The Carriage of Goods and the Liability of Air and Sea Carriers

The Carriage of Goods and the Liability of Air and Sea Carriers

Chapter 6

1© 2002 West/Thomson Learning

Bailments & Common Carriers Bailment: legal concept where

owner of property transfers possession to bailee, but retains ownership Shipper is bailor Carrier is bailee

Common Carrier: carrier contracting with public for transport services

Contract of Carriage: contract btwn shipper and carrier – in transport documents

Bailment Law Bailee (Carrier) must return

property to bailor in same condition as it was received

Carriers liable for damage or loss to cargo, except caused by: Acts of God Acts of public enemy or terrorist Acts of govt. intervention or court

order Acts of shipper Inherent characteristics of cargo that

cause its destruction Carrier may use disclaimers, but

legal limitations on use

Liability of International Air Carriers: Warsaw Convention

Liability of International Air Carriers: Warsaw Convention

General Principle: Air Carrier is presumptively liable for all damage to cargo UNLESS the airline shows:

Not at fault or negligent Shipper was negligent

Air Carrier liable for death or bodily injury resulting from accident aboard aircraft or in boarding or disembarking

Accident: event that is peculiar risk of air travel and “external” to passenger – Olympic Airways v. Husain

Warsaw Convention is exclusive remedy – El Al Israel Airlines v Tseng 2

Warsaw Convention Provisions (As Amended)

Warsaw Convention Provisions (As Amended)

Limits liability of Air Carrier For death or bodily injury, 1999

Montreal Convention abolished $75K limit; carrier strictly liable for 100K SDR (Subject to contributory negligence)

Carrier liable for damages beyond 100K SDR unless unless:

Not due to negligence of airline, employees or agents

Due to negligence or wrongful acts of 3rd parties

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Warsaw Convention Provisions (As Amended) Liability for Cargo Loss or Damage

Protocol 4 of 1999: Carrier liable unless due to: Inherent defect, quality or vice of cargo Defective packaging not by carrier Act of war or armed conflict Act of public authority Contributory negligence of shipper

Cargo: Liability limited to 17 SDR per Kg unless shipper declares higher value ( and pays additional fee if required)

Limitation doesn’t apply if damage due to intentional act or act done recklessly

Baggage: Liability limited to 1000 SDR per passenger unless has declared higher value; can’t recover more than actual value

Enforcing Warsaw Convention Suits can only be brought in

countries that are signatories Where ticket purchased, final

destination or where carrier has principal place of business

Montreal Convention: suits for death or injury in passenger’s principal residence if carrier operates there

Time Limits Must file notice:

Cargo or baggage damage: notify within 7 days of receipt of checked luggage, 14 days from receipt of cargo

Delay of baggage or cargo: notify in writing no later than 21 days from date of actual delivery

Must file suit against air carrier within 2 years

Liability for Carriage of Goods by SeaLiability for Carriage of Goods by Sea

Historically, carrier absolutely liable Carriers used exculpatory clauses Legal limitations on such clauses Hague Rules – 1924 Convention defines

liability for ocean carriers US Carriage of Goods by Sea Act

codifies Hague Rules Covers liability from loading to unloading

(“tackle to tackle”) Parties can extend application beyond

“tackle to tackle” by provisions in Bill of Lading (B/L)

Invalidates all exculpatory clauses in B/L Forum selection and arbitration clause in

B/L valid – Vimar Seguros y Reaseguros S.A. v M/V Sky Reefer (USSC 1995) 4

COGSA PrinciplesCOGSA Principles

Carrier must use due diligence in providing seaworthy vessel at beginning of voyage Carrier liable for failure to use

due diligence But carrier not liable for damage

due to fire, storms, and negligence in navigating or managing ship

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COGSA PrinciplesCOGSA Principles Delivery of damaged cargo: shipper must give

written notice to carrier at port of discharge For visible damage: give notice before or at

time goods taken from carrier’s custody If damage not apparent or visible, give written

notice within 3 days of delivery Failure to give notice creates presumption

goods delivered in good condition Suit must be brought within 1 year P must show goods loaded in good condition and

lost or unloaded in damaged condition Clean B/L establishes presumption goods

delivered to carrier in good condition – shifts burden to carrier

Problem with sealed containers: clean B/L only establishes outer condition of container

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COGSA Exceptions to LiabilityCOGSA Exceptions to Liability Errors in ship

navigation or management

Fire (unless carrier’s fault)

Perils of the sea Act of God Act of war Acts of public

enemies Legal seizure Quarantine

Acts of shipper Labor strikes Riots Saving life or

property at sea Insufficient

packing Inherent defect in

goods Inadequate

marking of goods Latent (hidden)

defects in ship8

COGSA: Defenses to LiabilityCOGSA: Defenses to Liability

“Warranty of Seaworthiness”: ship reasonably fit to carry cargo undertaken on intended journey Competence of crew, suitability of

equipment, etc. Carrier responsibility for proper loading,

storing and carrying, and unloading goods May presume unseaworthy if breaks down

shortly after departure Errors in Navigation or Management of

ship: carrier not liable for errors of master, mariner, pilot or crew member Depends on severity of storm and how cargo

damaged Negligence of crew may void defense 10

COGSA: Defenses to Liability

Fire: carrier not liable unless negligence of carrier caused fire

Liable for inadequate equipment or inadequately trained crew

Asbestos Corp. Ltd. v. Comapgnie de Navigation (2nd Cir. 1973): carrier negligent when firefighting equipment stored in engine room, couldn’t be used for fire in engine room

