Importance of a Shipping Law - Essay Example

Shipping Law Case Study: (a) Advise Jordan whether anyone has liability for the damage to his goods. He is concerned that he may not be able to sue anyone, as he was not given a bill of lading in respect of the goods. Shipping documents exists to facilitate international trade. Therefore it is logical to first consider the sales agreement itself. This contract describes the goods to be shipped, it provides for the price to be paid and the method of payment, and either expressly or by implication it provides who bears the risk at each stage of transportation and when property in the goods passes. Bill of lading is one such important shipping document. The original bill of lading is the title document in an ocean shipment or as the lawyers say it prima fascia evidence of ownership1. He who owns the bill of lading owns the shipment. The bill of lading is issued by the carrier when the overseas supplier arranges to have the carrier receive the goods for shipment onward to importer. It is a contract that specifies when and where the merchandise will be shipped and delivered via what routing. When you are paying for the shipment you are actually buying the bill of lading. Thus, the bill of lading plays a key role on any payment arrangement and is evidence of the contract of carriage between the parties. In the given case, Susan is the lawful holder2 of the bills of lading and any damaged caused to the goods can be claimed by the owner of the bills of lading. The only person on whom Jordan and Susan can claim for the damage is TC. The correct angle would be to put the burden of proof on the party issuing terms of the bills of lading (i.e., in most cases the carrier) that the shipper has effectively agreed to the terms of the contract. If this proof is upheld (i.e., the shipper has agreed to the terms) there is no need to provide for mandatory rules as a sort of protection from pre-formulated contractual language. As indicated earlier, the bill of lading is the best evidence of the contract of carriage, but the entire contract depends upon the offer of service by the carriage and its acceptance by the shipper, including the advertisement of the carriage, the booking notice, any statements by agents, and other such evidence, with the bill of lading as the capstone. Since, the bill of lading is only signed by one party, the agent of the carrier, with the shipper or his forwarding agent, responsible for the description of the goods to be loaded or already loaded, the bill of lading has been described as a contract for adhesion or a standard form contract if the shipper is using the usual forms provided by the carrier. The named consignee, often the shipper himself, is also a party to bill of lading, first, by receiving the goods at its destination upon producing the bill of lading, and, second, as he may assume the risk covered by insurance during the voyage although he has not yet acquired title to the goods. (b) TC has indicated to Susan that he will accept liability to her for damage to half of the goods. He intends to limit this liability under the US Carriage of Goods by Sea Act 1936. Susan has said that as she is the lawful holder of the bills of lading, she can sue him for all of the goods and that the Hague-Visby Rules will apply. Is Susan correct in these beliefs Hague-Visby Rules is one of the rule which defines the rights and duties of parties in a contract of carriage of goods by sea, insurance for goods, and transfer of title. The Hague and Hague- Visby rules are generally identical, except for provisions dealing with limitations of liability, third parties and a few minor areas. The Visby amendments to the Hague Rules increase the limits of the carrier liability, change the method of expressing the limitation amount (by weight) and protect third parties acting in good faith. The most important obligations under the Hague Rules or the Hague-Visby Rules are those rules imposed by Art.III. Rule 2 requires the carrier to properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried3. Scope of Application: The application of Hague Visby Rules depends on the place of issuance of the bill of lading; that is, the rules apply to all bills of lading issued in any of the contracting states. If the parties agree to incorporate any one of the rule in their contract, such rules will govern the contract of carriage even when the countries where the parties reside subscribe to different rules. However, this will not be allowed if the parties are required to apply certain rules adopted by their countries. These rules apply only to the Bill of lading. The Carrier's Duties Under B/L : A carrier transporting goods under a B/L is required to exercise "due diligence"4 in (1) making the ship seaworthy; (2) properly manning, equipping, and supplying the ship; (3) making the ship ( holds, refrigerating chambers etc) fit and safe for reception, carriage, and preservation of the goods; and (4) properly and carefully loading, handling, stowing, carrying and discharging the goods. Whenever loss or damage has resulted from unseaworthiness, the burden of proving the exercise of due diligence falls on the carrier. When different modes of transportation are used, the issuer of the bill of lading undertakes to deliver the cargo to the final destination. In the event of loss or damage to merchandise, liability is determined according to the law related to the mode of transportation at fault for the loss. If the means of loss is not determinable, it will be assumed to have occurred during the sea voyage. Basis of Carrier's Liability and Exemptions: The carrier's liability applies to loss of or damage to the goods. It does not extend to delays in the delivery of the merchandise. The rules exempt carrier from liability that arises from actions of the servants of the carrier(master, pilot, etc) in the management of the shipment, fire and accidents, nature, civil war, insufficient packing, and other causes that are not the actual fault of carrier. That loss or damage to the goods fall within one