Professional Documents
Culture Documents
Carriage Law
Carriage Law
Carriage Law
1 January 2000
Resources
There is no textbook for this course. All the information you require
is in this Study Guide. In addition, your Student Manual lists some
books that you may wish to read to expand your knowledge.
Learning outcomes
When you have completed this unit you will be able to:
• Discuss the broad historical changes in the way maritime trading
is done and the issues raised by these changes.
• Explain what is meant by documentary sale and credit.
• Describe how letters of credit are issued.
• List the documents involved in documentary sale and credit.
• Differentiate among the various international commercial-
trading terms (INCOTERMS).
Activity
1. Find out what are the major cargo types shipped into and out of
your country. Discover where they originate or where they are
destined.
2. Talk to a carrier and find out how delivery is usually made and
what the credit arrangements are for paying transportation fees.
3. Talk to an importer and to an exporter and find out how credit
arrangements are usually handled in their companies.
Documentary sale
In a documentary sale, the transaction is effected by documents,
without the need for face-to-face interaction. The international sales
contract that has developed is a contract for the sale of goods or
services. It is made between a buyer and seller who are usually in
two separate locations. The contract details the terms and conditions
of the sale.
In both cases, once across the rail of the ship at the shipping port, the
goods become the buyers’. The insurance supplied by the seller in a
CIF contract is on behalf of the buyer, and it would be the buyer who
would make a claim in the event of damage at sea or during
discharge.
These and other sale types will be detailed in Lesson 3 of this unit.
Cargo insurance is more thoroughly discussed in the course Marine
Insurance (DSL course SB–305.2).
Documentary credit
Payment in a documentary sale arrangement may be effected in two
ways:
• payment and sale on receipt of goods
• payment and sale by way of documentary credit.
The documents
The documents involved in documentary sale and credit are:
• bill of lading
• commercial invoice
• certificate of origin
• certificate of inspection or surveyor’s certificate
• insurance certificate.
Bill of lading
A bill of lading is a document evidencing the loading of goods on a
ship. It is also legal evidence of the existence of a contract of
carriage by sea. In the contract of carriage, the carrier commits him
or herself to carry specified goods from one point to another for a
certain sum of money.
Commercial invoice
The commercial invoice is the accounting document sent to the buyer
by the seller detailing the payments due.
Certificate of origin
The certificate of origin is a signed statement providing evidence of
the origin of the goods. This document may allow for economic
benefits or penalties to goods from certain regions.
Insurance certificate
The insurance certificate is a document proving that the goods have
been insured against the risks specified in the letter of credit.
Activity
Try to obtain and study copies of the following documents involved
in documentary sale and credit:
• bill of lading
• commercial invoice
• certificate of origin
• certificate of inspection or surveyor’s certificate
• insurance certificate.
Development of INCOTERMS
The International Chamber of Commerce (ICC) set out in 1953 to
overcome the problems of conflicting national laws and
interpretations by establishing a standard set of trade terms and
definitions that offer “neutral” rules and practices. They developed a
set of international commercial trading terms, known as INCOTERMS.
When one party or the other hesitates to subject itself to the national
laws and procedures of the other, a reference to INCOTERMS is the
answer. Both parties can then be sure that their legal relations are
grounded in a fair and reasonable international standard based on the
following principles:
• the liabilities and responsibilities of parties could vary in
accordance with various laws
• the terms are drawn from the most common practices of
international trade so that they could be adopted by the greatest
possible number of traders
• where there are major differences in current practice,
INCOTERMS provide for the minimum liabilities on the part of the
seller, leaving it to the parties to provide for greater liabilities in
their contracts if they so desire
Once the insurance is arranged and the goods are loaded on board the
ship, the seller possesses three documents: an invoice, a marine
insurance policy, and the bill of lading. There may also be other
certificates such as weights and measures or survey reports,
depending on the requirements of the buyer. These documents prove
that the seller has fulfilled his or her obligations. By presenting the
documents to the appropriate bank, the seller requests that the buyer
fulfils his or her the obligation to pay the agreed price.
The risk in the goods passes to the buyer when the goods are loaded
on board. Any loss or damage to the goods thereafter is borne by the
buyer who must make any claims against the insurers.
DAF—delivered at frontier
Delivered at frontier, DAF, means that the seller’s obligations are
fulfilled when the goods have arrived at the destination country’s
frontier, but before their customs border. The term is primarily
intended to be used when goods are to be carried by rail or road, but
it may be used for any mode of transport.
DEQ—delivery ex quay
The term delivery ex quay (DEQ) means that the seller makes the
goods available to the buyer on the quay (wharf) at the destination
port named in the sales contract. The seller has to bear the full cost
and risk involved in bringing the goods there. Two types of DEQ
contracts are in use:
• ex quay (duty paid) in which the seller is liable to clear the goods
for import
• ex quay (duties on buyer’s account) in which the buyer is liable
to clear the goods for import.
DES—delivery ex ship
Delivery ex ship (DES) means that the seller will make the goods
available to the buyer on board the ship at the destination named in
the sales contract. The seller has to bear the full cost and risk
involved in bringing the goods there.
EXW—ex works
Ex works (EXW) means that the seller’s only responsibility is to
make the goods available at the seller’s premises (office or factory).
In particular, the seller is not responsible for loading the goods in the
vehicle provided by the buyer, unless otherwise agreed. The buyer
bears the full cost and risk involved in bringing the goods from there
FOB—free on board
In an FOB sale, the seller’s obligation is to procure the goods and
deliver them on board the ship nominated by the buyer. It is the
buyer’s obligation to arrange for the carriage of the goods to their
destination and insure them. The buyer must nominate the port of
loading, unless it is already stipulated in the contract, and the name
of the ship, and must inform the seller when the ship is likely to
arrive at the loading port. Once the ship arrives for loading, the
seller must deliver the goods on board at his/her own expense.
Once the goods are loaded on board, a bill of lading is issued to the
seller. Presentation to the relevant bank of the bill of lading and any
other documents required according to the letter of credit entitles the
seller to receive the sale price of the goods.
The risk in the goods passes to the buyer when the goods are loaded
on board. The buyer bears the risk of loss/damage to the goods,
subject to the insurance cover, and pays the freight and any other
charges levied by the ship owner.
FOB airport
FOB airport is based on the same principle as FOB. The seller’s
obligation is fulfilled by delivering the goods to the air carrier at the
Activity
Ask some local businesses or your own place of work to show you
some sales or purchase contracts that involve transportation and
identify any INCOTERMS that are used. Try to find out whether the
same terms are always used by particular businesses, and why they
choose to use those term(s). Are the businesses in question sellers or
buyers?
_____________________________________________
Answer keys
Lesson 1
1. c. goods are sold subject to delivery to the buyer
Lesson 2
1. The system of documentary sale was developed to avoid the
problems that may arise when seller, carrier, and buyer are
different entities operating at a distance.
6. When issuing a letter of credit, the bank agrees to pay the seller
once the seller fulfils the buyer’s stipulations.
8. The buyer is assured that payment will be made to the seller only
after the goods are shipped.
9. b. advising bank
Lesson 3
1. FOB
2. CIP
3. CIF
4. EXW
5. DDP
Resources
There is no textbook for this course. All the information you require
is in this Study Guide. In addition, your Student Manual lists some
books that you may wish to read to expand your knowledge.
Learning outcomes
When you have completed this unit you will be able to:
• Distinguish between private and common carriers.
• Distinguish between liner services and tramp services.
• Explain what is meant by closed and open liner conferences.
• Identify various shippers’ associations.
• Differentiate among the various categories of cargo (break-bulk,
bulk, and containerized).
• Describe CY and CFS loading.
• Explain the use of EIRs in container shipping
• Discuss contracts of carriage (including the use of bills of lading
and charter parties).
• Differentiate among time, voyage, and demise charter parties.
• Identify the people and businesses involved in the maritime
transport chain.
Liner services
Liner shipping services may be provided by conference lines and
non-conference lines. These were also discussed in the course
Conference lines
Conference lines are carriers who have grouped themselves into
organizations called liner conferences. A liner conference is a group
of two or more carriers that provides international liner services for
cargo within specified geographical limits. They have an agreement
to operate under uniform or common freight rates. Although
conferences are not direct participants in the transportation chain,
they have a great deal of influence on the way it operates.
