [1980] 1 Lloyd’s Rep 545. see Owners of Cargo on Board the Morviken v Owners of the Hollandia (The Hollandia). stated that the doctrine of fundamental breach no longer existed. CA. clause 8. Art V). A clause to this effect is null and void by virtue of Art III(8) of the HVR. but only the Hague Rules.2. however. Lloyd L J. had not implemented the HVR.6 Variation of liability Under the Hague-Visby Rules the carrier’s liability can be increased by inserting such an agreement into the bill of lading (HVR. The reason for such a strict approach was that in the past the cover for marine cargo insurance was lost on deviation. It was held that the numerous cases applying or discussing the doctrine of fundamental breach were now superseded by the enactment of the Unfair Contract Terms Act 1977. The question whether the party in breach can still rely on exclusion clauses is a matter of the construction of the contract. Nowadays.3 of the Institute Cargo Clauses A. Under the modern view the doctrine of fundamental breach is rejected and with it the automatic consequence that the party in breach could no longer rely on the exclusion clauses in the contract. however. In this decision Lloyd L J expressed his view that the deviation cases should now be assimilated into the ordinary law of contract. in the following words: ‘The death knell sounded in Suisse Atlantique… The corpse was buried in Photo Production Ltd v Securior…’. The Netherlands.
QBD. If other aspects in relation to the contract of carriage were in dispute. however. whether in contract or tort (HVR. CA the Court of Appeal upheld a choice of law and jurisdiction clause which allowed the carrier to invoke a statutory limitation in respect of tonnage which was less than the package limitation of the HVR. these clauses were valid. 4. Was it an intended avoidance of the higher limits of the HVR.04_CH04. HL and now reaffirmed by the House of Lords in Jindal Iron and Steel Co Ltd v Islamic Solidarity Shipping Company Jordan Inc (The Jordan II). The choice of forum was only invalid because the Hague-Visby Rules had mandatory effect.3. However where the parties agreed on the content of these services and allocated obligations usually performed by the carrier to the shipper and consignee. Even though.2. Art IV bis (1)). under Art III(2) of the Rules. the validity of the clause depended on its aim. Thus.7 Limitation of liability and limitation of action The Hague-Visby Rules provide that any defences or limitations under the Rules apply to all actions. The carrier successfully invoked Art VIII of the HVR and could rely on the statute in force under the chosen applicable law to limit his liability. which had its own provisions of limitation of liability? In The Benarty it had been a different system. Article III(8) of the Rules renders void any clauses designed to lessen the carrier’s liability while performing the services. if the effect of a clause was a lower protection than under the HVR. A choice of law clause would be ineffective to the same extent as a choice of forum clause if on its application the carrier’s liability would be limited to a level below that of the Hague-Visby Rules. affirmed by GH Renton & Co v Palmyra Trading Corporation of Panama (The Caspiana). a charterparty bill of lading incorporated a fiost clause (free in out stowed and trimmed) from the charterparty under which the duty to load. without being invalidated by Art III(8). Therefore the clause was upheld. A similar evaluation of the facts and of Art III(8) of the Hague Rules and the Hague-Visby Rules was taken in Pyrene v Scindia. the choice of jurisdiction would be effective. the carrier had amongst others the duty to handle. because it would lead to the case being heard in the Netherlands where the lesser liability regime of the Hague Rules would be applied.QXD 11/21/05 3:09 PM Page 127 Chapter 4 Contracts of affreightment shipper. Loading the stowing was to be undertaken by the shipper and discharge by the receiver of the cargo. It would thus have the effect of relieving the carrier from some of his mandatory liability under the HVR and so was null and void according to Art III(8) of the HVR. aligning limitation with tonnage rather than the number of packages. CA where an implied choice of English law did not automatically include the HVR in a case where they had no mandatory effect. did not ex facie offend Art III(8) of the HVR because the reducing effect of the clause depended on the occurrence of a subsequent condition which might or might not arise. 127 . the Rules would not be applicable and thus no conflict would arise. The choice of forum clause. In a case where the bill of lading was issued and the goods loaded in a non-contracting State. these obligations could be transferred by agreement. unrelated to the carrier’s liability. the House of Lords held that the choice of forum clause was ineffective. However. stow and discharge the goods was transferred away from the shipowner. In this context see also The Komninos S. or the application of a different system altogether. In The Jordan II. load and stow the cargo carefully. in RA Lister & Co v EG Thomson (Shipping) Ltd and PT Djakarta Lloyd (The Benarty).
Art IV(5)(e)). Art III(6) contains a time bar of one year from delivery of the goods. the time limit started to run from the time when the cargo ought to have been 128 . however. however. one had to ask whether the delivery was made on the basis of the initial contract. Under the Hague-Visby Rules. an action is still subjected to the time limit. In order to avoid a claim falling foul of this hurdle. Art IV(5)(a).04_CH04. In such a case. This time bar is not just one of limitation but extinguishes the claim altogether. (c). The meaning of the term ‘delivery’ under a bill of lading relates to the transfer of possession to the consignee. Time bar The general period under the Limitation Act 1980 within which an action in contract must be brought is six years from the damaging event. Only in that event will the enumerated parcels be taken as individual packages (see River Gurara (owners of cargo lately on board) v Nigerian National Shipping Line Ltd (The River Gurara). (d)). but an express limitation of the sum payable in the event of liability is valid. The parties are free to fix other maximum amounts by virtue of Art IV(5)(g) of the HVR. The Court of Appeal held that in order to determine when ‘delivery’ under the contract took place. CA dealt with the fact that the cargo was not delivered at the initial destination but. Where it was delivered under a separate transaction. Thus. as long as they are not less than the amounts calculated under Art IV(5)(a) of the HVR. The Hague-Visby Rules on the other hand provide for a maximum limit of the carrier’s liability calculated on the basis of special drawing rights as defined by the International Monetary Fund per package or kilogram of gross weight (HVR. the amount as included in the bill serves as prima facie evidence of the goods’ nature and value (HVR.QXD 11/21/05 3:09 PM Page 128 Understanding International Trade Law Monetary value Under common law there is no set limit. (h)). CA). Art IV(5)(a). the time of ‘delivery’ is crucial in order to determine whether an action is time-barred or not. CA). CA). It is not interchangeable with ‘discharge’. However it is not always easy to determine when ‘delivery’ under Art III(6) of the HVR took place. carried to another place. Where goods are consolidated into a transport device such as a container. where the shipper declares the nature and value of the goods and this is inserted into the bill of lading. This limitation does not apply. Art IV(5)(c) of the HVR provides that the container is the package for the purposes of the limitation. had the loading obligation been fulfilled (Cargill International SA v CPN Tankers (Bermuda) Ltd (The Ot Sonja). as agreed between the parties at this destination. Trafigura Beheer BV v Golden Stavraetos Maritime Inc (The Sonia). subject to a variation under Art III(6 bis) of the HVR. unless the bill of lading enumerates the number of packages or units contained therein. albeit with amendments or whether it took place under a totally separate and distinct transaction. The carrier cannot avail himself of the package limitation if the damage was caused by his act or omission done with the intent to cause damage or which was reckless and envisaged possible damage (HVR. it starts to run from the date when the goods should have been delivered. (f). an action must be instituted in court or before arbitrators in pursuance of an arbitration agreement (for arbitration see TB&S Batchelor & Co Ltd v Owners of the SS Merak (The Merak). Even where goods have not been loaded.