Perils of Sea: “fortuitous action of sea or weather of sufficient force to overcome strength of seaworthy ship or diligence and skill of good crew”

Look to severity of storm

COGSA: Defenses to LiabilityCOGSA: Defenses to Liability

Q-Clause Defense: general exception holding carrier not liable if carrier can prove it wasn’t at fault and show what was the cause of loss

Shipper Liability for Hazardous Cargo: shipper strictly liable for shipping inherently dangerous goods when neither shipper nor carrier had actual knowledge or danger, Senator Linie GmbH & Co. Kg. V. SunwayLine, Inc. (2nd Cir. 2002) 11

The Cargo Shortage ProblemThe Cargo Shortage Problem

Carrier may be responsible unless can use Q clause defense

P must establish that shortage occurred while goods in carrier’s custody: P can show weight or quantity at

destination less than that listed on B/L Disclaimer – “shipper’s weight”- on B/L

not recognized by court Westway Coffee Corp. v. M.V. Netuno (SDNY

’81) But Plastique Tags, Inc. v. Asia Trans Line,

Inc. (11th Cir. 1996) 12

COGSA “Package” LimitationCOGSA “Package” Limitation

Limits carrier liability to $500 per package or customary freight unit unless shipper declares (and pays for) higher value Container not package under COGSA if

contents and number of units disclosed on B/L

Z.K. Marine v. M/V Archigetis (SDFl 1991): is yacht a “package”?

COGSA limitations generally don’t apply to goods carried above deck – but parties can provide for coverage in B/L (clause paramount)

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Other COGSA ProvisionsOther COGSA Provisions COGSA holds carrier liable for a

material deviation unless necessary to save lives or property at sea Material deviation from terms of B/L

causes carrier to lose protection under COGSA

Stowage of cargo above deck unless B/L so provides is material deviation – but not for sealed container

Himalaya Clauses: clause in B/L extending Hague Rules protection to agents, indpt. contractors, etc. Recognized in US Not recognized in UK and Canada 14

Amendments to Hague RulesAmendments to Hague Rules

Hamburg Rules: 1978 Convention Not adopted by US Would hold carrier liable for negligence and

errors of navigation or management of ship Rules opposed by insurance companies and

carriers So far, most of endorsing states have been

developing countries Visby Amendments to Hague Rules

Not adopted by US Raised liability per package to approx. $1000 Carrier liable for losses from recklessness in

operation and navigation Adopted by UK, Canada, Singapore, Japan,

Western European Countries 15

Rotterdam Rules: 2009 UN Convention on Contracts for the Int. carriage

of Goods Wholly or Partly by Sea Replaces the international regime of Hague

Rules (& Visby & Hamburg Rules) Adopted by the UN on Dec. 11, 2008 US signed Rotterdam Rules on Sept. 23, 2009 Now signed by 20 nations – must be ratified by

signatories; comes into effect 1 year after ratified by 20 members

Will change COGSA on international shipments to & from US

Carrier Liability: Focuses on Carrier fault or negligence

Carrier responsible for goods “door to door” Carrier must exercise due diligence as to

seaworthy vessel both at beginning and during voyage at sea

Carrier liable for errors in navigation Liability limited to 875 SDRs per package (up

from COGSA $500 limit)

Liability of Transport Intermediaries

Freight Forwarders: act as agent of shippers

US: must be licensed to operate; regulated by US Fed. Maritime Comm. and Int. Air Transport Assoc.

May also act as Customs Brokers Must post bond and have power of attorney Prima US Inc. v. Panalpina, Inc. (2nd Cir. 2000):

FF not liable for cargo during shipment Non-Vessel Operating Common

Carriers: act as freight consolidators for smaller shippers

Issue B/L Liable for loss or damage to goods during

transport

Ocean Shipping Reform Act 1998

Amends Shipping Act of 1984 to allow carriers greater flexibility in contracting

Carriers can enter “service contracts”: confidential bargained freight rates instead of posted tariff schedules

Service contracts function as contracts of carriage – no need to issue B/L

Carriers not acting as common carriers, so not subject to COGSA; can negotiate own liability terms

Ocean carriers exempted from antitrust laws Carriers must treat FF’s and NVOCC’s as

shippers Carriers may not unreasonably refuse to deal

or negotiate with shippers or intermediaries

Marine Cargo InsuranceMarine Cargo Insurance

Large volume shippers maintain open cargo policies Exporter authorized by insurer to issue

certificate of insurance Used under CIF contracts US: certificate of insurance acceptable

substitute for insurance policy; incorporated in UCC

UK: certificate of insurance not substitute

General average ( average means loss): loss that results when extraordinary expenses or losses result in saving the cargo or vessel at sea

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Insurance Losses and CoverageInsurance Losses and Coverage

Policies cover total loss of all or part of shipment General average loss: incur loss or extraordinary

expenses in saving vessel or cargo from real and substantial danger at sea

York-Antwerp Rules of 1950: accepted principles of general average – incorporated into B/L’s

Particular average loss: partial loss to cargo Depends on policy provisions: “free of

particular average” (FPA) means no coverage for partial losses

Coverage: Perils Clause: covers basic risks of ocean

voyage; fortuitous losses only All Risks Coverage: covers risks except those

particularly excluded War Risks: typically not covered but available

for ocean shipments Shaver Trans. Co. v. The Travelers Indemnity

Co. (S. Ore. 1979): FPA and standard perils coverage, shore coverage clause, Inchmaree clause

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Web Sites http://www.cargolaw.com http://www.joc.com http://www.jus.uio.no/lm/index.html http://www.iata.org/cargo/protocol1

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