Non-conference lines
In recent years non-conference lines have posed a challenge to the
conference system. This has been attributable to the development of
containerization and the emergence of many independent carriers
including several container consortia. This has resulted in more
competitive rates and terms for shippers.
Tramp services
This service has no fixed itinerary or schedule and is operated on any
route according to supply and demand. Tramp vessels are usually
chartered at negotiated rates particularly when the quantity of cargo
is large.
Shippers’ associations
Associations of producers or exporters of specific commodities, as
well as individual shippers may also group themselves into various
types of national organizations, or use the services of central
organizations. These are not direct participants in the transportation
chain, but influence how it operates.
Shippers’ councils
Shippers’ councils protect the interest of shippers (in regard to
transport services such as conferences) providing them with useful
information and negotiating on their behalf. Shippers’ councils
negotiate with shipping conferences on matters such as freight rates
and quality and adequacy of shipping services. Jamaica, for
example, has a national Shippers’ Council whose membership
includes individual shippers as well as corporate entities such as
manufacturers’ associations, chambers of commerce, and exporters’
associations.
Shipping agents
In many Caribbean countries, this function is carried out by
individual shipping agents that may offer concessionary rates on
large shipments of local produce.
Categories of cargo
Transport of goods by sea can be broadly categorized according to
the type of goods and their method of packing. These categories are
shipped under different types of legal documentation:
• break-bulk cargo is transported in conventional packing such as
boxes, crates, bags, or pallets. This type of cargo is usually
carried on the basis of conventional bills of lading
• containers may hold break-bulk or bulk cargo. Containerized
cargo is usually carried on the basis of container bills of lading
• bulk cargo has not been packed and is carried loose in the vessel.
Bulk cargo is usually carried on the basis of a charter party.
Container shipments
Containers are usually loaded and discharged ashore. They may be
handled from the point of origin to the point of destination in
different ways. These include container yard (CY) and container
freight station (CFS) loading. Responsibility for the costs and risks
involved at various stages vary.
FCL shipments
In an FCL shipment the container may be trucked from the shipper’s
warehouse or inland destination to the carrier’s yard or the port by an
independent trucker or company. The trucker checks the container
before accepting it and notes any damage on the EIR. When the
carrier accepts the container from the trucker, the carrier too checks
it and notes any further damage that may have occurred while the
container was in the custody of the trucker. The trucker would be
responsible to the shipper for any such damage, subject to his
contract with the shipper.
LCL shipments
If carriers accept LCL cargo they must deliver the cargo to the
consignee in the same condition as when it was received. In this
case the container becomes, in effect, an extension of the ship.
Instead of stowing the cargo directly in the ship’s holds the carrier
first stows it in the container. The carrier is then responsible for any
loss or damage to the cargo inside the container, subject to the
contract of carriage.
Activity
Talk to a carrier. Visit their premises and find out as much as you
can about their business. Ask them to show you an EIR.
Find out the following:
1. Is the business a private carrier or a common carrier?
2. Which categories of cargo (bulk, break-bulk, containerized) do
they usually transport?
3. About how much cargo do they handle in a year?
4. How many clients do they typically have in a year?
5. How do they set their freight rates?
6. Do they belong to a liner conference and/or a shipping council or
similar organization?
7. Do they operate out of a container yard and/or container freight
station?
Time charters
In a time charter, the owner provides the charterer with a ship and
the services of its crew for a certain period. Time charter agreements
are normally quite specific with respect to details of the ship’s
performance both at sea and for cargo handling purposes throughout
the period of hire. The agreements may be rigid with respect to
trading limits and the exemption of certain types of cargo.
Employment clause
The ship’s master is under the time charterer’s orders as to
movements, ports of call, bunkering arrangements and costs, and the
cargo to be carried. The right by the charterer to direct the master is
laid down in the employment clause, which usually states:
“…the master to be under the orders of the charterer as
regards employment, agency or other arrangements.”
Voyage charter
This is the oldest form of chartering. In a voyage charter, the
shipowner provides the charterer with all or part of the transport
capacity of the ship so that charterer may transport goods. The rights
and duties of the shipowner and the charterer are determined
according to the voyage charter party. The standard form of voyage
charter party is known by the code name GENCON.
The voyage charter may be for one or more voyages. Payment is in
the form of freight per ton of cargo carried. The freight rate varies
with the type of cargo and with the duration and length of the
voyage.
The rights and duties of the shipowner and the B/L shipper and/or
consignee would be governed by the bill of lading, unless the terms
of the charter party have been incorporated into the B/L.
Demise charter
In this method of chartering, the owner provides the ship to the
charterer for a definite period, but the ship has no crew and
sometimes is not fully equipped. The shipowner in fact provides the
“bare boat”—hence its alternate name, bareboat charter. Payment is
by way of charter hire, as in a time charter, although the amount
would be less, considering the greater cost to the charterer in
operating the ship.
Activity
Visit a shipping business, and try to obtain and read copies of time,
voyage, and demise charter parties. Find out how often relatively
they issue the various types of C/P.
Activity
In the port nearest to you, try to identify specific businesses and
organizations that operate at each stage of the transportation chain as
described in the last paragraph of this lesson.
Answer keys
Lesson 1
1. a. true
Chartered vessels are private carriers and the right of refusal
of work is what distinguishes a private carrier from a
common carrier. Common carriers carry goods for anybody
who wishes to pay for their services.
4. − no fixed itinerary
− no fixed schedule
− usually chartered at negotiated rates
− operated on supply and demand
5. − manufacturers’ associations
− chambers of commerce
− exporters’ associations
7. shipping agents
8. d. bulk
9. a. the shipper
Lesson 2
1. − multiple types of risks during transportation
3. − time charter
− voyage charter
− demise (bareboat) charter
4. c. the charterer
5. a. the shipowner
6. a. the shipowner
8. c. the charterer.
Lesson 3
1. − providers of transport (charterers and shipowners)
− users of transport (importers, exporters, shippers, and
receivers)
− providers of auxiliary services (freight forwarders, port
operators, and stevedores)
Resources
There is no textbook for this course. All the information you require
is in this Study Guide and your Student Reader. In addition, your
Student Manual lists some books that you may wish to read to
expand your knowledge.
Learning outcomes
When you have completed this unit you will be able to:
• Define a conventional bill of lading (B/L).
• Identify the international conventions that regulate the use and
contents of Bs/L (Hague, Hague Visby, and Hamburg Rules)
• Describe the form and contents of a B/L.
• Identify the three main functions of a B/L.
• Know how to endorse, sign, and date a B/L.
• Identify the other documents used in maritime transportation of
cargo.
• Explain what is meant by a clean bill of lading.
• Describe the use of reservation clauses and letters of indemnity
with bills of lading.
burden of proving how much ore had been shipped was on the
shipper.
According to Article 111, the shipper can demand that the carrier
delete these words and comply with rules by giving conclusive
descriptions. The shipper can however waive this right.
Carrier
The name of the carrier is generally found at the top of the bill of
lading. The carrier may be the actual owner of the ship or a time or
demise charterer.
The ship
The ship’s name enables the shipper/receiver to identify the owner of
the ship when the carrier is only a time or demise charterer of the
ship. This could be particularly important in a time charter, for the
time charterer may not be responsible for cargo loss or damage under
certain circumstances. In such a case, the shipper/receiver would
have to make a claim against the shipowner.
Shipper
The bill of lading normally contains the name and address of the
shipper. This information is particularly important if the B/L does
not contain any information about the consignee. The carrier may
need to contact the cargo interests urgently in the event of a casualty.
Endorsement in full
To endorse this form of bill of lading, the beneficiary may write on
the reverse side of the bill of lading, “Deliver to the order of…”,
followed by the name of a new beneficiary, and signed by the first
beneficiary. This is called endorsement in full. The person to whom
the B/L is endorsed may be the final receiver or an intermediary
beneficiary.
Endorsement in blank
The bill of lading may also be endorsed in blank. In order to do so,
the beneficiary simply signs and dates the bill of lading. In this way,
the bill of lading may pass from hand to hand by mere delivery, and
any holder may obtain delivery by presenting it to the carrier. The
bill of lading is then, in effect, a bearer bill of lading, which is
described below.
