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Contract for Carriage and Liability

Transportation of Goods by Sea I : legal issues


International Trade Law

Deva & Saad

Sea
Mode

By
Road

Charter Party

Acharter partyis the contract between the owner of


a vessel and the charterer for the use of a vessel. The
charterer takes over the vessel for either a certain
amount of time (a time charter) or for a certain pointto-point voyage (a voyage charter), giving rise to
these two main types of charter agreement.

Carrier

Carrier is that party of the Contract of Carriage who


has undertaken to perform a carriage on terms agreed
with the Contracting Shipper. It covers also any person
or company acting on his behalf.

Stevedor
A stevedore, dockworker, docker, dock laborer,
e
wharfie, wharf rat, and/or longshoreman is a

waterfront manual laborer who is involved in loading


and unloading ships.

Himalayan Clause
The main purpose of a Himalaya clause is to prevent cargo owners from
avoiding the contractual defences available to the carrier (typically the
exceptions and limitations in the Hague-Visby Rules) by suing in tort
persons who perform the contractual services on the carrier's behalf. It
also protects servants, agents and independent contractors of the
contractual carrier from being sued outside the regime of the Hague
Rules. The Carrier shall in no case be responsible for loss of or damage
to cargo arising prior to loading, after discharging, or while the cargo is
in the charge of another carrier, or with respect to deck cargo and live
animals

http://www.fta.co.uk/policy_and_compliance/sea/long_guide/himalaya.html

Background ofHimalayaclause: It is a contractual provision that seeks to provide servants, agents


and subcontractors of a carrier by sea with the same protection afforded to the carrier by the contract
of carriage. The clause takes its name from a decision of theEnglish Court of Appealin the case
ofAdler v Dickson (The Himalaya)[1954] 2 Lloyd's Rep 267. In this case the claimant was a guest
on-board the S.S. Himalaya. During the subject voyage she was injured when a gangway fell, throwing
her onto the quayside below.
Position under international conventions
Himalaya clauses developed primarily to overcome the situation under theHague and Hague
Visby Rules, where the carrier is not liable beyond 'tackle to tackle' but invariably engages
stevedores to carry out the physical loading and unloading nonetheless. Claims were and are
therefore often brought against the shore-based stevedores in an attempt to make a full recovery, not
limited by the Hague or Hague Visby Rules. Himalaya clauses will often effectively block such claims
by the shipper.
TheHamburg Rulesminimise the circumstances under which a carrier might legitimately seek to
incorporate a Himalaya clause. Firstly, the carrier is liable under the Hamburg Rules for port-to-port
shipment and thus responsible for stevedoring activities on the same basis as sea carriage. Its liability
is therefore limited by the Hamburg Rules rather than potentially unlimited under the two older
conventions. Secondly, the Rules provide for both the contractual and actual carrier to be liable.
Stevedores and terminal operators could therefore be held to be actual carriers and so both liable
under and protected by the Hamburg Rules.

The UK Contracts (Rights of Third Parties) Act 1999 validates properly written Himalaya
clauses where sea carriage is concerned but in quite a restrictive way. A third party can only

Paramount Clause
The Protocol signed at Brussels on 21 December 1979
(the SDR Protocol 1979) shall apply where the
Hague-Visby Rules apply, whether mandatorily or by
this Contract.
The Carrier shall in no case be responsible for loss of
or damage to cargo arising prior to loading, after
discharging, or while the cargo is in the charge of
another carrier, or with respect to deck cargo and live
animals

https://www.bimco.org/Chartering/Clauses_and_Documents/Clauses/Paramount_Clause_General.aspx

Carriers Responsibility
Contract for Sale and Contract for Carriage are two different things
Shipment terms Transfer of Risk takes places when the goods are placed
on Board at the port of Shipment
Under English Law, the fact that the transfer of risk under the relevant
contract takes place on shipment does not involve that delivery of the
goods takes at that stage.
There is a lack of synchronization between the commencement of the
carriers responsibility under the contract of carriage and the passing of
risk from seller to buyer under contract of sale. Because, some cases
Carrier takes responsibility of loading as well stowing operation.
New Incoterms helps. (FCA Free http://www.bmla.org.uk/documents/bmla_response_to_the_cmi_questionnaire.htm
Carrier, named place of delivery) (CPT,