unless their nature and value was declared in writing at the time of shipment.QXD 11/21/05 3:09 PM Page 129 Chapter 4 Contracts of affreightment delivered under that contract. The Privy Council held that the subcontractor. Convention on Limitation of Liability for Maritime Claims In addition to the above provisions. as sub-bailee. In addition. PC (Hong Kong). In KH Enterprise (Cargo Owners) v Pioneer Container (Owners) (The Pioneer Container). In order to avoid any problems due to lack of privity of contract. and (c) the carrier should have authority from the third party to act on its behalf or the third party should at least agree to this in hindsight. but not to independent contractors (see Midland Silicones Ltd v Scruttons Ltd sub nom Scruttons v Midland Silicones Ltd. Cases where such a clause has been upheld in favour of the third party include: New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd (The Eurymedon). shipowners. The law of bailment was also used to bypass the doctrine of privity of contract. In order to protect independent contractors as well as servants and agents the carrier must insert a Himalaya clause (so called after the case Adler v Dickson (The Himalaya). however. Thus. these statutory provisions still take effect (see HVR. (b) the carrier is contracting for these provisions in his capacity as carrier and also as agent for the third party. s 186 of the MSA 1995 excludes liability of the owner or charterer of a United Kingdom ship in the following circumstances: (a) where property on board ship was lost or damaged due to a fire on board.04_CH04. where Lord Goff discusses the development of Himalaya clauses and the acceptance of them by the English courts in order to accommodate commercial need. CA) into the contract of carriage. the one-year time limit of Art III(6) of the HVR only started ticking at that later date. Art VIII). Even where the Hague-Visby Rules apply. could rely on the terms of the (main) contract of carriage. (See also The Mahkutai. got lost or damaged due to theft. silver or jewels. Limitations and defences in favour of third parties Article IV bis (2) – (4) of the HVR admits the same defences and limits to liability of the carrier to his servants and agents. or (b) where valuables. ‘delivery’ only took place at the final destination. PC (Australia). by virtue of s 185 of the Merchant Shipping Act (MSA) 1995 incorporating the Convention on Limitation of Liability for Maritime Claims 1976. the carrier needs to conclude such a provision as agent of the third party. PC (Hong Kong) the contract of carriage provided for the subcontracting of carriage ‘on any terms’. HL. defences and limits to liability are intended to cover the carrier as well as the third party. and thus Art III(8).) 129 . only with some alterations. However where the on-journey was still part of the same contract. robbery or other dishonest behaviour. such as gold. including the exclusive jurisdiction clause. PC and Port Jackson Stevedoring Pty v Salmond and Spraggon (Australia) Pty. for a case involving the Hague Rules without a provision equivalent to Art IV bis of the HVR). carriers and salvors are entitled to limit their liability in certain circumstances specified by the Convention. Such a clause needs to meet three conditions: (a) the contract of carriage must make clear that the exceptions.
Freight is payable by the shipper. Once the lawful holder of the bill of lading 130 . 4. and also the carriage by road. however. If the goods are lost at sea.4 Duties and liabilities of the shipper under the contract of carriage 4. Many bill of lading contracts provide for freight to be non-refundable and payable regardless of the arrival of the ship and delivery of the goods. If all the goods arrive. to gain an understanding of the terms used in practice. but only of exclusions or limitations of liability. s 6(5) of the Contracts (Rights of Third Parties) Act 1999 restricts its application: a third party shall not be able to avail itself of any positive rights.1 Freight Freight is the remuneration paid by the shipper to the shipowner/carrier under the contract of carriage for shipping the goods to the agreed destination. the parties can agree to payment on other terms and this is mostly done in modern practice. s 1(2)). which came into force on 11 May 2000. it is calculated on what is in fact shipped. also attracts certain liabilities. the consignee of the cargo can also become liable. However. are only imposed on the lawful holder/consignee where he activates his position by either demanding delivery from the carrier or by making a claim under the contract of carriage (CoGSA 1992. This position. rail or air where the contract of carriage is subject to the appropriate international transport convention. These liabilities.2. s 3(1)). This stipulation ensures that the compulsory provisions of the international transport conventions cannot be circumvented and that no other conflict arises. Under charterparties (see 4. As a general rule of common law freight is payable to the carrier once the goods are delivered at the port of destination.04_CH04. the lawful holder of the transport documents has transferred to him and vested in him all rights of suit as if he were a party to the contract of carriage (CoGSA 1992. In case of slight variations of the weight due to the nature of the goods.4. s 2(1)). However. Freight is mostly calculated by weight or measurement. or (b) where the term purports to confer a benefit on this party (1999 Act. freight or hire may be payable in monthly instalments.2. However.QXD 11/21/05 3:09 PM Page 130 Understanding International Trade Law These problems due to the doctrine of privity have been alleviated to a great extent by the Contracts (Rights of Third Parties) Act 1999. The CoGSA 1971 does not qualify this liberty and different types of freight arrangements are now known.7 below). nothing is payable. the full freight is payable and cannot be deducted from a claim of damages against the carrier (see Dakin v Oxley). s 1(1)(a) and (b)). class or description (1999 Act. who has concluded the contract of carriage with the shipowner. charterparties and bills of lading. Where a third party is expressly identified in the contract by name. the contract on its true construction must not show that the contract parties had not intended the term to be enforceable by that other person (1999 Act. on the other hand. it may in its own right enforce a contractual clause which (a) either expressly provides that it may.2. with regard to the carriage of goods by sea. for example changes in moisture. s 1(3)). As we have seen in Chapter 2. In the latter event. but they are damaged. Please look through the documents at the back of this book.
2 Dangerous goods The shipper is not allowed to ship dangerous goods without prior consent of the carrier. Prepaid and advance freight are commonly used in bill of lading contracts. the latter must be refunded. taking into account the several other types of freight.QXD 11/21/05 3:09 PM Page 131 Chapter 4 Contracts of affreightment approaches the carrier with one of these demands. for example if the goods by choice of the cargo owner are delivered to an intermediate port rather than the port of destination. where the parties have agreed on a new contract. or if the carrier has only loaded part of the cargo he can claim pro rata freight. (e) Dead freight is payable as damages if the shipper does not honour the carriage contract and never delivers the goods. but the exact stipulations vary. The shipper is then liable for any additional freight as back freight.04_CH04. The parties can alter the default position by agreeing on another solution. If the carrier cannot fill the freight space with other cargo. it remains with the carrier even if the goods are lost. the shipper does not need to notify the carrier where the carrier or members of his crew know or reasonably ought to know of the dangerous character of the goods. usually on shipment or signing of the bill of lading. but carried further: for example if the shipper/seller uses his right of stoppage in transit and the goods need either to be taken back or delivered to a different destination. (b) Prepaid freight becomes due in advance. Advance freight is part of the insurable value of the goods and can be insured by the shipper because it is non-refundable. however. If the ship never sails. However. or part thereof. (a) Lump sum freight is sometimes arranged under charterparties and seldom under bill of lading contracts. regardless of whether the space has been filled or not. Where the cargo owner fails to take delivery the carrier must deal with the cargo in the owner’s interest and at the latter’s expense. 4. it has not earned the freight. he can claim the difference as damages from the initial shipper. If it is true advance freight. It is freight due for the use of an entire ship. However. 131 . s 3(3)). the carrier in turn can claim freight from the holder of the bill. The carrier might choose to either land or warehouse the goods. no freight is payable where the goods do not arrive at the agreed destination. The responsibility to pay the freight also still remains with the shipper (CoGSA 1992.2. (d) Back freight is payable if the goods are not unloaded as envisaged. or if he can only find cargo for which less freight is paid. which is non-refundable and does not just serve as a loan to the shipowner. The reason for the shipper’s duty to notify the carrier in advance is that the shipowner can refuse the cargo or take necessary precautions.4. As long as the carrier delivers some or all of the cargo he has earned the lump sum freight. As a general rule. Often the contract of affreightment will contain an express clause as to this obligation. The carrier cannot unilaterally decide to deliver the cargo short of the agreed port of discharge and then charge freight in proportion to the completed voyage. (c) Pro rata freight is only payable in exceptional circumstances. carry them on to another port or return them to the port of loading. Any expenses thus incurred by the carrier can be claimed as back freight.