Delivery orders
The delivery order is issued by the carrier or carrier’s agent to enable
the receiver/consignee to take delivery. This may be from the vessel
or from the warehouse or quay where the goods have been
discharged. When the consignee or representative produces the
original bill of lading, the carrier or agent scrutinizes it and issues a
delivery order. This instructs the master of the vessel or the port to
deliver the goods to the receiver or receiver’s agent.
The delivery order is not a document of title, nor does it contain the
terms of the contract between the carrier and the shipper/receiver. It
usually does not enable the receiver/consignee to bring an action
against the shipowner for any loss or damage to the goods.
Mate’s receipt
The mate’s receipt is the document tendered by the shipowner or
ship’s agent to the shipper upon delivery of the goods onto the quay
for shipment. A mate’s receipt is often issued by the ship’s officer’s
mate after checking the tally clerk’s records of what has been
received. Only later is the bill of lading checked against the mate’s
receipt.
The manifest
The manifest is a document issued by the shipping company (carrier)
or the ship’s agent at the port(s) of loading. It summarizes the
information extracted from all the bills of lading issued for each port
of discharge for the voyage in question.
The headings on the document provide the following information:
• name and tonnage (gross and net registered) of the ship
• nationality of the ship
• ship’s master’s name
• ports of loading and discharge
• departure date.
by other authorities who may be involved with the ship. It may also
be considered an essential document for the use of customs
authorities.
Activity
1. Visit a carrier’s place of business and obtain a blank bill of
lading. Note how many copies are included. Read everything
printed on it and try filling it in as though you were shipping
goods (of your choice) from your place of residence to a real or
imagined consignee at a port in South America.
2. Discuss with the carrier any issues that might arise in sending,
carrying, and receiving such a shipment.
3. Find out what other documentation (if any) might be needed by
the shipper, the carrier, and the consignee.
3. Where are the terms and conditions that govern the relationship
between carrier and the holder of a B/L recorded?
a. in the contract of carriage
b. in the Hague Visby Rules
c. on the face of the bill of lading
d. on the reverse side of the bill of lading
12. What conditions does the common law say must be in place for
the bill of lading to function properly in transferring title?
a. _________________________________
b. _________________________________
c. _________________________________
13. Which of the following statements are true, and which are false?
a. a named B/L is non-negotiable
b. an order B/L is non-negotiable
c. endorsement in full means that a B/L has been signed over
to another specified person
d. endorsement in blank means that a B/L has become non-
negotiable
e. a bearer bill of lading allows anyone holding it to pick up
the goods described
f. a B/L handed over to a bank may be endorsed in full or in
blank
Pre-dating a B/L
A shipper might wish to pre-date a bill of lading, so that the receiver
believes goods were shipped earlier than was the case. This would
allow the shipper to receive payment earlier. Pre-dating the bill of
lading is a misrepresentation of fact on the part of the carrier,
resulting in possible legal liability.
Any party who is suspicious of the date appearing on the bill of
lading may check the sailing schedules and the port records to
ascertain when the goods were shipped. It would be particularly
dangerous for the shipper to request pre-dating of the B/L if the date
requested is one prior to the arrival of the ship at the port of loading
or prior to loading, as this information could be easily obtained by
the buyer/receiver.
Activity
There is no specific Activity for this lesson.
4. Can a shipper who does not sign the B/L be held to the terms of
the contract that the B/L describes?
a. no, because the B/L is not a contract
b. no, because there is no agreement without both signatures
c. yes, because the shipper filled in the details or supplied
them to the carrier
d. yes, because even though it is not signed, the usual terms of
shipping and the details on standard Bs/L are freely
available for shippers to read and understand.
The shipper would not want the carrier to “clause” the bill of lading
if a clean B/L is required for payment. Any carrier’s clauses with
regard to the condition, quantity, or marks of the goods would
prevent the bill of lading from being clean.
Letters of indemnity
In an international transaction, the seller who ships the goods usually
needs a clean bill of lading in order to obtain payment from the bank.
When there is reason to doubt the particulars of the shipment
supplied by the shipper, the carrier may be reluctant to issue a clean
bill of lading as it may result in unnecessary involvement in liability
claims for loss or damage of goods. In this situation, the shipper
may offer the carrier a letter of indemnity in exchange for a clean bill
of lading. Indemnity is protection or security against loss. In this
case, it means that the shipper would protect the carrier from claims
made for damaged or lost goods.
Activity
Visit a shipper and/or a carrier and try to obtain or read recent
examples of reservations and letters of indemnity.
3. What two things might carriers do if they are unsure that the
shipment is as described by the shipper?
a. _________________________________
b. _________________________________
Answer keys
Lesson 1
1. c. it provides evidence of the existence of a contract of
carriage
6. d. no, the shipper may waive the right to insist that the carrier
includes the weight and quantity
7. The carrier may need to contact all the cargo interests in the
event of a casualty.
9. b. false
Under the Hague Visby Rules, a carrier may not deny
statements on the bill of lading once it is transferred to a
third party.
13. a. true
b. false
c. true
d. false
e. true
f. true
16. b. carrier
18. After checking the tally clerk’s records of what has been
received.
Lesson 2
1. c. Hamburg
5. The carrier must ensure that the unusual clause is clearly legible
and understood by the shipper.
Lesson 3
1. a. true
The bill of lading already has a printed clause stating that
the goods are in order. The carrier notes any damage or
shortage on the B/L to ensure protection against claims of
loss during carriage.
6. b. false
To be legally valid, a reservation clause should be precise
and clearly defined so that the carrier may avoid being held
liable for that particular noted damage or shortage.
10. d. to allow the carrier to give a clean bill of lading that will
satisfy the bank issuing a letter of credit
12. In the event that the shipper does not respond to a carrier’s claim
(based on the letter of indemnity) in a dispute over loss or
damage, the bank would likely meet its commitment to the
carrier without the need for litigation.
Resources
There is no textbook for this course. All the information you require
is in this Study Guide. In addition, your Student Manual lists some
books that you may wish to read to expand your knowledge.
Learning outcomes
When you have completed this unit you will be able to:
• Describe the changes in the conventional bill of lading brought
about by containerization.
• Understand and use the terminology of multimodal
transportation documents.
• Identify he characteristics of multimodal transportation
documents.
• Discuss the liability of the carrier at various stages of the journey
under multimodal transportation documents.
• Describe the use of through and transshipment bills of lading.
Liability
In the first container bills of lading, no attempt was made to develop
a uniform system of liability according to which the carrier would
assume responsibility for the whole transport from when the
container leaves the shipper’s premises, to when it is delivered at the
Activity
Try to visit a container shipping company and talk to someone who
works with the transport documents.
1. Find out what terminology they use for the documents for
multimodal transportation of cargo.
2. Find out what are the advantages and disadvantages of container
shipping from a carrier’s point of view.
International agreements
Attempts have been made to establish an international regime of
liability for carriage by more than one mode of transport. There have
been two important international agreements:
• the International Chamber of Commerce’s 1973 voluntary code
regarding uniform rules for combined transport documents.
These rules have no statutory force in themselves They operate
only by virtue of the contract between the consignor and the
operator that may comply with them
• the United Nations Convention on International Multimodal
Transport of Goods (1980) held that the transport operator is
liable for the whole of the transport covered by a multimodal
transport contract.
the subcontractors. All claims are made directly against the MTO,
who then may seek redress from sub-contractors.
Activity
Talk to a carrier about the issues of liability and responsibility for
safe transportation when containers are used. Find out what their
procedures for checking cargo, containers, and documents are.
Activity
Talk to a carrier and try to obtain samples of through and
transshipment bills of lading. Read everything printed on them.
Answer keys
Lesson 1
1. a. CTO = combined transport operator
b. MTO = multimodal transport operator
c. CTBL = combined transport bill of lading
d. CTD = combined transport document
e. MTD = multimodal transport document
2. c. MTD
Lesson 2
1. The main difference is the addition of pre- and post-carriage to
the ocean leg of the carriage.
Lesson 3
1. A through bill of lading contains:
− a clause giving the carrier the right to transship
− a statement that the cargo will be transshipped ata particular
port.
5. b. false
Holders of the through bill of lading may claim the goods at
the destination. The transshipment bill of lading enables the
agent of the contracting carrier to obtain the delivery order.
This agent has received the transshipment B/L from the
contracting carrier.
Resources
There is no textbook for this course. All the information you require
is in this Study Guide. In addition, your Student Manual lists some
books that you may wish to read to expand your knowledge.
