#17365 - Loss Of Or Damage To Goods - Shipping and International Trade

LOSS OF OR DAMAGE TO GOODS

Notes

• The problem of the loss or deterioration of the goods in transit must be analysed partly in terms of the obligations of the parties as to quality, packing, shipment, etc.; and partly in terms of risk.

  • Therefore the cases for this week consider the obligations of the seller/buyer as to the goods, and also when risk passes

SUMMARY

RISK

When does risk generally pass?

FOB Contract

• On shipment

  • (Ingliss v Stock)

  • Also Cunningham v Munro

CIF Contract

• On or as from shipment

  • The Julia

  • As from -> there might be a sale of goods while goods are afloat

  • Thus as from indicates that risk is deemed to have passed when shipment occurred -> it’s retrospective in that sense

• What does “on shipment” mean?

  • At the ship’s rail

• This rule is crude but certain

  • Both parties know exactly when to get insurance

  • It’s crude but also clear -> that’s the attraction of the rule

• Are there better alternatives?

  • What about linking risk to control -> if you have control of the goods, you can manage the risk better

  • Possibility for reform is discussed in your seminar notes (see your Benjamin readings)

General rule

• General rule in S20(1) SGA is that risk passes with property

  • But there is significant departure from this rule in both FOB and CIF contexts

Important exceptions to the general rule

• 1) There is an important exception in S20(2) SGA

  • “where delivery has been delayed through the fault of either buyer or seller the goods are at the risk of the party at fault as regards any loss which might not have occurred but for such fault”

  • Delivery = shipment (S32(1))

  • DN: unclear what “fault” means – but I think “fault” means breach

    • You could take a broader view of fault, but then the problem is where does fault end then

• S20(2) is possibly important in a FOB context

  • In a standard FOB contract, if there is a delay in shipment, it’ll be because the buyer has failed to arrange for a suitable vessel to pick up the goods within the shipment period

    • So in that case, the risk would shift to the buyer even before shipment

    • But in that case, the buyer is already in breach of their contract with the seller to arrange a suitable seller

    • So they’ll already be liable to the seller for any loss arising from the breach

• However, it is irrelevant in a CIF context

  • If shipment is delayed, likely to be due to the seller

  • You’ve got a straightforward breach of S13!

    • Implied term that goods will match description

    • So you could sue for damages, OR straight up reject the goods (if they’ve deteriorated)

• 2) S32(2) (reasonable CoC)

  • Essentially, risk stays with seller if he fails to make a reasonable CoC

• Usually irrelevant in a strict FOB case, because there usually the buyer makes the CoC

  • It could be relevant in an extended services FOB, where the seller is involved in arranging the CoC

• What about CIF? (or extended services)

  • Not really relevant – the seller is already obligated to make the CoC

  • But need to show that the failure to make a reasonable contract CAUSED the loss

    • But this is unclear – no case law

  • One possibility is that it reverses the burden of proof

    • i.e. seller needs to show that the loss was NOT caused by failure to make reasonable CoC

  • So it might strengthen the hand of the buyer

• The provisions of s.32(2) apply even where there is no contractual obligation on the seller to make a contract of carriage—where he is merely “authorised” but not “required” to send the goods to the buyer

• What is a reasonable contract appears to depend on what is usual in the trade in question.

  • Benjamin’s: In one case the seller had the option of sending the goods either at carrier’s or owner’s (i.e. buyer’s) risk; and it was held that he had not made a reasonable contract by choosing the latter method

• 3) S32(3) (notice of insurance)

  • Could be impt in a FOB contract because the buyer has to take out insurance

  • So they might need such information

  • But OTOH they might not need such information from the seller, because they’re the ones making the shipping arrangement -> so they already know everything they need to know to make the insurance arrangement!

  • So this would only be relevant where the SELLER is responsible for making shipping arrangements but the BUYER is responsible for taking out insurance

• In a CIF context it’s usually not going to matter, the SELLER has to arrange the insurance and contract of carriage ANYWAY

  • So if it were a C and F contract, then maybe!