freight and cargo). it was ruled that the duty not to ship dangerous cargo in Art IV(6) of the HVR imposes strict liability and overrides the principle that the shipper is not liable to the carrier without act. Depending on the circumstances this party might have a cause of action against another for the loss. CA).4. the freight earner and the cargo owner in the success of the voyage.3 General average and other expenses Sometimes the carrier has to incur expenses in order to save the cargo or to save the whole adventure. if the goods become a danger to the ship. But this is only the case if the sacrifice was reasonably incurred to avert danger threatening all three interests (ship. it is provided that any dangerous cargo shipped without the carrier being aware of its nature and character and consenting to such a shipment. destroy them. can at any time be discharged or destroyed without compensation to the shipper. thus delaying discharge operations (see Mitchell. In the last case it did not matter that the shipper did not know about the beetle infestation. as does cargo which needs government permission not obtained in advance. the cargo and the freight.4. HL). loss is incurred or expenses are made to save the whole adventure and thus the common interest of the shipowner. including the ship. fault or neglect on his behalf as enshrined in Art IV(3) of the HVR. The contract and the facts have to be read together. This is called general average.2. Once the carrier consents to carry the cargo.QXD 11/21/05 3:09 PM Page 132 Understanding International Trade Law At common law this is an implied undertaking by the shipper. Where the carrier incurred reasonable expenses to save the goods.2. Loss or damage incurred by one party to the marine adventure is called particular average. the shipper is strictly liable for any damage caused. but is to be found in the surrounding circumstances as a whole. Art III (1)) was held to override Art IV(6) of the HVR where the damage resulted from the unseaworthiness (see Mediterranean Freight Services Ltd v BP Oil International Ltd (The Fiona). the shipper or the consignee claiming the cargo becomes liable to compensate the carrier for doing so. For example inflammable or explosive substances fall within this category. Should he nevertheless ship dangerous cargo.04_CH04. Then one has to ask whether the shipowner on the true construction of the contract has contracted to bear the risk inherent in the particular shipment. Cargo which either causes physical damage to the ship or to other cargo or which presents a threat is classed as dangerous. Under Art IV(6) of the Hague-Visby Rules. and the 132 .3. And even where the goods are shipped with knowledge and consent of the carrier. Cotts & Co v Steel Bros & Co. At other times. or render them innocuous without incurring any liability towards the shipper other than general average (see at 4. in peculiar circumstances. the carrier can land them. for example he bought feed for animals shipped on board. However the duty of the carrier to make the ship seaworthy (HVR. 4.3 and 5. All parties must contribute to the cost incurred or compensate one of the parties for any damage caused to its interest. KBD) or cargo that is infested with a pest and so the ship is ordered to leave the port of destination with its cargo (Effort Shipping Co Ltd v Linden Management SA (The Giannis NK). the shipper has discharged his obligations and cannot be held responsible at common law for any resulting damage.4 below for an explanation of general average). The shipper must pay for any damage or expenses incurred from such a shipment. What constitutes dangerous cargo? Courts have held that the dangerous nature of the cargo does not depend on the cargo being listed as a dangerous substance.
4). In the past. and insurance cover for these contributions is available together with the insurance for the goods (for a more detailed explanation please see Chapter 5 at 5. This interest is irrespective of the passing of property. for example for charges other than those already mentioned and also often authorising the shipowner to realise his lien by selling the goods.5 Transfer of rights and liabilities under the transport documents — Carriage of Goods by Sea Act 1992 As we have seen (at 2. unlike the Bill of Lading Act 1855.2.3. The ‘new’ law. The 1992 Act is. Payments due by the holders of the interests in the voyage to the party or parties which incurred the damage are called general average contributions. under the Bill of Lading Act 1855 the statutory transfer of rights of suit under the carriage contract was limited to a third party having received property of the goods by reason of the consignment or indorsement of a bill of lading only. but replaces the Bill of Lading Act 1855.5. 4. Thus a claim in tort is not easy to establish.3 above) the CoGSA 1992 is not in conflict with the CoGSA 1971 implementing the Hague-Visby Rules. The consignee or indorsee must also be able to prove negligence on behalf of the carrier. by express agreement between the parties.6 and 2. not limited to bills of lading but also covers sea waybills and delivery 133 . once the risk of loss of or damage to the goods under the sale contract has passed to the buyer/consignee or indorsee.2. As soon as he duly delivers the goods. (b) general average contributions. In practice the lien is extended. the shipowner loses his common law lien. he has a strong interest in the safe arrival of the goods and thus in the proper performance of the carriage contract. Thus the transfer of rights of suit to the consignee was only effected in limited cases. He can withhold delivery until the following payments in relation to these goods have been made: (a) any freight that is payable on delivery. The 1992 Act is of great practical importance as under common law the contract of carriage is normally concluded between the shipper and the carrier (unless the shipper specifically acted as agent for the consignee). by virtue of the CoGSA 1992 confers rights and liabilities with respect to bills of lading irrespective of a transfer of property.4. In order to be able to sue in tort.4 Shipowner’s lien with regard to shipper’s duties Under common law the shipowner has a possessory lien on all the goods carried on the same voyage to the same consignee under the same contract of carriage. in force since 16 September 1992. beyond the limits of the common law provision. However. The gap is now filled by the Carriage of Goods by Sea Act 1992.QXD 11/21/05 3:09 PM Page 133 Chapter 4 Contracts of affreightment sacrifice must have benefited all parties involved. Please have a look at the clauses used in practice by studying the carriage documents at the back of this book.6. and (c) any expenses incurred by the shipowner for protecting and preserving the goods. Between the consignee or indorsee and the carrier there is no privity of contract. 4. The shipper or the consignee of the cargo claiming delivery of the cargo will be liable for such contributions. the consignee or indorsee must have had a possessory or proprietary right in the goods at the time of damage.04_CH04.
The 1992 Act also deals with non-negotiable bills of lading but. (b) or to make a claim under the contract of carriage. The holder must approach the carrier: (a) either to take or demand delivery of the goods. the damage might be sustained by a person who is not the holder of the transport document.04_CH04. transfer of the transport document to the lawful holder is not enough. any rights of suit vested in the original party or any intermediate holders of the bill are extinguished (CoGSA 1992. s 2(1)).1 Rights of suit against the carrier The third party lawful holder of a bill of lading (as defined in CoGSA 1992. any rights vested in a person by virtue of the order are ‘confined to rights in respect of the goods to which the order relates’ and leave the rest of the bulk cargo ‘untouched’ (see CoGSA 1992. they do not fall within the bill of lading category of the Act (see CoGSA 1992. However no rights of suit are transferred where the holder has obtained the bill at a time when it no longer gives right to possession of the goods unless one of the two following circumstances are met: (a) the transfer of the bill was effected in pursuance of a contractual obligation concluded prior to the moment when the bill ceased to be a transferable document of title (ie prior to delivery of the goods to the holder).2. In such an event the holder of the transport document can claim on behalf of another for the damage sustained by that other person (see CoGSA 1992. for example for freight and expenses incurred by the shipowner/carrier with respect to the cargo. 134 . s 2(3) with its correlation for liabilities in s 3(2)). As an introduction. s 2 (4)). Since property and the right of suit under the CoGSA 1992 are unrelated. s 1(3) and s 5(1)). s 5(2)) or the person to whom delivery is to be made under a sea waybill or a delivery order has all rights of suit against the carrier as if he were party to the carriage contract (CoGSA 1992. In order to become liable. s 2 (2)). s 3(1)).5. however. and (b) where possession of the bill is a result of the rejection of the goods (CoGSA 1992. just a few sections are highlighted in the following paragraphs. however. However he is under no obligation to do so. being incapable of transfer. 4.QXD 11/21/05 3:09 PM Page 134 Understanding International Trade Law orders. s 2(5)). It is worth reading the six sections of the Act in full. but are treated as a sea waybill (see CoGSA 1992. s 1(2)). ie where the consignee demands delivery from the carrier before receipt of the bill of lading from the seller/shipper (see CoGSA 1992.5. 4.2 Liabilities under shipping documents The third party holder in whom the rights under s 2(1) of the CoGSA 1992 are vested can also become liable under the transport document ‘as if he had been a party to that contract’. Where a ship’s delivery order for unascertained goods forming part of a bulk cargo is concerned. (c) or having demanded delivery before those rights were vested in him. Please note: the rights of suit of the original shipper under a sea waybill or delivery order are not prejudiced. Once the rights of suit have transferred to the lawful holder of the bill of lading.2.
he must also accept the corresponding contractual liabilities.QXD 11/21/05 3:09 PM Page 135 Chapter 4 Contracts of affreightment These rules follow the principle of mutuality that where the holder of the bill wishes to enforce the contract against the carrier. his liability was also discharged (The Berge Sisar). According to his Lordship the liability under s 3(1)(c) of the CoGSA 1992 clearly depends on whether the person taking or demanding delivery would become the lawful holder of the bill with respective rights of suit by operation of s 2(1) of the CoGSA 1992. Where the holder only keeps the bill as security. which meant that once a lawful holder had transferred his rights of suit under s 2(1) of the CoGSA 1992 by subsequent indorsement. However this intention is clearly stipulated in the Act. the same principles apply to sea waybills and delivery orders. however subsequently he became the lawful holder of the bill. The third party holder is therefore in charge: only once he claims against the carrier will he be subject to liability. see s 3(2)). see Fig 4. For example the consignee took delivery of the goods from the carrier (probably against a letter of indemnity) before the bill of lading was transferred to him. Unloading of the vessel was in the common interest of the ship and the cargo and typically required co-operation. Allowing the vessel to berth at its import jetty and taking samples of the cargo did not amount to such a demand. For an illustration of the principle of mutuality. So which precise action is needed to activate this liability? Lord Hobhouse in Borealis AB v Stargas Ltd (The Berge Sisar). the original party to the contract of carriage is not released from its duties by means of transfer despite the fact of losing his rights of suit (CoGSA 1992. Liability under a ship’s delivery order of a larger bulk cargo is restricted to the goods to which the order relates (CoGSA 1992. but was common co-operation between the players. ‘Taking delivery’ is seen as the voluntary transfer of possession of the goods from the carrier to the holder for which ordinarily the bill of lading is surrendered. s 3(3)).8. Making the necessary alterations. ‘Making a claim’ in the sense of s 3(1)(b) of the CoGSA 1992 referred to a formal claim of the holder against the carrier asserting the carrier’s legal liability under the contract of carriage. asserting his contractual rights as transferred by s 2(1) against the carrier to have the goods delivered to him.04_CH04. 135 . HL. clarified that ‘demanding delivery’ in s 3(1)(a) and (c) of the CoGSA 1992 referred to a formal demand by the holder. The principle of mutuality was held to be crucial in the application of the act. no liability is incurred unless and until he seeks to realise his security. Again co-operation in discharge operations alone would not qualify. (1) Effecting rights of suit by virtue of s 2(1) of the CoGSA 1992 Lawful holder of the bill of lading (2) Incurring liability by virtue of s 3(1) of the CoGSA 1992 (3) Liability ceases with loss of right of suit under s 2(1) of the CoGSA 1992 Carrier Fig 4.8 Principle of mutuality under CoGSA 1992 On the other hand. He can avoid any liability by selling the goods before delivery is sought and without making any other claim.