Learning outcomes
When you have completed this unit you will be able to:
• Identify various parties to the carriage of goods by sea.
• Describe the functions of the various parties to carriage of goods
by sea.
• Describe the relationships among these various parties and how
they are governed.
Providing information
In addition to dealing with these ship-related duties, the agent must
constantly keep the shipping company informed about conditions in
the port. This information includes such things as freight rates,
market trends, and any commercial or legal changes that may affect
the company’s operation. Some examples of relevant changes are
new policy regulations on cargo allocations or liner conferences, new
carriers on the scene, structural changes in the port, changes in
pilotage or port regulations, and so on.
• legal requirements—
– examine any claims that have been made against the
vessel and process the claims (particularly cargo claims)
if he has authority to do so
accept service of writs and other court documents. This
would depend upon the extent of the contract with the
carrier and whether such is provided for in the contract.
The shipbroker
The usual and principal function of a shipbroker is to arrange
contracts for chartering, buying, or selling an entire vessel. The
broker provides information about the market and assists in the
negotiation of contracts. A shipbroker is an agent for one, or in some
cases both, of the parties to the contract whether it is a charter party
or a sales agreement.
The shipbroker’s role is essentially to provide the link between the
parties seeking to charter, sell, or buy a vessel. For example, the
broker might link a carrier who has an empty ship or empty space
with a shipper who requires transport capacity.
Activity
1. Arrange to visit a ship’s agent in the port nearest to you and
discuss the work they do.
2. Arrange to visit a shipbroker in the port nearest to you and
discuss the work they do.
Bulk shippers
A bulk shipper ships a large quantity of homogenous goods, (packed
or unpacked) requiring the loading capacity of an entire ship or a
large part of a ship. A bulk shipment is usually performed on the
basis of a charter party.
Liner shippers
A liner shipper ships small homogenous or heterogeneous parcels of
goods that require relatively small amounts of shipping space for
each shipment and are shipped to numerous destinations. The
shipments may be direct to destination or via transshipment at
intermediate ports. A liner shipment is performed on the basis of a
bill of lading.
The consignee/receiver
The consignee or receiver is the person named in a bill of lading
(B/L) to whom goods are to be delivered. Normally, the B/L states
that goods are deliverable to the consignee or their “order or
assigns”. In this case, the contract of carriage is governed basically
by the B/L terms together with any other terms expressly
incorporated into it.
Where the shipper has the goods made deliverable to the shipper’s
agent then there is no real consignee. The shipper becomes, in effect
the consignee, and the agent is an “order or assign”.
The significance of this lies in the relative importance of the
statement about the condition of the shipment signed by the carrier in
the B/L. This statement is only regarded as prima facie1 evidence in
disputes between shipper and carrier about the condition of goods. It
would serve as conclusive evidence in a dispute between consignee
and carrier.
1
Prima facie evidence means at first sight; based on first impressions.
Delivery
The unique nature of the bill of lading enables the receiver to be the
person entitled to the goods. According to the contract of carriage as
enumerated in the bill of lading, the carrier undertakes to deliver the
goods to the named receiver or any one who produces a properly
endorsed bill of lading. Thus the person who holds the bill of lading
gets delivery upon its production and is considered the receiver.
The endorsee
The endorsee is the person to whom the bill of lading has been
assigned by endorsement by the previous holder. The most recent
case law indicates that, for the endorsee to sue on the basis of a bill
of lading, both endorsement of the B/L and delivery of the goods
must have been made to the same person.
Import cargo
The carrier may discharge and deliver imported cargo in two ways:
• direct delivery of goods from the ship’s tackle to the vehicles of
the receiver
• indirect delivery of the goods such as when the goods are
delivered into the custody of the port for storage. The port
would later deliver the goods to the receiver.
Export cargo
When dealing with export cargo, the freight forwarder does the
following:
• receives the goods at (or near) the port or arranges for their
transport from the premises of the client to the port
• completes the customs formalities or arranges for these to be
completed by an authorized custom agent
• in some ports, delivers the goods either stacked in warehouses or
on the quay to the port authority or the shore handling company
before loading operations begin
• in other ports, delivers the goods directly on to the quay for
loading
• completes the bill of lading and obtains the signature of the
carrier or agent
• takes any required measures to defend the interests of the client.
For example, the freight forwarder may tender reservations
against the road haulier in the event of any loss or damage to
goods. This would protect the client’s right to take subsequent
action.
VO-MTOs
VO-MTOs are shipowners who extend their services (mainly
because of containerization) to include carriage over land and even
carriage by air. Normally they do not own or operate means of
transport by road, rail, or air. They arrange for these forms of
transport by subcontracting with other carriers.
NVO-MTOs
NVO-MTOs are not ocean carriers (shipowners). In fact, although
they may be owners or operators of some other means of transport
such as trucks, they need not own or operate any means of transport
at all. These businesses arrange the carriage of goods by using more
• NVO-MTOs are responsible for cargoes not only while they are
in their custody but even while they are in the custody of the
subcontracted carriers. Unlike the freight forwarder, the NVO-
MTO has to achieve the end result, and ensure that the cargo is
delivered.
Although the two are easy to distinguish legally, from the operational
point of view it could be difficult to determine whether a certain
function was performed by some one acting as a freight forwarder or
as an NVO-MTO.
Activity
1. Talk to a carrier, a shipper, and a freight forwarder about the
ways their jobs are affected by containerization.
2. Discuss with a freight forwarder and an MTO the ways in which
their functions overlap and differ.
4. If the shipper is not the charterer of the cargo vessel, what is the
main source of the terms of carriage?
a. they are not specified
b. charter party
c. contract of carriage
d. bill of lading
6. How does the shipper know when to load goods on vessel under
a voyage charter?
_____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
11. Under what conditions may an endorsee sue under the terms of a
bill of lading?
a. whenever the endorsement is proper (legal)
b. when it is properly endorsed and the cargo is delivered to
the endorsee
c. when the endorsee collaborates with the receiver of the
goods
d. an endorsee may not sue under the terms of a B/L
14. List at least five things the freight forwarder may have to do
when helping with imported cargo.
a. _________________________________
b. _________________________________
c. _________________________________
d. _________________________________
e. _________________________________
Usually the port delegates some of its authority and duties to other
organizations. Often they charge certain tariffs to those using the
port’s facilities.
Landlord ports
The port authority may delegate all of its function related to port
operations to private companies by way of management contracts.
This is the case in the Port Authority of Jamaica, which operates as a
regulatory authority as well as a landlord port. This means that
although it may own some port facilities, it does not itself operate
any of these facilities.
This report has two main functions: to provide a record and to serve
as a basis for levying tariffs.
Activity
Find out which ancillary parties to cargo carriage are active in your
local port. Talk to as many of them as you can to find out what they
do and how many people are employed in their offices.
6. Who may “enter in” the ship with customs? Mark any that
apply.
a. ship’s master
b. ship’s agent
c. customs broker
d. importer
7. Who prepares the customs entry report? Mark any that apply.
a. ship’s master
b. ship’s agent
c. customs broker
d. importer
Answer keys
Lesson 1
1. These relationships are defined in contracts, which are governed
by contract law.
2. b. ship’s agent
6. b. ship’s agent
7. b. ship’s agent
8. c. shipbroker
9. c. shipbroker.
Lesson 2
• liner shipper
2. b. charter party
3. d. bill of lading
4. d. bill of lading
5. − carrier
− shipping agent
− port agent
− freight forwarder
10. Many countries have laws based on the UK Bills of Lading Act,
which states that the rights of suit may be transferred from the
parties to the contract of carriage to anyone named in the B/L
containing its terms.
12. a. the freight forwarder acts for both shipper and receiver, but
the clearing agent acts only for the receiver
Lesson 3
1. − safe navigation
− traffic control
− harbour maintenance
− port development
3. b. false
In some ports, stevedoring services are offered by private
companies.
4. − cargo handling
− cargo reception and identification
− cargo storage and custody
6. a. ship’s master
b. ship’s agent
7. c. customs broker
d. importer
Resources
There is no textbook for this course. All the information you require
is in this Study Guide. In addition, your Student Manual lists some
books that you may wish to read to expand your knowledge.
Learning outcomes
When you have completed this unit you will be able to:
• Identify carriers’ rights, obligations, and defences under
common law.