• See your seminar notes (Benjamin’s) for case law on this

• 4) Cunningham v Munro Exception

  • Lord Hewart: “there may also be circumstances where, although the purchaser may be entitled to reject when the goods are being placed over the ship's rail, yet the vendor may be entitled to recover damages in respect of the deterioration of the goods”

  • Where the buyer informs the seller that the ship will be arriving on a particular day, and the seller brings the perishable cargo down to the docks, but the ship only arrives later, after the goods have deteriorated. Even if the ship arrives within the shipment period (and thus the buyer is not in breach), there can still be a cause of action

    • Indeed, Benjamin’s has argued that this would, for instance, clearly include storage charges as well as deterioration owing to ineffective shipping instructions given by the buyer, even where there is no breach

    • “If the time of shipment is at the buyer’s option, he may at one point in the shipment period give shipping instructions which are ineffective; and if as a result of such instructions the seller suffers loss he can no doubt recover damages, e.g. in respect of storage charges or deterioration of the goods before shipment. But such abortive shipping instructions do not put the buyer finally in breach, it being still open to him to give effective shipping instructions during the remainder of the shipment period; and the market may fluctuate during this time”

  • Benjamin’s explains this as a subset of S20(2) SGA, as an example where the buyer is at fault

    • But DN: if you take this broader view of fault (beyond breach), then the question is where does it end

    • Note: S61(1) defines fault as “wrongful act or default”

OBLIGATIONS OF THE SELLER

SGA

Mash & Murrell

• Where goods are sold on a delivery involving transit, there is an implied warranty that they can endure the normal course of transit, and will be of merchantable quality for a reasonable time thereafter (Mash & Murrell)

  • This seems to derive both from the common law, as well as under S14 SGA – in Mash & Murrell, the term at common law is described as the “third side of the same coin” (with the first two sides being SGA 14(1) and 14(2))

  • In The Mercini Lady, Rix LJ does not necessarily reject the existence of an equivalent implied term at common law, but rather of an implied term that the specification is to be met at delivery but also for a reasonable period after delivery

  • i.e. he rejected the existence of a continuing warranty, but Mash & Murrell was concerned with a prospective warranty

APPROPRIATION AND LOST GOODS

Can you appropriate goods which are lost?

• Groom and Manbre Saccharine show that you can appropriate goods which are lost

  • In Groom, the ship sank on 6 Aug, and it was only on 20 Aug that the seller tendered documents to the buyer

    • Prior to that, there didn’t seem to be any identification of the cloth that was to be used under the contract

    • While there was correspondence about war risk and insurance, it is hard to see how this would be sufficient to constitute appropriation

  • Further reinforced by Manbre Saccharine

    • Nothing in the case to suggest that there was contractual appropriation before the goods were lost

    • Only communication was sending of the invoice

    • This case goes even further than Groom -> here the seller knew that the goods were lost

    • Thus this suggests that you can appropriate goods that you KNOW are lost to the contract!

LIABILITY OF THE CARRIER

Liability of the carrier wrt loss of or damage to goods

1. when the Hague-Visby Rules do not apply

• IMPT to know this for next week

  • One consequence of deviation might be that the H-V rules don’t apply

• What does Lord Sumption say in Volcafe?

  • That it’s just a bailment for reward -> governed by common law rules on bailment

  • (1) carrier has a duty to take reasonable care

  • (2) if loss/damage is suffered, the carrier bears the burden of proving the absence of negligence

• There are also established excepted perils at common law

  • Act of God, jettison, act of Queen’s enemies, bad packing (?)

• There used to be an old regime of common carriers

  • Under which the carrier would be subject to strict liability

  • But people don’t really use common carriers anymore

2. when the Hague-Visby Rules do apply

• Art III R1

  • Seaworthiness -> refers only to initial seaworthiness (at the beginning of voyage)

    • Some discussion of what that means in the Maxine Footwear ccase

  • What’s the standard of care wrt seaworthiness?

    • Due diligence

    • It means a duty of reasonable care -> but a non-delegable duty of reasonable care

    • So he’s liable if the person whom he’s delegated the work to is negligent

• Art III R2

  • What’s the standard of care for Art III R2?

    • Also reasonable care (According to Lord Sumption in Volcafe)

    • Although with a big caveat, it’s qualified by the excepted perils in Art IV R2

    • SO you can’t assess the content of the obligations in Art III R2 without reference to Art IV R2

Burden of proof

• Art III R1 (seaworthiness)

  • Who needs to prove what?

  • Cargo-owners would need...