5.4 Summary chart To summarise and illustrate the working of the Carriage of Goods by Sea Act 1992 as between the seller.2.2. the carrier also owes a duty of care in tort. s 2(5) of the CoGSA 1992 (2) Still liable as original party to the contract. please study Fig 4. Where the Hague-Visby Rules apply.1 Carrier’s liability in tort Irrespective of the rights and duties under the contract of carriage.9.6. whether the claim is based on contract or tort (HVR. 4. the carrier can avail himself of the same defences and limits of liability.9 Rights and liabilities between shipper and carrier and bill of lading holder and carrier under the CoGSA 1992 4. The Act does not impinge on the possibility of bringing a claim against the carrier in tort or in bailment. s 3(1) of the CoGSA 1992 (4) Bill of lading is conclusive evidence of goods shipped Buyer/consignee/ lawful holder of bill of lading Fig 4. ‘as if the holder of the transport document had been party to the contract of carriage’.2. s 2(1) of the CoGSA 1992 (3) Liable once carrier is approached with bill of lading rights. a claim in the tort of negligence requires the claimant either to have had property in or a possessory title to the goods or at 136 .04_CH04. (1) No more rights under bill of lading as from transfer. according to the decision of the House of Lords in Leigh and Sillivan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon). However.3 Bill of lading as conclusive evidence By virtue of s 4 of the CoGSA 1992 a bill of lading is conclusive evidence between the carrier and a person having become the lawful holder of the bill with respect to the goods as represented under the bill of having been shipped or received for shipment.2.6 The liability of the carrier in tort or in bailment The CoGSA 1992 deals with claims in contract. 4. the buyer and the carrier.5. s 3(3) of the CoGSA 1992 (3) Bill of lading prima facie evidence of goods shipped Shipper exporter/seller Shipowner/ carrier Sale contract Tender of bill of lading (1) Contract as of bill of lading (2) Rights under bill of lading contract.QXD 11/21/05 3:09 PM Page 136 Understanding International Trade Law 4. Art IV bis (1)).
and (c) where the shipper has lost his right to claim against the carrier by virtue of s 2(5) CoGSA 1992 because he transferred the bill of lading. 4. However the claimant must show attornment. Towards a person having an immediate right to possession. The bailee may in turn pass possession to another person. that the bailee holds the goods for him. The contract is governed by common law unless the parties expressly incorporate one of the carriage conventions.2 above). PC and The Winkfield.2 Carrier’s liability in bailment Where the claimant has no title to sue under the contract or by way of operation of the CoGSA 1992.2. unless he proves absence of fault.2. The bailee is liable for the goods while in his charge. This right of action is not limited to the immediate bailor. that is.1. The carrier for example may sub-bail the goods to a warehouse or to another carrier in case of transhipment. Where a buyer obtains the proprietary or possessory rights only after the damaging event took place he has no right of action in tort. the carrier is also liable in tort for conversion or wrongful interference if he wrongly delivers the goods to a person not entitled to them (see Chabbra Corporation Pte Ltd v Jag Shakti (Owners) (The Jag Shakti). who is called the subbailee.04_CH04. (b) where the bill of lading provides for transhipment. To claim in bailment might be particularly useful in the following events: (a) where the bill of lading was made out by the charterer and in his name. he nevertheless may be able to sue the carrier successfully in bailment. provided possession has not completely passed to the new holder (see East West Corporation v DKBS 1912. The person entitled to immediate possession of the goods can sue the bailee for breach of his duties. The terms of their sub-bailment will also be applicable towards the head bailor where the head bailor has consented to sub-bailment either in general on any terms or specifically on the relevant terms. 137 . Under the common law concept of bailment the bailee voluntarily assumes possession of the goods of another (the bailor).6.2. The bailee has to take reasonable care of the goods and must not convert the goods. 4. The terms on which the bailee accepts custody of the goods are mostly found in a contract. CA). but the cargo owner wants to sue the shipowner. In such a case the bailment is classed as bailment on terms and the terms of the carriage contract are relevant to define the bailee’s duties and also the limitations of his liability. the contract for the hire of the entire vessel is called a charterparty. for example the Hague-Visby Rules. the damaging event occurs after the goods have been transhipped and the cargo owner wants to sue the second carrier. for example the contract of carriage under which the carrier accepts the goods into his care.QXD 11/21/05 3:09 PM Page 137 Chapter 4 Contracts of affreightment least possession of the goods at the time when the damage occurred. PC (Hong Kong)). It is not necessary that the claimant has suffered loss. CA).7 Charterparties As we have touched on before (see 4. which often is a problem in cases of succession of title. but can extend to the head bailor (in case of sub-bailment) or a third party owner (see KH Enterprise (Cargo Owners) v Pioneer Container (Owners) (The Pioneer Container).
Figure 4. differentiating between the various types of charterparties. As we have seen.04_CH04. Charterparty (chp) (a) Full shipload (b) Usually conducted as ‘tramp service’ (c) Contract and freight according to market demand (d) Contract terms are freely negotiable — common law applies (e) Contract of carriage is charterparty. Bills of lading can be issued under chp.10 briefly contrasts some of the practical and legal differences between charterparties and bill of lading contracts.10 Comparison between charterparties and bills of lading issues The charterparty is binding between the charterer and the shipowner. using simple examples of a cif seller and a fob buyer as charterer of the vessel.13. however chp still governs the relationship between charterer and shipowner (f) Right of suit between the contract parties based on chp Bill of lading (bol) contract (a) Smaller consignments (b) Can also be conducted by ‘liner service’ (c) Freight tariffs on liner service.11 Contracts of carriage: charterparty and bill of lading where cif seller charters the vessel 138 .11 – 4. Only where the terms of the charterparty have been clearly incorporated into the bill of lading will the charterparty be of any relevance to the holder of the bill of lading.QXD 11/21/05 3:09 PM Page 138 Understanding International Trade Law into their contract. charterparty contracts and bill of lading contracts are based on different legal rules due to the different bargaining power of the players in each of the contracts. otherwise freight is negotiable (d) Mandatory international rules generally apply. Exporter/seller/ charterer Voyage or time charterparty as contract of carriage Shipowner/ carrier Sale contract Tender of bill of lading Bill of lading as contract of carriage Buyer/consignee/ lawful holder of bill of lading Fig 4. This is illustrated in Figs 4. but also the lawful holder of bol (s 2 (1) of the CoGSA 1992) based on bol (‘as if’) Fig 4. but it is not relevant to the third party consignee. eg Hague-Visby Rules (incorporated into English law by the CoGSA 1971) (e) Contract of carriage is evidenced in bill of lading. As between the latter and the carrier the transport document (bill of lading) will prevail. Chp bills of lading only take effect when transferred to third party (f) Right of suit: between parties to the contract of carriage based on contract.