• Identify carriers’ rights, obligations, and defences (exclusions)
under the Hague and Hague Visby Rules.
• Explain what is meant by providing a seaworthy ship.
• Identify specific requirements during loading, stowage, the
voyage, discharge, and delivery.
• Discuss to what extent carriers may extend or limit their rights,
obligations, and defences under common law and under Hague
and Hague Visby Rules.
• Describe how carriers may extend or limit certain rights,
obligations, and defences under common law and under Hague
and Hague Visby Rules.
• Identify the limits of application of the Hague and Hague Visby
Rules.
Hague Rules. If it does not, the terms that are contrary to the Rules
would be legally invalid and the appropriate provisions of the Rules
would be deemed incorporated instead.
In the Caribbean
To give a Caribbean example, the Jamaica Carriage of Goods Act
and the Trinidad & Tobago Carriage of Goods Act have similar
provisions. These state that in any contract for the carriage of goods
by sea to which the rules apply, there shall not be implied any
absolute undertaking by the carrier of goods to provide a seaworthy
ship.
Elements of seaworthiness
The Hague Rules elaborate the different elements of the requirement
of seaworthiness. Article III (1) states as follows:
The carrier shall be bound before and at the
beginning of the voyage to exercise due diligence to:
1. Make the ship seaworthy;
2. Properly man, equip and supply the ship;
3. 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.
Although the Hague Rules requirement of seaworthiness may seem
less stringent than the common law requirement, this is not so in
practice for the following reasons.
• Unlike in common law, the undertaking is one of the minimum
obligations under the rules, and it cannot be avoided or lessened
by the carrier.
• The English courts have held that there must be “due diligence”
by the persons, whether servants, agents or independent
contractors that are engaged by the carrier to make the ship
seaworthy. Thus the negligence of a fitter employed by an
independent and competent firm of repairers could be attributed
to the carrier. This makes the burden of proving “due diligence”
quite difficult in practice.
Stowing
The carrier is responsible for the proper stowage of cargo even if the
task is physically performed by the shipper. It always takes place
under the supervision of the master or crew of ship.
Under the common law, the carrier could exclude liability for
stowage with a suitable exclusion clause. Under the Hague Rules
however, this is not possible. Stowage is indicated as one of the
obligations of the carrier.
The carrier can, under common law, insert a clause excluding this
obligation.
Under the Hague Rules, too the carrier must proceed without
unjustifiable deviation. The Rules however improve the common
law position of the carrier, by expanding the situations where
deviation is justified. Article IV (4) allows deviation in the
following cases:
• to save life
• to save property
• in reasonable response to circumstances.
The carrier is then left only with the common law exclusions namely,
Act of God, King’s Enemies, and inherent vice.
Liberty clauses
The bill of lading often contains what is known as a liberty clause.
This gives the carrier the right to call at any port. The question arises
as to whether a liberty clause would amount to an exclusion clause
and thus be contrary to the Hague Rules. The answer appears to be
that liberty clauses are indeed contrary to the Rules.
Liberty clauses are used, for example, when a common carrier is
carrying cargo to a number of destinations and requires the flexibility
to call at any port. The carrier thus undertakes to carry the cargo
from the port of loading to the port of discharge calling at any other
port of his choice. The courts however tend to interpret liberty
clauses restrictively, as giving the right only to call at certain other
ports. These would be any ports in the course of the advertised
voyage or along its geographical route.
Notice of discharge
The carrier has no obligation to give notice of arrival to the
receiver/consignee unless this was so agreed. If the name of the
consignee is indicated on the bill of lading under “party to be
notified”, this would amount to an agreement to notify. In this case,
the carrier would be obliged to inform that person.
Manner of discharge
In common law, the carrier’s obligation is to get the goods out of the
ship’s hold and put them on the ship’s deck or alongside, so that the
receiver could take the goods without difficulty. This however is
often altered by the custom of the port. In many ports today the
receiver is not present at the time the cargo is discharged and the
goods may have to be moved and possibly stored before being
received by the consignee/receiver. The total discharging operation
is carried out by the ship and the port.
The Hague Rules do not elaborate the manner of discharging the
goods. It would thus depend on the custom of the port and the type
of goods. Even if the receiver decides to perform the entire function
of discharge, it is unlikely that the carrier could avoid responsibility
for discharge.
End of discharge
The point at which discharge ends or, to be more precise, the point at
which the carrier’s part of discharge ends, is important. This is
because that is the point at which the Hague Rules cease to apply to
the contract of carriage of goods. Discharge is the final activity
regulated by the Rules. This does not mean that the carrier has no
further obligations towards the goods, but it means that the carrier is
free to contract further tasks in any manner. The carrier could
exclude all responsibility for the goods after they are discharged
from the ship.
There is no fixed rule regarding the end of the carrier’s function of
discharge. As in loading, it would depend on the intention of the
parties and the custom of the port. Many ports yet follow the
practise of the “ship’s rail” that is, responsibility of the carrier ceases
as the goods are lifted off board over the ship’s rail. The bill of
lading could stipulate when discharge is to end and it often contains
clauses that specify the end of discharge and the end of the carrier’s
responsibility towards the cargo. For example the bill of lading may
contain a clause which states:
… the goods are considered to be at the shipper’s
risk as soon as they are discharged over the ship’s
rails
or
…the goods to be at risk of consignee from ship’s
tackle.
These clauses do not appear to contravene the Hague Rules.
LOB certificates
As a result of these clauses, the carrier would not be held responsible
for any loss or damage to the goods after discharge from the ship,
even if the carrier continues to handle them. For example if the
goods were to fall overboard during the discharging operation, the
carrier could decline responsibility for such loss as they would have
passed the ship’s rails. This position is acknowledged in many ports.
These ports issue LOB (lost overboard) certificates. The carrier may
produce LOB certificates in legal defence in the event of a claim
from the consignee.
Although discharge of the cargo into the port releases the carrier
from taking care of the goods any further, the carrier is obliged to
authorize delivery to the proper consignee. The carrier’s obligation
is to deliver or authorize delivery to the first person who presents a
properly endorsed bill of lading.
Activity
1. Find out what national laws (if any) are in place in your country
to regulate the obligations of a cargo carrier.
2. When were they enacted?
3. Do they make reference to the Hague or Hague Visby Rules?
2. List at least four of the things that the carrier must do to achieve
this basic undertaking.
a. _________________________________
b. _________________________________
c. _________________________________
d. _________________________________
10. What do the Hague Rules say about the carrier acting with
reasonable dispatch?
a. nothing
b. that it depends on the facts of the case
c. that this obligation may be negotiated and/or excluded
d. that the carrier’s obligation is absolute in this regard
11. Under the Hague Rules, what three things might be regarded as a
justifiable deviation?
a. _________________________________
b. _________________________________
c. _________________________________
16. What is the chief determinant of the way in which goods are
discharged?
a. the bill of lading
b. common law
c. the Hague Rules
d. custom of the port
• acts or defaults that are connected with the ship itself, which
would be within the exclusion
• acts or defaults that are connected with the cargo, which would
not be within the exclusion.
In effect the Hague Visby Rules exonerate the carrier from damage
caused by negligent navigation and ship management.
2
Privity is a relation between parties that is recognized by law. In law, a person having an interest or part in
any action is said to be “privy to” that action.
Act of God
The exclusion of “Acts of God” refers to any accident due to natural
causes that could not have been prevented by human intervention.
Such accidents would include lightning, floods, frost, and sometimes
even wind.
Act of war
This exclusion covers all consequences of an act of war. It covers
the consequences of acts done in a civil war as well as hostilities
between separate countries.
Quarantine restrictions
This covers loss or damage to goods due to their being subject to
quarantine procedures. This could involve damage to cargo due to
fumigation or delay in discharging.
Act of omission by the shipper, or the owner of the goods, his agent or
his representative
This usually covers loss or damage arising out of the conduct of the
shipper. For example the shipper may give the carrier an inaccurate
description of the goods, which causes the carrier to stow the goods
Deterioration of perishables
Perishable cargo such as vegetables may decay; juice and fluids
undergo fermentation and acidity; grain may heat up and/or become
infested with weevils; cargo that has been packed into bags in damp
condition may develop mould. The carrier is not liable for these
developments. This assumes that the carrier continues to care for the
cargo in the normal manner, providing adequate ventilation.
