#17369 - Parties - Shipping and International Trade

PARTIES

Abbreviations

• CoC -> Contract of Carriage

• HL -> House of Lords

• CA -> Court of Appeal

• BoL or B/L -> Bill of Lading

• FOB -> Free on board

• CIF -> Cost insurance freight

• [ ] -> writings in square brackets are my own opinions/comments on cases and articles

• LoC -> Letter of Credit

• HVR -> Hague-Visby Rules

Summary

• These cases seem to consider the question of: who can be sued?

  • The Rewia established the general rule, The Hector, The Starsin both departed from it

  • The Hector -> identity of carrier clause was TRUMPED by a typed statement stating that the carrier was the charterer

  • The Starsin -> terms which parties have chosen to include will be given more weight compared to pre-printed terms

• Also, when can a third-party take the protection of a contract (specifically, Himalaya clauses aka exemptions from liability)

  • Midland Silicones introduced the rogue 4-step agency exception to the privity rule (essentially a separate contract that incorporates the terms of the original contract, including the Himalaya clause), and Eurymedon tried to explain how this separate contract arises (unilateral offer that either matures into a contract after performance or is accepted by performance)

• IMPT to distinguish the different types of charterparties (so you can understand what’s going on in the cases)

  • Time charterparties -> the charterer hires the ship, the master and crew for a certain amount of time

    • Shipowner retains possession of the ship and thus holds the goods on bailment

    • Carver: Time charterparties are “contracts for the provision by the shipowner of services by means of the use of the ship, the master and crew being provided by the shipowner, who also retains possession of the ship”

  • Demise charterparties -> the charterer hires the ship but without its crew

    • Shipowner temporarily transfers possession of the ship

    • Carver: “Demise charterparties are simply contracts for the hire of the ship, the master and crew being normally provided by the charterer who therefore (through such employees) conducts the carriage operation.”

• FOB -> Free on board (duty is to get the goods onto the ship)

  • Benjamin’s: :The f.o.b. contract has, in the words of Devlin J.,1 become “a flexible instrument”, so much so that no really satisfactory definition of such a contract is possible. The central idea is that the seller is bound at his expense to place the goods “free on board” a ship for transmission to the buyer from a port or range of ports specified in the contract

  • The “classic” f.o.b. contract was described in Wimble, Sons & Co v Rosenberg. Its essential features are that the seller must at his own expense put the goods on board a ship which has to be nominated or designated by the buyer. The seller is not bound to reserve shipping space in advance nor to bear any expense of shipment which arises after the goods have been put on board”

• CIF -> Cost Insurance Freight (duty is to procure shipping and tender the documents to the buyer)

  • Benjamin’s: “A C.I.F. contract is an agreement to sell goods at an inclusive price covering the cost of the goods, insurance and the freight payable for the carriage of the goods to the destination specified in the contract.

  • The essential feature of such a contract is that a seller, having shipped, or bought afloat, goods in accordance with the contract, can (and must) fulfil his part of the bargain by tendering to the buyer the proper shipping documents: if he does this, he is not in breach even though the goods have been lost before such tender.

  • In the event of such loss the buyer must nevertheless pay the price on tender of the documents, and his remedies, if any, will be against the carrier or against the underwriter, but not against the seller on the contract of sale.”

• **IMPT: CRPTA does not apply to contracts of carriage by sea, EXCEPT FOR EXEMPTION AND LIMITATION CLAUSES (see s6(5))

  • so it DOES apply to Himalaya clauses!

• Both carrier and shipper are neutral terms

  • Shipper can be buyer/seller depends on type of contract and terms, etc

  • CoC is between carrier and shipper

• Implied contracts

  • There can be an implied contract between the shipper/consignee and servant/contractor of the carrier incorporating the terms of the B/L (Scruttons, Eurymedon)

    • But NOTE: simpler to just use CRTPA

    • Another alternative: Art IVbis R2 HV, which applies to“servant or agent of the carrier (such servant or agent not being an independent contractor)”

    • Performance of an obligation already owed to someone else (e.g. stevedores unloading the goods) can constitute good consideration (Eurymedon)

    • In practice we usually go through (1) CRTPA, (2) Art 4bis R2, then (3) Eurymedon!