Further duties between the parties depend on the type of charterparty. as discussed above. time and bareboat charterparties.13 Contracts of carriage: bareboat charterparty and bill of lading where the seller has chartered the vessel by demise and sold his goods on a cif basis The implied duties at common law. For a detailed study of charterparties please consult a textbook on carriage of goods by sea (see 8.3 below).7. tender of bill of lading Bill of lading as contract of carriage Buyer/consignee/ lawful holder of bill of lading Fig 4. The shipowner remains responsible for the running of the 139 .12 Contracts of carriage: charterparty and bill of lading where the buyer has chartered the vessel and resold the goods in transit Shipowner charterparty by demise/ bareboat charterparty Exporter/cif seller/ shipper/demise charterer/ carrier Sale contract. 4. not to deviate and to dispatch without undue delay and also the obligation of the shipper not to ship dangerous cargo are all relevant to the charterparty.04_CH04. well-established form contracts are used to determine the parties’ respective rights and duties. Please see the appended charterparty form contracts at the back of this book for each of the categories and compare and contrast their terms. In most cases. on the shipowner/carrier to provide a seaworthy vessel.2.QXD 11/21/05 3:09 PM Page 139 Chapter 4 Contracts of affreightment Fob buyer/ charterer Voyage or time charterparty as contract of carriage Shipowner/ carrier Sale contract Tender of bill of lading Bill of lading as contract of carriage Second buyer/ consignee/lawful holder of bill of lading Fig 4. There are three main categories of charterparties: voyage.2.1 Voyage and time charterparty Under a voyage and time charterparty the charterer hires the vessel for a specific voyage or for a determined period of time.
and its performance to load and discharge etc. 2004). The charterer takes possession of the vessel and runs it as if he were the owner. (Where a charterparty bill of lading has successfully incorporated these terms under the charterparty into the bill of lading contract. He is the legal carrier and responsible to answer any claims. depending on the facts and severity of the breach. is the legal carrier of the goods. The charterer employs and directs the vessel in accordance with the charterparty. the 140 . where specified. As the use of the vessel is his for the specified period of hire the charterer bears the risk of speedy performance of the vessel and any delays during the voyages or the cargo handling. Thus a third party holder of the bill of lading can and will have to sue the shipowner as the carrier. Thus it is important for the holder of a bill of lading to watch out for any incorporations clauses and be aware of their reach. If the stipulated time is exceeded the charterer has to pay damages for detention or. The carrier will usually have a lien on the cargo for the payment of any outstanding demurrage or freight. operates as a lease of the vessel rather than a contract of carriage. If less than the agreed quantity is loaded he is liable for dead freight.7. also called charterparty by demise. JF Wilson. these terms will impact on the position of the bill of lading holder.7. from the named port of loading to the port of destination. its speed. liquidated damages called demurrage.2.) Time charterparty Under a time charterparty the charterer hires the vessel for a specific period of time and pays hire in regular intervals (usually monthly) for the services of the ship. 4.3 Who is the legal carrier? In practice one of the big problems for the cargo claimant is to identify the legal carrier in order to be able to instigate proceedings against the correct party.4 above) which allows a specified amount of time for loading and discharge. otherwise the shipowner may be able to withdraw the vessel. Voyage charterparty Under a voyage charterparty the charterer hires the vessel for a single voyage or consecutive journeys. 4.2. Where the Hague Rules or the Hague-Visby Rules apply. if the contract is not performed to his satisfaction. Harlow: Pearson Education. he will want to obtain some performance warranties from the shipowner about the ship’s consumption. In the case of a bareboat charterparty this is different. Carriage of Goods by Sea (5th edn.2 Bareboat charterparty The bareboat charterparty. unless otherwise agreed.QXD 11/21/05 3:09 PM Page 140 Understanding International Trade Law vessel and. Payment of the hire by the stipulated time is of utmost importance. He takes complete control over the ship and full responsibility for its navigation and management. regardless of the amount in fact carried. Breach of these terms can give rise to claims of damages or even to repudiation of the contract. The parties usually provide for a ‘laytime and demurrage’ clause (see 2. even more so where multiple charterparties exist. The charterer contracts to provide full cargo for the ship and to pay freight for it. but is generally only entitled to send it to safe ports. In order for the charterer to plan and calculate. carrying lawful cargo.04_CH04. 7 describes the difference between a demise charterparty and a voyage or time charterparty as follows: the former is comparable with a contract of hire of a self-drive car as opposed to using the services of a taxi in the cases of a voyage or time charterparty.7.
However the charterer may arrange the bill of lading contract as principal party and issue the bill in his name. The scope of the Hamburg Rules (Art 2) extends to any contract of carriage by sea between two different States.2. Its emphasis is shifted towards the interests of the cargo owner rather than the protection of the carrier as in the Hague and Hague-Visby Rules. This might be the reason why most of the major seafaring countries have not ratified this convention. booking notes and other non-negotiable transport documents are also included. If the face of the bill of lading indicates the carrier without doubt.8 Hamburg Rules Another legal regime for carriage contracts other than charterparties is the United Nations Convention on the Carriage of Goods by Sea 1978. whereas under a bareboat charterparty the demise charterer mans and runs the ship and thus performs as the actual and legal carrier. the name on the face of the bill should prevail (for a more detailed discussion of the topic see Homburg Houtimport BV v Agrosin Private Ltd (The Starsin). the shipowner or demise charterer still owes the cargo claimant a duty of care under the law of bailment and thus may be liable. The liability regime is based on a single 141 . known as the ‘Hamburg Rules’. not just bills of lading as under the Hague-Visby regime. so if he accidentally sues another his claim against the true carrier may be time barred. The territorial application is similar to that of the Hague-Visby Rules. Often conflicting statements with respect to the carrier’s identity make it essential to check all the terms of the contract and the relevant case law as to their validity. thus binding himself as carrier. Regardless of who is the carrier under the bill of lading. PC (Hong Kong) and The Mahkutai. the Hamburg Rules might be applicable where the port of discharge is in a contracting State (Art 2(1)(b)). which are the terms of the bill of lading (see KH Enterprise (Cargo Owners) v Pioneer Container (Owners) (The Pioneer Container). the charterer. ‘Goods’ within the ambit of the Hamburg Rules (Art 1(5) and Art 9) include live animals as well as deck cargo. However. regardless of the transport document used. but the reverse of the bill contains a carrier clause to the contrary. Thus. 4. does not incur liability as the legal carrier he can insert clauses in the bill of lading identifying the shipowner as the carrier. So sea waybills. Or he might have given the master permission to sign in his name and on his behalf. Also. the shipowner remains the actual and legal carrier under a time and voyage charterparty.04_CH04. The charterer can also be caught where he signs the bill of lading without clarifying that he does so ‘on behalf of the master and owners’ of the vessel. but it also covers inward voyages. The Hamburg Rules in Art 4 provide for the responsibility of the carrier during the entire period in which he is in charge of the goods. under many jurisdictions he risks having to pay the legal costs of the party that was wrongly sued. HL). As a general rule. including the United Kingdom.QXD 11/21/05 3:09 PM Page 141 Chapter 4 Contracts of affreightment cargo claimant only has one year to bring suit against the carrier. Please read the Hamburg Rules alongside the following brief discussion and compare its stipulations with those of the Hague-Visby Rules. the Hamburg Rules do not apply to charterparties. Usually the bailment is classed as a bailment on terms. The convention has been in force since 1 November 1992 and differs in quite a few aspects from the Hague and Hague-Visby regime. To ensure that he. PC (Hong Kong)).