Example:
Bananas were sent from a Caribbean Island to Dubai in a
general cargo vessel fitted with a manual ventilation system.
The carrier ventilated the holds whenever the weather permitted
it. As expected the voyage lasted several weeks. Upon arrival it
was found that the bananas had started to sprout, and hence the
consignment was useless for marketing.
Sweat damage
Condensation may form on the sides of the ship’s holds and or on the
goods directly, due to the passage of the ship from cold to warm
climates or vice versa.
The carrier is expected to prevent the goods from touching the ship’s
sides and the bottom by placing adequate dunnage (wooden planks
under and around the goods. Adequate ventilation must be provided
also, depending on the weather. Some older vessels have only
manual ventilators. If the ship has taken all possible precautions and
sweat still forms on the goods, the carrier would not be held
responsible for any resultant loss.
Insufficiency of packing
This exclusion covers loss/damage to the goods that may arise
because of defective or inadequate packing by the shipper.
The carrier often attempts to rely on this exclusion when goods are
discharged in a damaged condition with the outer packing torn. This
is particularly so in the case of alcoholic drinks, for which the
customary packing is bottles inside cardboard boxes. However since
the carrier gives a bill of lading at the outset stating that the goods
are in good order, it would be difficult to later claim that the packing
was unsatisfactory. In practice, where defective packing could have
contributed to the damage, the carrier may agree to settle a claim at
50% of the loss.
Any other cause arising without the actual fault or privity of the carrier
The exclusion continues as
...or without the fault or neglect of the agent or
servant of the carrier, but the burden or proof shall
be on the person claiming the benefit of this
exception to show that neither the actual fault or
privity or the carrier nor the fault or neglect of the
agents or servants of the carrier contributed to the
loss or damage.
This is a “catch-all” exclusion that would help the carrier if the loss
does not fall within other listed exclusions, but there is no fault or
negligence on the carrier’s part. Although there is no need to
establish the cause of loss/damage in order to rely on this exclusion,
the carrier must show that there was no fault or negligence of carrier,
or carrier’s servants and agents. In practice, the only way to show
absence of fault or negligence would be to establish the actual cause
of damage. This exclusion cannot easily be relied upon.
Example—case not falling within this exclusion:
Bananas were shipped from a Caricom Port to Liverpool. At
Liverpool, the vessel was discharged by stevedores who were
independent contractors. Precautions were taken by the carrier
to guard the cargo at night, but some of the cargo was stolen in
the night by thieves.
It was held that the thieves were probably friends of the
stevedores and that the carrier had not established a contrary
position. It was also held that the stevedores were agents of the
carrier and the carrier had not established the lack of fault or
negligence on the part of the agent.
Activity
Talk to a carrier, a shipper, or a lawyer about any recent claim
against a carrier for lost or damaged cargo.
1. Find out if the claim or defence came under the Hague or Hague
Visby Rules.
2. What were the circumstances of the loss/damage?
3. What defence against the claim did the carrier use? Did a
recognized exclusion apply?
4. Was the claim successful?
5. How much money was involved in the claim?
3. For what three things do the Hague Visby Rules say that carriers
are not responsible?
a. _________________________________
b. _________________________________
c. _________________________________
Delay
The Hague Rules contain compulsory provisions only with regard to
loss or damage to cargo. They do not appear to impose any
responsibility on the carrier concerning delays.
Activity
There is no specific Activity for this lesson.
Answer keys
Lesson 1
1. The carrier undertakes to carry goods from the port of loading to
the port of discharge, and there deliver the cargo in the same
condition as it was received.
3. − act of God
− act of the King’s enemies
− inherent vice of the goods
5. b. false
The Hague Rules do not apply to charter parties unless a bill
of lading is also issued under the C/P, in which case the
Hague Rules apply to the B/L’s terms.
6. c. under common law, the ship must be seaworthy, whereas
under the Hague Rules, the carrier needs only to have made
a diligent effort to ensure seaworthiness
7. a. common law
Under common law, the carrier and shipper may agree
between themselves to waive or take on such
responsibilities. Under the Hague Rules, the carrier may
not waive responsibility for improper loading.
10. a. nothing
12. A liberty clause is a clause in the bill of lading that gives carriers
the right to call at any port. It is contrary to the Hague Rules—
courts usually restrict the right to certain ports.
Lesson 2
1. b. the carrier may not exclude any listed obligations
Lesson 3
1. Hague Rules do not cover the period before loading on board
and after discharge.
2. b. common law
4. nothing
Resources
There is no textbook for this course. All the information you require
is in this Study Guide. In addition, your Student Manual lists some
books that you may wish to read to expand your knowledge.
Learning outcomes
When you have completed this unit you will be able to:
• Explain what is meant by breach of a contract of carriage and
how such breach is established.
• Identify the way in which a carrier may be liable—through
payment or through completed performance.
• Define how liability is assessed.
• Describe the ways in which liability is limited by international
and national regulation.
• Discuss time limits for liability claims.
Activity
There is no Activity for this lesson.
4. What are the two ways in which carriers may show that they are
not liable for damaged goods?
a. ________________________________
_________________________________
b. _________________________________
_________________________________
Assessing damages
Under common law, when two parties have made a contract which
one of them has broken, the “innocent” party ought to receive
damages, that is financial compensation. These should be the
amount required to put the party in the same position as if the
contract had been performed correctly.
To do this, the party must be compensated for:
• loss arising naturally (that is in the usual course of things) from
the breach of contract
• loss arising because of the special circumstances of the case,
known to both parties at the time of contract (that is, in
circumstances where the other party could have contemplated
this possible loss).
Limitation of liability
Although the carrier may be liable for breach of contract, this
liability may be further excluded or limited by the contract. The
common law, national law, and international conventions have
different approaches to this type of limitation.
Certain national legislation and various international conventions
place limits on the liability of the carrier relating to the limitation of
liability of seagoing ships. These include:
• the Hague Rules
• the Hague Visby Rules
• the Hamburg Rules
• various Merchant Shipping Acts
• other national legislation.
Monetary limit
The Hague Rules limited the liability of the carrier to £100 (pounds
sterling) per package or unit unless the nature and value of the goods
were declared by the shipper and inserted in the bill of lading. The
rules state that the monetary units are to be taken to be gold value,
Package limitation
A package is an element of the consignment packed separately and
identified by distinctive marks. A package can be parcel, a carton, a
crate, a pallet, or even a container. The monetary limit of £100 is
applied to each package as enumerated in the bill of lading.
Example:
Suppose a bill of lading states: “500 cartons highland tea”. The
per package limitation would apply to each carton. Thus, if the
partial or complete damage to a single carton is assessed at
£80, the carrier would pay £80 per damaged carton. If the
damage is assessed at £120 per carton, the carrier would pay
only £100 per damaged carton because of the monetary limit.
The package limit, though seemingly simple, has created problems in
application when a number of packages are consolidated in a larger
package such as a crate, pallet, or container. The question then arises
as to whether the £100 limit should be applied to the smaller or the
larger package. The Hague Rules make no reference to consolidated
goods and the carrier would naturally attempt to claim the larger
package as the package to which limits apply.
Example:
Suppose that the shipper stuffs 1000 packages of Highland tea
into a container for FCL shipment. The bill of lading may state
one container said to contain 1000 packages… or one container
containing 1000 packages….
Under the Hague Rules, the carrier would naturally attempt to
define the whole container as the package with the £100 limit.
This argument has succeeded in the past, where the bill of lading
stated, said to contain 1000 packages, However, similar claims
failed when the bill of lading stated containing 1000 packages.
The container cannot be claimed as the package when a carrier
transports it as an LCL shipment. In this case, it is considered that
the shipment is stuffed into a container for the carrier’s convenience.
The unit most commonly used is the shipping unit. For example, the
bill of lading may refer to “100 tons of Highland Tea”. The £100
limit would then apply to each ton of tea. If the B/L referred to
10 000 kilograms of tea, the £100 limit would apply to each
kilogram.
When the bill of lading indicates both the weight and the number of
packages, the weight is ignored. In this situation, the weight is
normally included simply to show the calculation of freight. The
monetary limit would be applied to each package noted on the bill of
lading.
The 1987 Trinidad & Tobago Merchant Shipping Act as well as the
1998 Jamaica Shipping Act also provide for limitation of the
carrier’s liability based on tonnage.
These Acts also provide for the limitation of liability of port
authorities and owners of docks.