  • There can also be a Brandt v Liverpool implied contract between the carrier and subsequent holder of the B/L

    • But NOTE: in modern times, the holder of the B/L can just rely on s2(1) and s2(4) COGSA

    • Cannot use CRTPA (CRTPA only applies to charterparties wrt exclusions/limitations of liability)

    • The Brandt v Liverpool implied contract is largely irrelevant today, unless COGSA doesn’t apply because the wrong type of document is passed on

      • Only arose because of the property gap problem under the old 1855 Act!

      • Benjamin’s: For e.g., delivery may be taken by a buyer under a letter of indemnity, or under a delivery order other than a ship’s delivery order as defined by that Act, no other carriage document being transferred to him or identifying him as the person to whom delivery is to be made; goods may be sold after a bill of lading has become “spent” and the bill may then be transferred to, and delivery of the goods be claimed by, the buyer; the goods may be delivered to a buyer against a bill of lading which has not been indorsed, or properly indorsed, to him

    • In Aramis -> Court declined to imply a Brandt v Liverpool contract

      • 1) No consideration

        • Party didn’t agree to pay any outstanding consideration

      • 2) No offer and acceptance

        • No acceptance -> because they DIDN’T EVEN DELIVER the goods (non-delivery of one part of the goods)

        • Short delivery isn’t really acceptance as well!

      • 3) Also no intention to create legal relations

        • Because they didn’t act any differently

• Pyrene v Scindia

  • There was also an implied contract in Pyrene v Scindia to make the seller a party to the FOB contract even where the buyer’s agent arranges shipping space

    • By delivering the goods alongside the ship, the seller makes an offer, but he says ONLY on the terms of the contract of carriage

    • By lifting the goods, the shipowner accepts the goods

  • Convinced?

    • Not really!

  • Why does Devlin J rely on this “fiction”?

    • To enforce the limitation in the Hague rules

    • To find a way to enforce the Hague rules against the Seller

  • Is this device really needed?

    • NOT REALLY

    • If ship simply sails away without loading goods: seller can just sue the buyer, and then buyer can just sue the carrier!

    • If the carrier damages the goods, same!

**Pyrene v. Scindia Navigation [1954] 2 Q.B. 402, 420–429

Notes

• Core issue: whether seller is privy to the contract of carriage/affreightment under FOB contract

  • The answer seems to simply be: yes!

  • Because in all three categories listed by Devlin J: he says the seller is clearly a party to the contract under Categories 1 and 2 (being the one that procures the B/L)

  • And this case is Category 3, and it is clearly the three parties’ intentions that the seller is a party to the contract so far as it affects him

    • Alternative analysis: there is an implied contract between seller and shipowner

• Devlin has 3 categories

  • 1) B nominates the ships, S puts the goods on the ship on account of the buyer and procures a BoL in terms usual to the name

    • The S is directly a party to the contract of carriage, at least until he takes out the BoL in the B’s name

  • 2) In modern times, it’s often necessary to book space well in advance, so the S makes arrangements (with the ship?) and takes the BoL in his own name

    • Then he tenders the BoL to the B and the B pays

    • Similar to cif contract

  • 3) The B gets his agent to book space, and gets the BoL in his own name

Facts

• Sellers delivered a fire tender sold under a contract of sale f.o.b. London, alongside a ship nominated by the buyers.

• While the tender was being lifted on to the vessel by the ship's tackle and before it was across the rail it was dropped and damaged.

• Under the contract of sale the property had not then passed.

• Seller sued shipowners in tort for the cost of repairing the tender

• Shipowners admitted liability, but claimed that the amount was limited by Art 4(5) Hague Rules

• Sellers made 3 arguments (from digest):

  • (a) as the tender had not crossed the ship's rail it was never loaded on to the ship and therefore, since the accident occurred outside the period specified in article 1 (e), the rules did not apply

  • (b) the rules were not incorporated in the contract of carriage because no bill of lading had been issued

  • (c) even if the rules could be applied to the operation of loading at the time of the accident, they had no application as between themselves and the shipowners because they were not a party to the contract of affreightment/carriage (under a fob contract the buyer makes the contract of affreightment with the shipowner)

• Court rejected all three arguments, held that sellers were bound by Hague Rules

Held (Devlin J)

• 1) Court rejected (a) and (b)

• 2) Seller made two arguments wrt (c) -> at 420-429

  • (i) That they were not a party to the contract of carriage

  • (ii) That even if they were, the rules would not apply to...