04_CH04. besides which some countries have implemented their own rules of law on sea carriage. However the carrier can rebut this presumption and prove that all measures were taken that could reasonably be expected so as to avoid the occurrence that caused the loss and its consequences (see Hamburg Rules.2. The intended harmonisation thus was not achieved. even if performed by the actual carrier (Hamburg Rules. The carrier’s liability. The limitation period is two years (Hamburg Rules. However. The carrier remains liable for all stages. but can also include the to-carriage and on-carriage. The Hamburg Rules are also better designed to cope with modern practices of through transport by distinguishing between the carrier (any person by whom or in whose name the sea carriage contract was concluded) and the actual carrier (any other person who is entrusted with the performance of the carriage or part of it (see Hamburg Rules. which is presumed if the goods are lost or damaged whilst in his charge. the burden of proof is on the carrier. Here the claimant has to prove that either the fire or the damage resulting from the fire arose due to fault or neglect on the carrier’s behalf (see Hamburg Rules. The instrument is aimed to apply to contracts of carriage regardless of the type of transport document used. Art 5 (4)). However there is one exception and that is damage or loss by fire. delivery to the consignee. rights of suit and time for suit. Thus. Arts 6 and 26). rights of control. but again does not apply to charterparties. It applies to deck cargo and caters for electronic transport documents. The draft also includes package and time limitations. Art 11). Art 10).9 UNCITRAL draft instrument on the carriage of goods [wholly or partly] [by sea] So far there are three international conventions on sea transport which have received varied support. general average. The liability regime is a mixture of the Hamburg and Hague-Visby approach. if the actual carrier is named in the contract of carriage. Similar to Art III(8) of the HVR. transfer or rights under the transport documents. is based on fault with a reversed burden of proof. however here the presumptions can be rebutted. but the carrier can increase his liability. Provisions are drafted to cover the shipper’s duties. (2)). Art 20) instead of only one under the Hague-Visby Rules and the ‘package’ limitation is higher than under the Hague-Visby Rules (see Hamburg Rules. The latter events mirror most of the Hague-Visby exceptions. The draft so far aims to apply to carriage of goods which involves at least a sea leg across the borders. Art 23 of the Hamburg Rules asserts that all stipulations are null and void which derogate directly or indirectly from the Rules’ provisions to the detriment of the shipper. the fault of the carrier. Art 5). which has important practical implications. as in the Hamburg Rules. Art 1(1). but also includes a list of events in which the carrier is presumed not to be at fault. arbitration and the relationship with other conventions. The instrument also includes rules on jurisdiction. the carriers’ liability can be excluded in so far as the claimant can sue the named carrier in a ‘competent court’ (Hamburg Rules. 142 . freight. To fill the gap UNCITRAL is negotiating a draft instrument on the carriage of goods.QXD 11/21/05 3:09 PM Page 142 Understanding International Trade Law concept. 4.
which was ratified by 135 parties.QXD 11/21/05 3:09 PM Page 143 Chapter 4 Contracts of affreightment The UNCITRAL website at http://www. Further amendment of the Warsaw Conventions took place by virtue of the Montreal Additional Protocols 1975 Nos 1 – 4.2). 4. The Guadalajara Convention is implemented by the Carriage by Air (Supplementary Provisions) Act 1962. The pertinent conventions are the following. general average sacrifice or the owner’s own fault or negligence can be pleaded and proved. the common carrier is absolutely responsible for any loss or damage to the cargo unless defences such as act of God. The amended Warsaw Convention was supplemented by the Guadalajara Convention 1961 (the Convention Supplementary to the Warsaw Convention for the Unification of Certain Rules relating to International Carriage by Air performed by a person other than the Contracting Carrier) to ameliorate the position of cases where the contracting carrier and the actual carrier are different persons. If neither of them applies we have to turn to the rules with respect to non-convention carriage. Protocols Nos 1 and 2 replaced the original gold franc with the Special Drawing Rights as defined by the International Monetary Fund. both concerning the carrier’s liability for passengers. (b) The Warsaw Convention as amended in The Hague on 28 September 1955 was incorporated into English law by the Carriage by Air Act 1961 and is set out in its Schedule 1. In principle. the Warsaw Convention on Carriage by Air of 12 October 1929. inherent vice in the goods. No 3 has yet to enter into force after the deposit of the thirtieth instrument 143 .3. This Act was later replaced by the Carriage by Air Act (CAA) 1961 to give effect to the amended Warsaw Convention. However the initial 1929 Convention is still applicable as part of English law with respect to those few countries remaining signatories only to the old convention. act of the Queen’s enemies. No 1 for the unamended Convention and No 2 for the Warsaw Convention as amended by the Hague Protocol. 2 and 4 are in force in the United Kingdom.04_CH04. ‘Working Group III’. The features are largely similar to those pertinent to the carriage of goods by sea and you should be able to transfer and adapt your knowledge and understanding developed under the previous heading (4. was given effect in the United Kingdom by the Carriage by Air Act 1932. like the rules on sea carriage. is governed by three different convention regimes.3 Aspects of carriage of goods by air and land In the following we are going to discuss very briefly some aspects of these forms of transport.html shows the detailed reports and the progress under ‘Commissions & Working Groups’. No 3 relates to another Protocol known as the Guatemala Protocol.1 Carriage of goods by air The law relating to carriage of goods by air. which in England are the common law rules on the common carrier. and No 4 raises the limits of liability with respect to cargo and postal items. The unamended Warsaw Convention is still contained in Schedule 2 to the Carriage by Air Acts (Application of Provision) Order 1967. (a) The first highly successful regime with 151 parties. to give you an indication where to start any further research.org/uncitral/en/index. which are recommended for further study. The Montreal Additional Protocols Nos 1. 4. They all concern the limits of the carrier’s liability.uncitral.
This is carriage between two different contracting States. both incorporating the above-mentioned conventions. It consolidates. but will set out a few basic principles. updates and unifies the provisions of the Warsaw Convention with all its amendments and also. Please take some time to consult the full text of the amended Warsaw Convention (WC) and the Montreal Convention (MC) and compare their contents for further study. Liability is automatically on the carrier for destruction. which provides that for any carriage by air the applicable provisions of the most recent Convention have the force of law. The provisions are in principle quite similar to the ones of the sea carriage conventions which have already been discussed in detail. the Montreal Convention 1999 prevails over the Warsaw Conventions and its amendments (Montreal Convention 1999. the law on air carriage is now mainly governed by the Carriage by Air Act 1961 and the Carriage by Air (Supplementary Provisions) Act 1962. In England. loss or damage to the cargo or for delay. or if he misses out some of the particulars. The Warsaw Convention as amended by the Hague Protocol and the Montreal Additional Protocols Nos 2 and 4 is appended to the Carriage by Air Act 1961 in Schedule 1A.04_CH04. for the first time. therefore. Art 9 the carrier who had not issued an air consignment note or included all the particulars as required by Art 8 could not avail himself of any limitation of liability. The carrier must issue an air waybill or a cargo receipt (Arts 4 – 11). addresses the allocation of liability between the contractual carrier and another carrier actually performing the carriage. This is also set out in s 1(4) of the Carriage by Air Act 1961.) The air waybill or the cargo receipt is prima facie evidence of the conclusion of the carriage contract. (c) The new Montreal Convention for the Unification of Certain Rules for International Carriage by Air of 28 May 1999. (Under the unamended Warsaw Convention of 1929. Art 55). Many of their provisions are similar or identical but there are also a few distinct differences. The conventions determine the legal liabilities and relationships between the air carrier and either the passenger or the cargo consignor and/or consignee. It is also a receipt relating to weight or number of packages and other information if the specific conditions are met (Arts 11). which came into force on 4 November 2003. or carriage with the place of departure and landing in the same contracting State. but if he does not do so. Between States party to the other Carriage by Air Conventions. They are appended to the Carriage by Air Act 1961 and can be found in I Carr and R Kidner. We are not going into detail.QXD 11/21/05 3:09 PM Page 144 Understanding International Trade Law of ratification. As of September 2005 it had 66 parties. Art 35). the acceptance of the cargo and the conditions of carriage stated therein. defined in Arts 1(2) (ie of both conventions). Art 29 and MC. Statutes and Conventions on International Trade Law (2003). where there is an agreed stop in another State. if it took place whilst the goods were in the charge of the carrier unless he proves certain exceptions (Arts 18. The Montreal Convention has also been ratified by the European Union in its own right with the entry into force date of 28 June 2004. has been ratified by the United Kingdom: it is given effect to by the Carriage by Air Act 1961 as amended and has the force of law as of 28 June 2004. whether or not there is a stop or transhipment in another state. On top of this the claimant is required to submit a written complaint forthwith after dis- 144 . He can avail himself of limitations in respect of the financial limit (Arts 22) and also of a two-year limitation period (WC. no sanctions are attached. 19). The conventions apply to so-called international carriage.