Activity
Find out what national or international rules your country applies in
the case of limitation of carrier’s liability. What year were these
rules adopted there?
6. What common law freedom did the Hague Rules take away?
a. the freedom to limit liability
b. the freedom to use a bill of lading to describe limits
c. the freedom to insert any clause in the bill of lading that
limits liability
d. none
7. What are the three types of limit defined under the Hague Rules?
a. _________________________________
b. _________________________________
c. _________________________________
10. What two changes in limitation did the Hague Visby Rules
introduce?
a. _________________________________
b. _________________________________
12. Who benefits most from the changes introduced by the Hamburg
Rules?
a. shipper
b. carrier
c. consignee
d. no-one; everyone is affected equally
Activity
Under the regulations used in your country, what is the time
limitation for making liability claims?
2. What is the time limit for bringing action in a court of law under
the Hague Rules?
a. within one year of the agreed date of delivery
b. within two years of the agreed date of delivery
c. within six years of the agreed date of delivery
d. none, because extensions are always granted
4. What is the time limit for bringing action in a court of law under
the Hamburg Rules?
a. within one year of the agreed date of delivery
b. within two years of the agreed date of delivery
c. within six years of the agreed date of delivery
d. none, because extensions are always granted
Answer keys
Lesson 1
1. A person who is in breach of contract has failed to perform a
legal duty or to meet a legal obligation as specified in a contract
to which the person is a party.
3. a. shipper
and/or
c. consignee
Lesson 2
1. a. by paying damages to the other party
b. by ensuring performance or completion of the contract
7. − monetary limit
− package limitation
− per unit limitation
8. a. £100
b. £90
12. b. carrier
13. c. tonnage
14. c. tonnage.
Lesson 3
1. So that a person does not have to endure an on-going threat of
legal action indefinitely.
Resources
There is no textbook for this course. All the information you require
is in this Study Guide. In addition, your Student Manual lists some
books that you may wish to read to expand your knowledge.
Learning outcomes
When you have completed this unit you will be able to:
• Identify the obligations of the shipper, receiver/consignee,
freight forwarder, multimodal transport operator, port
authority/operator, cargo handlers, and ship’s agent,
• Identify the ability, if any, of these various parties to contract out
of their liabilities.
The carrier is then liable to a third party who buys the shipped goods
on the strength of the bill of lading. If the goods have been
inaccurately described and the buyer has suffered loss, a claim may
be made against the carrier. There is however an obligation on the
shipper to indicate the information accurately. Failure to do so will
make the shipper liable to reimburse the carrier for any loss the
carrier may suffered by way of payment to a third party.
If however the nature or value of the goods have been knowingly
wrongly stated by the shipper, the carrier is not liable for loss or
damage suffered by third parties. The shipper is directly liable to
those who have suffered loss.
Liability to others
In the traditional role, the forwarder acts only as agent for the
principal. The agent incurs no personal liability vis-à-vis third
parties. The principal, who is the shipper in this case, would be
liable for any wrongful acts or omissions done within the scope of
the agent’s authority. The agent may of course be liable to
indemnify the shipper, but this would depend on the contract with
the shipper. The freight forwarder may be able to rely on an
exclusion clause to limit liability.
If the freight forwarder acts outside the scope of agreed authority,
then he or she would be personally liable to third parties. In this
event the forwarder would not be able to rely on any of the
exclusions in the contact with the shipper. For example, the freight
forwarder may be held responsible if a crane were damaged due to a
misrepresentation made by the forwarder about the weight of a
consignment which exceeded the safe working load of the crane,
causing it to collapse.
Liability to shipper
In undertaking to deliver cargo to the carrier, the freight forwarder
may be a principal with respect to the shipper, rather than an agent.
This is because, rather than simply following the shipper’s
instruction, the freight forwarder is offering a delivery service. This
would also be the case with regards to storage of cargo, if the
forwarder stores the cargo rather than arranging with a storage
company on the shipper’s behalf to store it. The forwarder’s liability
towards the shipper is governed by their contract.
Liability to others
Freight forwarders that act as principals are alone responsible for
their actions vis-à-vis third parties.
Thus if the freight forwarder offers a delivery service to the shipper,
the freight forwarder would have to negotiate as a principal with a
road haulier to get the goods to the port. The forwarder would then
be personally responsible to the haulier.
At times the freight forwarder may be deemed to be acting as the
principal even when acting for the shipper. For example, when
booking space on a ship in the London freight market, the freight
forwarder is deemed to be acting as principal and may be responsible
in the event of non-shipment.
When undertaking additional functions such as confirming
shipments, or countersigning official weight and quantity certificates,
the freight forwarder would be personally liable. Nevertheless this
does not preclude the forwarder from remaining an agent so far as
the forwarding operations are concerned.
the MTO commits to carry the goods to their destination, but accepts
responsibility for cargo only while it is in the MTO’s custody or
while being carried by transport operated by the MTO. In the event
of loss or damage, the shipper/consignee would then have to
ascertain when the loss or damage occurred and claim against the
actual carrier concerned.
Activity
Talk to an experienced multimodal transport operator or freight
forwarder and discuss how modern transportation developments over
the last decade have affected their obligations and liability when
operating in the Caribbean.
4. The consignee must take receipt of the goods from the ship.
True or false? Explain.
a. true
b. false
_____________________________________________
11. What does the “network liability principle” imply regarding the
liability of an MTO?
_____________________________________________
_____________________________________________
Liability of stevedores
Under the Hague Rules, loading, stowing, breaking stow, and
discharging are the carrier’s obligations. This means that, unless the
occurrence is covered by an exclusion clause, the carrier would be
liable to the shipper if the goods suffer loss or damage during these
activities.
It is the carrier that engages stevedores to perform all or some of
these functions. The carrier is free to enter into any contract with the
stevedore. The terms of the contract may depend on whether the
stevedores are from a private firm or from the port authority. The
carrier may have greater flexibility in negotiating terms with a
private firm than with the port authority. The port authority is more
likely to have fixed terms. These terms are sometimes included in
the regulations that govern the port.
In case of loss/damage to cargo while handling it, the stevedore is
liable to the carrier subject to the exclusions and limitations in the
contract or port regulations. The carrier is liable to the
shipper/consignee according to the Hague Rules.
Activity
Try to arrange to talk to an appropriate official of the port authority
or a port operator nearest to your home or work. Discuss the
organization’s obligations and liabilities in modern cargo
transportation.
_____________________________________________
_____________________________________________
Activity
Try to talk to a ship’s agent about the ways in which liability has
been affected by modern transportation trends.
Answer keys
Lesson 1
1. Any four of the following:
− prepare the goods for shipment
− take them to the port and/or hand them to the carrier
− describe the goods accurately on the bill of lading
− inform the carrier of the dangerous nature of the goods if
necessary
− pay the freight
4. b. false
The consignee may accept cargo from the ship, the quay, or
a stowage facility.
• There are three possible reasons why the consignee may have to
pay freight:
− in taking delivery of the goods, a promise to pay freight
may be implied
− a clause in the B/L may require such payment
− the law of the country concerned may require it
8. their contract
9. a. true
Even though the FF usually avoids liability while acting for
the shipper, in some circumstances such as booking space
for the shipper on a ship in the London freight market they
may be deemed to be acting as principals.
10. c. principal
Lesson 2
1. a. Hague Rules cover only activities during and after loading
and during and before discharge.
2. d. national legislation
3. a. the carrier
and
b. the stevedores
The carrier is liable to the shipper or consignee. The stevedores
are liable to the carrier.
Lesson 3
1. b. the carrier
2. a. the agents
Unit 9 Delivery of
goods
In the carriage of goods a distinction is made between discharge and
delivery of cargo. Although the carrier’s obligation under Hague
Rules ends at discharge, some responsibility continues because the
carrier must then authorize delivery of the goods to the entitled
consignee/receiver. This unit examines what occurs between
discharge and delivery under various circumstances.
The three lessons in this unit cover the topics of:
• normal and problematic delivery
• non-delivery and misdelivery
• delivery in the case of general average.
Resources
There is no textbook for this course. All the information you require
is in this Study Guide. In addition, your Student Manual lists some
books that you may wish to read to expand your knowledge.
Learning outcomes
When you have completed this unit you will be able to:
• Describe the normal delivery process after discharge.