"liner terms" or aFIO(S)(free in and out


(stowed)
Liner Terms found in shipping documents and it is usually understood
to mean that ship-owner takes the cost of loading and discharge and
responsibility also. The question arises whether ship-owner
undertaking as regards either risk or expense or both?
A Liner Terms or FIO clause may be relevant to the question at what
moment the carriers responsibility for the goods commences but this
is very much dependent on the wording of the particular clause.
If the Clause places that whole responsibility and risk of loading and
stowage operation on the shipper it is possible that the stevedores
who perform those operations may be treated as the shippers agents;
if so delivery to the carrier would be held to occur when the
stevedores place the cargo in the ships holds.
If under a particular clause the carrier undertakes the whole
responsibility and risk of loading the cargo ( both before and after the
ships rail) it will be clear that delivery to the ship-owner takes place

Art II

Hague Rules and the Hague Visby Rules

Risks : Subject to the provisions of Article VI, under every contract of


carriage of goods by water the carrier, in relation to the loading,
handling, stowage, carriage, custody, care and discharge of such goods,
shall be subject to the responsibilities and liabilities and entitled to the
rights and immunities hereinafter set forth.

Further, it is settled that the carrier does not fulfil the obligation to deliver simply by discharging the
goods on arrival at the discharge port and leaving them in a place from which the consignee may
collect them. The consignee must be given a reasonable opportunity to collect the goods. If the goods
are lost or damaged after arrival but before the consignee has had reasonable opportunity to collect
them, then the carrier remains liable.
The test of the stage of damage or deterioration at which this identity is lost was stated by Lord Esher
to be whether "the nature of the thing has been altered, and it becomes for business purposes
something else, so that it is not dealt with by business people as the thing it originally was." It is thus
a test of degree, which will inevitably vary from case to case. Nonetheless, it would appear that
whenever this "commercial identity"islost, the duty to pay freight would also cease. It is thought
that similar principles would be held to apply to the consignees duty to take delivery.
However, the English courts have rejected the literal construction in favour of the view that the Rules
do not define thescopeof the carriers obligations, they only determine the mannerin which the
obligations must be performed: the scope of the carriers obligations (including when they begin and

Art III Rule 3 ( c )

Hague Rules and the Hague

Visby Rules

3.After receiving the goods into his charge, the carrier, or the master or
agent of the carrier, shall, on demand of the shipper, issue to the
shipper a bill of lading showing among other things
(c) the apparent order and condition of the goods:
Provided that no carrier, master or agent of the carrier shall be bound to
state or show in the bill of lading any marks, number, quantity, or
weight which he has reasonable ground for suspecting not accurately to
represent the goods actually received or which he has had no
reasonable means of checking.
It has been held that Art. III Rule 3(c) imposes an unqualified or
"absolute" duty on the carrier to make an accurate statement of fact as
to the apparent order and condition of the goods. The duty is not merely
one which the ship-owner or master must take reasonable care to
perform

Instructions as to Delivery
Risks : Subject to the provisions of Article VI, under every contract of
carriage of goods by water the carrier, in relation to the loading,
handling, stowage, carriage, custody, care and discharge of such goods,
shall be subject to the responsibilities and liabilities and entitled to the
rights and immunities hereinafter set forth.

Carriage of Goods by Sea Act 1992 -English


Law

Rights under 2.(l) Subject to the following provisions of this section, a person who
shipping becomes documents.
(a) the lawful holder of a bill of lading;
(b) the person who (without being an original party to the contract of carriage) is the person to
whom delivery of the goods to which a sea waybill relates is to be made by the carrier in
accordance with that contract; or
(c) the person to whom delivery of the goods to which a ship's delivery order relates is to be
made in accordance with the undertaking contained in the order, shall (by virtue of becoming
the holder of the bill or, as the case may be, the person to whom delivery is to be made) have
transferred to and vested in him all rights of suit under the contract of carriage as if he had
been a party to that contract.

Other Instructions
It is common for charterparties to contain provisions entitling the
charterer to give instructions to the ship-owner in the course of
performance of the contract. It is not usual for such provisions to be
included in other types of contract for carriage by sea.
Where a shipper wishes to give instructions to the carrier as to such
matters as the time of delivery or the conditions under which the goods
are to be carried, it is normal for the shipper and the carrier to negotiate
and reach agreement upon the terms of the carriage and for those terms
to be recorded in the carriage document. If the terms are so recorded
then, in the event of breach, the right of suit will be transferred to the
holder of the bill of lading or consignee under the relevant sea waybill. If
there is an oral agreement between the shipper and the Carrier but the
relevant term is not evidenced by the bill of lading or sea waybill, it is
unlikely that the 1992 will effect a transfer of the right to sue for breach of
that term to the holder of the bill of lading or consignee under the sea