Art 3). Apart from these considerations the sale contract can take all kinds of variations similar to those used for sea transport. The road carrier’s situation must not be worse than it would have been had the contract been concluded for only that particular part of the journey. The abbreviation CMR stems from its French name: ‘Convention relative au contrat de transport des Merchandises par Route’. agents or any other person whose services he uses in the performance of the carriage (CMR. Art 26 and MC. Art 34). for example at http://www.3.uio. with their containers. 145 . sea or inland waterways or air. not applicable between the United Kingdom and the Republic of Ireland (see the protocol of signature). The carrier is liable for his own acts and omissions and also for those of any servants.QXD 11/21/05 3:09 PM Page 145 Chapter 4 Contracts of affreightment covery of the damage. However. within 7 days from the date of receipt for a baggage claim. However. the liability of the carrier by road is to be determined according to the convention governing the other means of transport. Please read the stated conventions and acts alongside this very brief introduction. international conventions on the carriage of goods by road and rail are nevertheless increasing in importance due to the Channel Tunnel and ‘Ro-Ro vessels’. at least one of which is a contracting State (CMR.04_CH04. Art 31). however. The parties cannot limit the liability of the carrier to below that of the provisions of the convention. By virtue of Art 2 of the CMR the convention is also applicable where the vehicle carrying the goods is carried for part of the journey by rail. damage or delay was caused by the other means of transport without any act or omission of the road carrier. Ro-Ro ships are designed for lorries. 4. based on that specific other liability scheme (CMR. The CMR applies to road carriage contracts against remuneration where the place of taking over the goods and the place of delivery are located in two different States.no/lm/.jus. Art 2). to the extent that it is proved that any loss. to ‘roll on and off’ the vessel before and after the sea transit. Art 23 and MC. The CMR was incorporated into English law by the Carriage of Goods by Road Act 1965 and is contained in the Act’s Schedule. but only the Montreal Convention deals with carriage by a person other than the contractual carrier (MC. Both conventions provide rules for successive carriage and combined carriage. Art 1). They can be found in a comprehensive international trade or commercial law statute book or on the internet. Arts 39 – 46). The air waybill is not a document of title. The convention is.2.2 Carriage of goods by road and rail Even though Britain is an island. The conventions set out rules with respect to jurisdiction (WC.1 Carriage of goods by road Carriage of goods by road is governed by the Convention on International Carriage of Goods by Road of 19 May 1956 (CMR). Art 49). Art 33) and the Montreal Convention even makes express provision for written arbitration agreements (MC. 14 days for a cargo claim and 21 days in case of delay (WC. but this is not an issue as the nature of the goods transported and the speed of the carriage do not lend themselves to sale and resale during transit.3. such an agreement is null and void (WC. Art 47) and mandatory provisions cannot be avoided (WC. 4. Art 32 and MC. Art 28 and MC. the sale contract needs to be contemplated accordingly and even if the parties agree ‘cif air München’ or ‘fob Paris airport’ these terms need to be understood and adapted accordingly.
unless the longer three-year period applies in case of wilful misconduct (CMR. it is presumed that the goods were in apparent good order and condition and that the marks and numbers correspond with the note (CMR. If the consignment note is not claused with specific reservations by the carrier.04_CH04. The amount of compensation to be paid by the carrier as well as the upper limit of his liability is calculated in accordance with Art 23 of the CMR. Thus. Any derogation from the convention provisions is null and void (CMR. The consignment note is not a document of title. All the Member States to COTIF 1980 constitute the Intergovernmental Organisation for International Carriage by Rail called OTIF. whether the goods are delivered at the place of destination or at the frontier. Art 3). Art 9(1)). weight. 4. Art 30). several exceptions are set out in Art 17 of the CMR to alleviate this general liability of the carrier. however.QXD 11/21/05 3:09 PM Page 146 Understanding International Trade Law The carrier has to make out a consignment note which confirms the contract of carriage. every carrier is party to the whole contract and is liable for the whole operation by reason of his acceptance of the goods and the consignment note (CMR. In order to preserve his claim the consignee taking delivery has to check the goods and make reservations. The consignment note must be made out in three copies and is to contain specified particulars (CMR. 146 . etc is liable for any inaccuracy in his statements (CMR. The carrier is liable for loss or damage to the goods or any delay whilst the goods are in his charge. It is prima facie evidence of the carriage contract and its conditions as well as of the receipt of the goods (CMR. but additionally requiring the seller to load the goods on the carrying vehicle. Art 32). it is particularly useful for sale contracts concluded on ex works or delivery terms. marks. Art 34). However.2. number of packages. The liability with respect to successive carriers is dealt with in Arts 34 – 40 of the CMR. based on one carriage contract.2 Carriage of goods by rail International transport of goods by rail is governed by the International Convention concerning the Carriage of Goods by Rail (CIM: the abbreviation is derived from its French name ‘Convention Internationale concernant le transport des Merchandises par chemin de fer’). Arts 8 and 9(2)).3. and in case of delay within 21 days (CMR. In case of apparent loss or damage reservations have to be made on delivery. Where a carriage which is governed by a single contract is performed by successive road carriers. The sender providing information about the goods. which has as its principal aim to ‘establish a uniform system of law applicable to the carriage of passengers. Article 31 of the CMR sets out rules for jurisdiction and procedural matters. For example the mode ‘free on truck’ (fot) is essentially an ex works contract. The general limitation period for any action is one year. luggage and goods in international through traffic by rail between Member States. The CIM was initially concluded in 1961 and remains in force although it is now an integral part of the Convention concerning the International Carriage of Goods by Rail (COTIF 1980) (COTIF 1980. Art 41). Art 18). road carriage has the advantage of enabling door-to-door service. Arts 4 – 9). including their packaging. Arts 7 and 11(2)). These exceptions mostly have to be proved by the carrier (CMR. The carrier must check the information provided as well as the apparent order and condition of the goods. where the damage was not apparent they have to be made in writing within 7 days. Road transport therefore does not lend itself to buying and selling of the goods in transit.
The transport operator takes on the full and sole responsibility towards the cargo owner for the goods for the whole transit. Art 2). The amended convention (COTIF 1999) will come into force once two-thirds of the existing Member States of OTIF have ratified the 1999 Protocol (see the 1999 Protocol.3. In general. 147 . 42 and 45). The terms of a sale contract providing for this transport method can vary depending on the choices of the parties and on the overall journey of the goods. but negotiates independent contracts on behalf of the cargo owner for the other stages. For example ‘free on rail’ (for) is a contract providing essentially for ex works terms but additionally making the seller responsible for delivering the goods into the care of the railway carrier.3 Multimodal transport The legal problems are compounded by using multimodal transport or combined transport methods. Thus each carrier is only responsible for his leg of the transport and the rights and responsibilities depend on the individual unimodal terms and conventions. Thus this carrier acts as principal while he carries the goods. The limitation period is one year unless the two-year period is triggered by specified events as set out in Art 58 of the CIM 1980. In this case it becomes crucial for the exporter or importer to be able to determine during which leg of the transit the damage occurred. Art 1). In combined transport a freight forwarder. Combined transport needs to be distinguished from ‘through transport’ where one unimodal carrier is responsible for his leg of the journey. Art 4 and COTIF 1980. The transport document is a consignment note which is not a document of title. the carrier is liable for all loss or damage arising while the goods are in his charge as well as for any delays. despite the fact that the transport operator has subcontracted different stages to individual unimodal carriers. have been given effect in the United Kingdom by virtue of the International Transport Conventions Act 1983. The contractual rights of the cargo owner depend solely on the single multimodal transport contract. which is a revised and updated version of COTIF 1980 and the CIM.04_CH04. The CIM 1980 is applicable to contracts of carriage by rail under a through consignment note which is made out for a route over the territories of at least two Member States using transport lines designated as international (see CIM 1980. but contracts the other stages only as agent for the cargo owner. Further amendments will take place with the coming into force of the 1999 Protocol of Vilnius.QXD 11/21/05 3:09 PM Page 147 Chapter 4 Contracts of affreightment and to facilitate the application and development of this system’ (COTIF 1980. As of September 2005 this had still not come into force. COTIF 1980 has since been amended by the Protocol of 20 December 1990. container operator or multi-modal transport operator concludes a single contract of carriage to ship the goods to their destination by using at least two or more different forms of transport. However he can avail himself of various exceptions (CIM 1980. Only then can he successfully sue the responsible party. Art 36 and burden of proof in Art 27) as well as an overall financial limit (see CIM 1980. COTIF 1980 (as amended by the 1990 Protocol) and thus the Uniform Rules concerning the Contract of International Carriage of Goods by Rail in Appendix B to COTIF 1980. Arts 40. Art 20 § 2). 4.