of these exemptions does not automatically absolve the carrier from liability if the damage/loss could have been prevented by the carrier's exercise of due diligence in carrying out its duties. Limitations of Action: All claims against the carrier (TC in this case) must be brought within one year after the actual or supposed date of delivery of the goods. This means that lapse of time discharges the carrier (Susan) and the ship from all liability in respect to loss or damage. The Hague Rules also stipulate that notice of claim be made in writing before or at the time of removal of the goods. Yes, indeed, Susan can claim for all the losses caused. (c) Must Susan pay outstanding demurrage She is of the opinion that demurrage does not now count, given that TC is in breach of contract. Demurrage5 refers to the fee or charge on detention of a vessel by freighter beyond the given time limit. Both the parties involved should be aware of the arbitration rules to be followed. It is generally a sum of money due from the party at fault to the owner of the vessel as compensation for the improper delay or detention of a vessel, calculated in terms of loss of earnings. The sellers shall be liable for any dead freight or demurrage, should it happen that they have failed to have the commodity ready for loading after the carrying vessel has arrived at the port of shipment on time. Risk of loss or damage to goods in sales contracts between sellers and purchasers in different localities is regulated by article 94 of the Commercial Code. In general terms, article 94 provides that, if a seller, at the request of the purchaser, dispatches the sold goods to a locality other than were the goods originally were at the time of sale, risk of loss will be borne by the purchaser, unless agreed otherwise or the law provides otherwise. A seller having shipped or brought afloat the goods in accordance with the contract fulfils his part of the bargain by tendering to the buyer the proper shipping documents. If he does this, he is not in breach even the goods have been lost or damaged before such tender. Any negligence on the part of the buyer to accept the documents in time and obtain the clearance would be his responsibility as to demurrage incurred thereby. The buyer is not discharged from his obligation by the fact that the goods are lost or for some other reason cannot be delivered or that he has not had the opportunity of examining them. The buyer may refuse to take up the documents, although otherwise valid, if further performance of the contracts involves dealing with an enemy, or by showing that the documents are not in order. However, such a thing is not liable in this case. The time and place of appropriation are important elements for determining where the property in the good passes. It is clear that property does not pass until the documents have been taken up by the buyer, and the seller, therefore, can claim damages for breach of contract and not the price if the buyer refuses to take them up. Again, if the seller has reserved the right of disposal until certain conditions is fulfilled, the property does not pass unless the conditions imposed by the seller on delivering the documents are fulfilled, and on the buyers failure to perform the condition the seller is entitled to the return of the documents6. However, when the documents are duly accepted and the price duly paid by the buyer, it is open to question whether the property passes subject to its being reinvested in the seller, if it be discovered on examination of the goods after there arrival that they are not in conformity with the contract and are thereupon rejected by the buyer, or whether it remains in the seller until the buyers had an opportunity of examining the goods, and passes on his accepting them. Since, however the buyer has the right to examine and reject the goods, as in this case, and may lose this right if he does any act in relation to the goods which is inconsistent with the ownership of the seller. Hence in this case, Susan has already accepted the goods and sold half of them, it is not advisable to reject he remaining lot. Instead, Susan can go ahead and claim for the damages and loss caused in the shipment. As the owner of the goods is in breach of contract, Susan is not liable to pay any demurrage as the lay time was caused due to the mishap caused by the irresponsibility from the owner's side. d) O has said that as the bills of lading made it quite clear that they were subject to the terms of the charter under which they were issued, any bill of lading liability against him through the SDOs issued will be governed by the limitation provisions under the US Carriage of Goods by Sea Act 1936. Is this correct Carriage of Goods by Sea Act (COGSA), governs carriage by sea to and from ports of the United States and its possession in foreign trade. That means it can govern a case before an American Court involving a shipment under a bill of lading that has been issued in a foreign country and that may incorporate a foreign national law and/or an international convention not ratified by the United States, e.g. Hague/Visby Rules. Applying the U.S. COSGA to such situations violates normal conflict of laws practice, for the American court is than denying both the place where the contract was made and the substantive law acknowledge by both parties in their agreement. Carrier Duties: Essentially COGSA and the Hague Rules are the same, with the requirements of due diligence by the carrier "before and at the beginning of the voyage" to make the ship seaworthy and to "properly and carefully" load, handle, stow, carry, keep, car for, and discharge the goods carried7. The bill of lading is the prima facie evidence of the receipt by the carrier, with the same requirements for accuracy as the Hague Rules. The prohibition of any clauses or covenants removing the carrier from all liability is repeated in COGSA. Carrier Liabilities : Carriers also escape liability for damage or loss to cargo under 17 clauses, as in the Hague Rules : they are, any act, default, or