Rule

HAGUE-VISBY RULES

Obligatio Article 2
Subject to the provisions of Article VI, under
n of the
every contract of carriage of goods by sea the
Carrier

carrier, in relation to the loading, handling,


stowage, carriage, custody, care and
discharge of such goods, shall be subject to
the responsibilities and liabilities and entitled
to the rights and immunities hereinafter set
forth.
Article 3
1. The carrier shall be bound before and at the
beginning of the voyage to exercise due
diligence to:
(a) Make the ship seaworthy;
(b) Properly man, equip and supply the ship;
(c) Make the holds, refrigerating and cool
chambers, and all other parts of the ship in
which goods are carried, fit and safe for their
reception, carriage and preservation.
2. Subject to the provisions of Article IV, the
carrier shall properly and carefully load,

HAMBUR
G RULES

ROTTERDAM
RULES
Article 11
Carriage and
delivery of the
goods
Article 13.
Specific
obligations
Article 14.
Specific
obligations
applicable to the
voyage by sea

Obligation of the Carrier in English Law.


The Hague-Visby Rules, as they have been interpreted by the English courts, do not provide an
answer to the question, "when does the carriers responsibility for the goods end?" A literal
reading of Art. III Rule 2 might suggest that the carrier is under an obligation to discharge the
goods from the vessel, such that the carriers responsibility for the goods cannot end before
discharge is completed. However, the English courts have rejected the literal construction in
favour of the view that the Rules do not define the scope of the carriers obligations, they only
determine the manner in which the obligations must be performed: the scope of the carriers
obligations (including when they begin and end) is a matter which the parties are free to
determine by their own contract. Accordingly, the terms of the sea waybill or bill of lading
represent the starting point for determining when the carriers responsibility end
In determining whether or not the stevedores are the consignees agents, the terms of the sea
waybill or bill of lading again represent the starting point. The bill may state expressly that the
stevedores are the consignees agents. Alternatively, the stevedores will be treated as the
consignees agents if the terms of the bill make the consignee responsible for discharge.
If the bill is silent as to the position of the stevedores or as to responsibility for discharge, it may
be necessary to ask whether, on the facts, the stevedores who handled the cargo were the
servants or agents of the carrier or of the consignee. Relevant factors would include who
appointed and paid the stevedores and whether they acted under a contract made by the carrier
or the consignee. In one case, where it was customary for discharge to be effected by the dock
companys servants at the quay it was held, in the context of a claim for demurrage, that the

Exercise
An English seller enters into a charter party for the M/V reefer sun II to ship a large quantity of highdefinition plasma flat-screen televisions packed into five shipping containers from the port of
Southampton to its final destination in a Mediterranean country. The shipment calls for the M/V reefer
sun II to arrive in italy where the standard containers will be unloaded on to trucks and transported
inland to a second port on the other side of the peninsula where they will be reloaded on board a
second carrier, the M/V Apollonia, for their final destination. As this is a form of multimodal transport
involving more than one type of transportation, the carrier issued a single through bill of lading
covering all phases of the voyage until the goods are loaded on board the second carrier. At this
point, the M/V Apollonia will issue a second bill of lading states: Himalaya clause: all exceptions,
defences, immunities, limitations of liability, privileges and conditions applicable by the English law to
the carrier shall be extended to the benefit of all persons performing services on behalf of the
carrier.
After the m/v reefer sun ii arrives in italy at the first port, the following events occur:
1) The Italian stevedores hired by the carrier to unload the cargo damage the first container containing 20 package
units, causing 1 million in damage.
2) when the m/v reefer sun ii arrives, not all of the trucks are at the port of call due to an oversight by the English
seller. The second container is loaded on to a truck for transhipment; the third, the fourth, and fifth containers are
placed in a dock warehouse where they await the arrival of additional trucks. While in the warehouse, a fire
destroys the third container; resulting in a total loss of the cargo worth 4 million.
3) the forth and fifth containers are transhipped by truck to the second port where they arrive in the late afternoon.
The containers are loaded on board the second vessel, the M/V Apollonia, which issues a bill of lading with a clause
paramount, providing that the bill of lading is subject to English law. The M/V Apollonia is scheduled for departure
the next morning, but overnight the fourth container is broken into aboard the vessel and all of the goods are