The UNCTAD/ICC Rules only apply if the parties incorporate them into their contract. Container trade has its own particular features.org/ttl/docs-legal/nm-rules/UNCTADICC%20Rules. You can purchase the latter from the International Chamber of Commerce or find them via the website of UNCTAD at www. 2003). which came into force on 1 January 1992. They are also printed in the appendix to Day & Griffin. Some of the form contracts used in practice provide for their application. Bearing the above in mind please consult the BIMCO MULTIDOC 95 in the appendix to this book and read the UNCTAD/ICC Rules in your own time.4 Revision and further reading 4. However the ICC (International Chamber of Commerce) and UNCTAD (United Nations Conference on Trade and Development) have developed the UNCTAD/ICC Rules for Multimodal Transport Documents (ICC No 481). As of May 2005 the Convention had been raitified by only one-third of the required parties. for example the BIMCO Negotiable Multimodal Transport Bill of Lading (MULTIDOC 95) which you can find in the appendix to this book.1 Questions This is your opportunity to revise what you have learned and to check whether you have understood the issues covered in this chapter. For example under the Hague Rules and the Hague-Visby Rules the carrier is only liable if he acted negligently. also offer a variety of documents.QXD 11/21/05 3:09 PM Page 148 Understanding International Trade Law Multimodal transport is particularly interesting due to containerisation of goods. London: Butterworths.fiata. The Convention enters into force twelve months after 30 States have ratified it. the International Federation of Freight Forwarders Associations (http://www. such as ‘delivered at container depot’ or ‘free arrival station’ (which should not be confused with free alongside ship.org or directly at http://r0. whereas under the Warsaw Convention and the CIM or CMR liability is strict. which are based on different liability schemes. 4. In case of a ‘less than full container load’ (lcl) the exporter will usually have to send the goods to the container freight station.pdf. he may get a door-to-door container which is filled at his premises and unloaded at the business premises of the buyer. Where the exporter intends to fill a whole container. 148 .04_CH04.4.com/). They are largely based on the UN Draft Convention and supersede the ICC Uniform Rules for a Combined Transport Document (ICC No 298). The Law of International Trade. Problems can arise with respect to the different legal rules governing the different legs of the transit. It expresses the principle of uniform liability of the transport operator in Art 16. which has the same initials).unctad. ‘full container load’ (fcl). issues and sale contract terms. In practice it may be difficult to discern and prove where during transit the damage occurred. Organisations such as FIATA.unctad. (3rd edn. In order to cope with these issues the UN Convention on International Multimodal Transport of Goods was adopted in Geneva on 24 May 1980. where they are loaded. I suggest that you attempt to advise the parties in the scenarios below before you move on to the next chapter.
shipped from England under bills of lading.QXD 11/21/05 3:09 PM Page 149 Chapter 4 Contracts of affreightment Question 1 S ships goods from England to France. if he has not shipped the goods himself? Question 6 S wants to ship goods from various countries with carrier C.000 boxes are shipped. Which legal rules apply to the carriage contract to define the rights and duties of the carrier? Question 2 Does it matter whether a bill of lading has been issued for the goods in Question 1? Question 3 Do the Hague-Visby Rules apply to shipment of goods from a port in Scotland to a port in England? Question 4 The goods. he wants to know whether he can deliver 149 . Keen to get the goods of the previous journey unloaded.04_CH04. Will the Hamburg Rules apply? Will the carrier be liable? Question 8 Carrier C has arrived at the port of destination and has another shipment to load. Does this clause achieve their aim? Question 7 Goods are shipped under a bill of lading from England to Egypt. (a) Is the carrier liable for the damage? (b) The shipper claims that the vessel was not seaworthy. Knowing that the UK is a signatory to the Rules they therefore stipulate that English law shall govern the contract. The goods were very valuable. Are there any restrictions as to when and how much the cargo owner can claim? (e) Has the carrier earned freight for each of the consignments shipped under the above bills of landing? Can he delay delivery of the goods until freight has been paid? Question 5 On which bases can the cargo owner sue the carrier. Neither the cargo owner nor the carrier can prove the cause for the damage. Both are keen to incorporate the Hague-Visby Rules into the contract of carriage. are damaged in transit due to entry of seawater into the holds. Does this make a difference? Who has the burden of proof? (c) Other goods are also damaged due to a fire on board the vessel. The carrier claims they would not have been damaged had they been packaged properly. Will the shipper’s claim be successful in that regard? (d) Another bill of lading states that a container containing 1. The goods are destroyed during the journey due to a fault of the carrier. They arrive damaged despite a clean bill of lading.
He also wants to know whether the UK has implemented the relevant conventions. HL concerning bill of lading — carriage of goods by sea — straight bill of lading — Hague Rules — Carriage of Goods by Sea Act 1971 (b) Daewoo Heavy Industries Ltd v Klipriver Shipping Ltd (The Kapitan Petko Voivoda) [2003] EWCA Civ 451. [2004] 10. ‘Solving the Scope-of-Application Puzzle: Contracts. [2005] 11. road and rail and on multimodal transport. He seeks your advice as to which conventions are pertinent in the areas of carriage of goods by sea. ‘Is using a “straight” bill of lading still straightforward? The decision in The Rafaela S’.2 Further reading (a) JI MacWilliam Co Inc v Mediterranean Shipping Co SA.3 JIML 274–290 150 . [2005] 11. (The Rafaela S) [2003] EWCA Civ 556.1 JIML 22–41 (g) KF Haak and Maih Hoeks. and Documents in the UNCITRAL Transport Law Project’. HL concerning charterparty — bill of lading — negligent stowage of cargo — identity and liability of carrier — Himalaya clause — bailment (d) Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26. ‘The developing law relating to deck cargo’. [2004] 10. ‘Charterer’s bills and shipowners’ liabilities: a black hole for cargo claimants?’ [2004] 10. road and rail conventions. CA concerning charterparty — contract — frustration — seaworthiness (e) Richard Williams. The goods are damaged in transit due to the carelessness of the train operator on the second leg of the journey.QXD 11/21/05 3:09 PM Page 150 Understanding International Trade Law to Buyer B the goods of a consignment for which a non-negotiable bill of lading had been issued. air. ‘Arrangements of intermodal transport in the field of conflicting conventions’. 4. CA affirmed by [2005] 2 WLR 554.2 JIML 100–109 (f) Michael F Sturley.5 JIML 422–433 (h) Simon Baughen. C asks you for advice and wants an explanation as to the validity and standing of such a letter of indemnity. Trades. B has not yet received the bill of lading due to delays in the document transfer but can validly prove his identity as the buyer identified in the bill. He also wants you to explain and summarise the common features of the carriage of goods by sea. Who is responsible for the damage and according to which Rules? Question 10 T has newly opened his business as multimodal transport operator.3 JIML 248–253 (i) James Marissen. CA concerning bills of lading — breach of contract — charterparty — deck cargo — limit of liability — Hague Rules (c) Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2003] 2 WLR 711. C is to arrange through-transport to Austria. air. He even offers a letter of indemnity to the carrier.4. Question 9 S from England ships containerised goods with carrier C to Germany.04_CH04.
‘The Himalaya Clause — revisited’. The Starsin’.04_CH04. [2003] JBL 160–180 (m) Caslav Pejovic. [2001] JBL 461–488 (v) Malcolm Clarke. ‘Implications of a “British” Jurisdiction Clause’. Hague/Visby and Hamburg Rules’.2 JIML 115–122 (o) Stephen Girvin. ‘Documents of title in carriage of goods by sea: present status and possible future directions’.5 JIML 448–460 (n) Simon Baughen. ‘Allocating onus of proof in sea cargo claims: the contest of conflicting principles’ [2001] LMCLQ 261 (u) Caslav Pejovic. [1997] JBL 130–142 (x) Regina Asariotis. [2003] LMCLQ 311 (p) William Tetley. ‘Contracting Carriers. [2003] 9. [2003] LMCLQ 201 (l) Paul Todd. [2003] 9. ‘Electronic commerce: formal requirements in commercial transactions’ [2002] LMCLQ 467 (s) Sze Ping-Fat. ‘Representations in Bills of Lading’. Himalaya Clauses and Tort in the House of Lords. ‘Interpretation and Construction of the Hague. 151 . ‘Defining the Ambit of Article III r. [2002] JBL 235–249 (t) Chinyere Ezeoke. [2003] 9.1 JIML 30–70 (k) Benjamin Parker. [2002] LMCLQ 356 (r) Hugh Beale and Lowri Griffiths.1 JIML 40–64 (q) Malcolm Clarke.QXD 11/21/05 3:09 PM Page 151 Chapter 4 Contracts of affreightment (j) William Tetley. ‘The Common Carrier’s Strict Liability: a Concept or a Fallacy’. ‘Carriage Conventions and their Interpretation in English Courts’. [2004] 10. [1992] JBL 321–325. ‘Delivery of goods without a bill of lading: revival of an old problem in the Far East’. ‘Transport Documents: their transferability as documents of title. ‘The transport of goods in Europe: patterns and problems of uniform law’ [1999] LMCLQ 36–70 (w) Charles Debattista.8 of the Hague Rules: Obligations and Exceptions Clauses’. electronic documents’. ‘Liability for incorrectly clausing bills of lading’.
Documents Similar To Contracts of Affreightment