neglect of the carrier, master, crew or servants of the carrier in the navigation or management of the ship; fire, unless caused by the actual fault and privity of the carrier; perils of the Sea Act of God Act of War Act of public enemies Arrest by princes, rulers, or people or seizure under legal process Quarantine restrictions Act or omission of the shipper, owner of the goods or agents; strikes or lockouts riots or civil commotion saving life or property at sea. wastage in bulk or weight or any loss or damage due to inherent defect or vice of the goods insufficiency of packing insufficiency or inadequacy of marks latent defects not discoverable by due diligence, and, finally any other cause that arises without the actual fault or privity of the carrier and without the fault or neglect of its agents and servants, with the burden of proof here placed on the carrier or its surrogates. In addition to these generous exemptions for liability, COGSA provides that a reasonable deviation of the ship in its voyage will not be a breach of the contract of carriage. But a deviation to load or unload cargo or passengers will be considered unreasonable. Carriage that is not "ordinary commercial shipments made in the ordinary course of trade", that is, private contracts for carriage for particular goods under special conditions are not bound by COGSA provided that no bill of lading has been or will be issued and that the terms of the agreement are embodied in a receipt that is non - negotiable and so marked. Such contracts may be made with any stipulations agreed to by the parties, including the rights, responsibilities, and liabilities of the carrier - so long as any terms touching seaworthiness of the vessel are not contract to public policy. (e) How might Jordan and Susan sue O and TC, given that both Jordan and Susan are based in the UK and O and TC have said that neither of them intends ever to visit the UK The people on whom Jordan and Susan can claim for the damage is TC and O. The correct angle would be to put the burden of proof on the party issuing terms of the bills of lading (i.e., in most cases the carrier) that the shipper has effectively agreed to the terms of the contract. If this proof is upheld (i.e., the shipper has agreed to the terms) there is no need to provide for mandatory rules as a sort of protection from pre-formulated contractual language. Under the Hague Rules, a 'contract of carriage' means only such contracts that are covered by a bill of lading or any similar document of title relating to the carriage of goods by sea. The Hague Rules make no distinction between public (common carrier) or private carriage. The rules do not apply to charter parties, which are essentially contracts for the lease or hire of a ship and not contracts of carriage. However if a bill of lading under a charter party is negotiated with a third party, then that bill of lading will be covered under the Hague Rule. Following closely, although expansively, the Harter Act, the rules require to carrier to provide a seaworthy ship in all respects and to "properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried", The carrier, on demand of the shipper must issue a bill of lading showing the identification marks of the goods, the number of packages or pieces, quantity, weight, and apparent order and condition. The shipper is deemed to have given accurate marks, number, quantity and weight to the shipment, but the carrier is not required to state in the bill of lading such items if he has responsible grounds for suspecting that they are inaccurate. Notice of any loss or damage to goods must be sent to the carrier in writing within three days of the discharge or delivery of the goods to the consignee. In any case, no liability will be incurred by the carrier if a suit for loss or damage is not brought within one year of discharge of delivery. Finally, to avoid questions about the application of the Hague Rules to various bills of lading, relating to the carriage of goods between the ports of two states were bound by the Hague Rules if (a) the bill of lading was issued in a contracting state; (b) the carriage was from the port of a contracting state ; or if the contract, evidenced in the bill of lading, provided that the Hague Rules applied or that the legislation of the state giving effect to those rules applied. Following the Harter Act 8, Harter Act is a law passed by Congress in 1893 which provides that a vessel owner is not responsible for loss or damage caused by faults or errors in navigation, provided the ship owner has taken proper care to see that the ship is in all respects seaworthy and properly manned and equipped The Hague Rules forbade the insertion of any clause, covenant, or agreement in the contract of carriage that would relieve the carrier from liability for loss or damage to cargo caused by the carrier's negligence, fault, or failure in the handling, care, custody, and delivery of goods. It is also to be noted that the application of Hague Visby Rules depends on the place of issuance of the bill of lading; that is, the rules apply to all bills of lading issued in any of the contracting states. If the parties agree to incorporate any one of the rule in their contract, such rules will govern the contract of carriage even when the countries where the parties reside subscribe to different rules. However, this will not be allowed if the parties are required to apply certain rules adopted by their countries. These rules apply only to the Bill of lading. References: Parsons Theophilus, 2004: A Treatise on Maritime Law: Including the Law of Shipping, the Law of marine Insurance and, the Law and Practice of Admiralty. Steven J. Hazelwood, Andrew Tettenborn & Simon Gault, 2004 : Marsden - Collisions At Sea. Tiberg Hugo, 1995 : The Law of Demurrage ( Intellectual Property in Practice) Todd Paul, 1993: Bills of Lading and Bankers Documentary Credits. Carriage of Goods by Sea Act (COGSA) and S.943 and H.R. 20005 : Hearing before the Subcommittee on Surface Transportationsecond session, April 21, 1998 (S.hrg) Read More