• Describe how delivery processes are adapted when there is
damage, shortage, a split delivery, delivery without a bill of
lading, or delivery to a changed consignee or destination.
• Discuss liability when cargo is delivered to the wrong place or
not at all.
• Describe the effects of general averaging on delivery.
Normal delivery
Goods are tallied when they are discharged from the ship and the
tally sheets indicate the quantity of goods discharged, the
corresponding marks and numbers, and the place where the goods
have been landed. Any discrepancies or peculiarities would be noted
on this tally sheet. The tally sheets may be signed by a
representative of the port and the ship.
The shipowner’s duty is to give the delivery order to the first person
who presents a properly endorsed bill of lading. On becoming aware
of the arrival of the ship, the consignee presents the bill of lading to
the carrier or carrier’s agent. The carrier or agent then gives a
delivery order directing the port to release the goods to the
consignee.
The consignee checks the port records to ascertain whether the goods
have been discharged and if so where they are stored. After
completing the documentation, the consignee would take delivery
from the shore handling company or the port authority and examine
the goods at that time.
Short delivery
After obtaining the delivery order, the consignee may be unable to
trace the goods in the port. This may be either because the carrier
has not yet discharged the goods or because they have been lost after
discharge into the custody of the port.
When unable to trace the goods on the discharging records available
at the port, the consignee may come personally to the carrier’s or
agent’s office to ask for assistance in tracing the goods. If not, the
consignee may simply lodge a claim with the carrier, demanding the
goods or compensation for their loss.
The carrier would then check through the records. If the goods have
been properly discharged according to the carrier’s tally sheets, the
carrier would quote the tally sheets and their numbers and refer the
consignee to the port authority.
Split delivery
The consignee may request the carrier to issue a number of separate
delivery orders for a consignment represented by one bill of lading.
This could be because the consignee wishes to sell or has sold the
consignment to a number of different buyers and wishes to let them
take delivery direct from the port. This means that the consignee
avoids having to take delivery of the entire consignment and split it
up.
The carrier could agree to such an arrangement. It does not matter to
the carrier how many parties take delivery from the port, as long as
the delivery orders issued agree with the total amount stated in the
bill of lading.
Irregular delivery
There are various ways in which delivery of goods can be considered
irregular:
• delivery without a bill of lading
• delivery to a different destination
• delivery to another consignee.
lading. For example, where the goods can only be directly delivered
to the receiver, the carrier may have to wait in port for an indefinite
period unless willing to deliver the goods without the bill of lading.
In such a situation the carrier would ask the consignee for a letter of
indemnity and a bank guarantee from a reputable bank. These two
documents would give the carrier some protection in the event of a
claim from the lawful holder of the bill of lading. The carrier would
seek reimbursement from the person to whom delivery was made
and the bank that issued the guarantee.
A similar problem may arise if the shipper claims to have lost the bill
of lading and is thus unable to get payment from the bank. In such a
situation the carrier may agree to issue a fresh set of bills of lading,
on the strength of a letter of indemnity from the shipper, supported
by a bank guarantee.
The incidence of fraud is so frequent and the value of cargo is so
high today that the carrier of his agent must be very careful in giving
delivery without the production of the bill of lading.
Activity
Talk to a carrier and discuss recent examples of
1. short delivery
2. delivery of damaged goods
3. delivery without a bill of lading.
11. Who is held responsible if delivery is made from the port to the
wrong person without a bill of lading?
a. the port
b. the shipper
c. the carrier
d. whoever handed over the goods
12. What would give the carrier some protection against liability for
delivery to another destination if someone shows up with an
unchanged original bill of lading and demands the goods?
a. ________________________________
b. _________________________________
The custom of many ports is to use the date of the ship report.
Activity
Talk to a carrier about their experiences of losing shipments
completely or sending them to the wrong destination. Find out what
documentary and practical processes they used to put matters right.
Find out also what parts of their processes make these occurrences
unlikely.
2. What is the custom of many ports regarding the date from which
the limitation period is counted for placing claims of wrongful
delivery?
a. date of discharge
b. date of ship’s report
c. date of delivery as per the bill of lading
d. date the actual delivery is acknowledged
Activity
Try to get hold of a copy of the 1994 York Antwerp Rules—ask your
local tutor if you have difficulty. Review all the rules, but especially
the general average procedures and those aspects of the rules that
affect discharge and delivery of cargo to consignees when some
cargo has been sacrificed.
Answer keys
Lesson 1
5. Uon discharge from the vessel onto the quay or into the custody
of the port.
Lesson 2
1. a. yes, because the issue comes under common law
Lesson 3
1. b. as soon as possible after the GA situation is confirmed as
such by the adjusters
Resources
There is no textbook for this course. All the information you require
is in this Study Guide. In addition, your Student Manual lists some
books that you may wish to read to expand your knowledge.
Learning outcomes
When you have completed this unit you will be able to:
• Distinguish between apparent and non-apparent loss and
damage.
• Explain how to make reservations against the carrier using the
proper forms in the event of lost or damaged cargo.
• Identify the time limits allowed for reservations and claims
• Explain the legal effect of reservations
• Differentiate among joint surveys, court surveys, and cargo
underwriter’s surveys.
• Identify the persons who may make claims against the carrier.
• Identify the rules regarding jurisdiction over cargo claims.
Example 6:
Damage to the enamel-coated interior of a 15-tonne tank was
considered apparent damage because the tank was provided
with a manhole, thus enabling an internal inspection to be made
at the time of delivery. If no such inspection aperture had
existed, it would have been considered non-apparent damage.
Apparent damage
According to the Hague Rules, Article III Paragraph 6, the consignee
must give notice of apparent loss or damage “before or at the time of
the removal of the goods into the custody of the person entitled to
delivery…”
Non-apparent damage
According to the Hague Rules, notice regarding non-apparent loss or
damage must be given to the carrier “within three days of the
delivery of the goods”.
Time limits are discussed more fully in Lesson 3 of this Unit.
Activity
Ask a carrier to show you an example of a proper notice of
reservation.
5. How much time is allowed under the Hague Rules for notice to
be given of non-apparent damage?
_____________________________________________
Had the consignee given notice there would have been no such
burden, and it would have been the carrier who would have had the
burden of proving that the loss or damage did not occur while in the
carrier’s custody.
Example:
A carton containing refrigerated meat arrived at the discharge
port, with the meat partly defrosted and emitting a strong smell.
The consignee took delivery without giving notice of damage to
the carrier. On discovering that the meat was spoilt, the
consignee arranged a survey in conjunction with the cargo
underwriter.
Removal without notice was prima facie evidence of delivery in
good order by the carrier. Therefore, the consignee had to not
only establish the damage by producing the survey report, but
also that it occurred while in the custody of the carrier. To do
this, the consignee had to obtain the temperature records of the
refrigerated compartment of the ship during the voyage.
Surveys on board
The Rules also state that in the case of any actual or perceived loss or
damage, the carrier and the receiver shall give all reasonable
facilities to each other for inspecting and tallying the goods. The
Court surveys
The consignee may apply to the court to get an order to hold a joint
survey. The surveyor appointed by the court would notify the parties
concerned of the date and place where the survey would be
conducted. The carrier normally declines to participate at surveys
organized by the consignee.
Activity
Ask a carrier or insurance company to let you read a copy of at least
one type of survey report.
8. What is the usual process with an average sized claim for cargo
damaged in transit?
a. the consignee claims from the insurance company and the
carrier at the same time
b. the consignee claims from the insurance company who
settle and then claim under subrogation from the carrier
c. the consignee claims from the carrier first and then from the
insurance company if the carrier will not settle
d. the consignee claims from the carrier only. Only large
claims are made on the insurance company
Time limit
The law in each country usually provides a time limit within which a
claim must be brought to court. The time limit varies with the type
of claim. Once the time has lapsed, the court will not hear the case.
The time limit applicable to cargo claims depends on the national
legislation and the relevant international conventions.
view is that it is the date on which goods are delivered into the
custody of the port or shore handling company. That is, the date of
discharge from the vessel.
The first view may be more in keeping with the letter of the law.
However, the second view is usually applied, as it is more in keeping
with the practical realities of commercial shipping operations. The
carrier would discharge the goods on to the quay and they would be
kept in the custody of the port, either on the quay or in warehouses,
until the consignee takes delivery. It is possible to argue that the port
takes delivery of the goods on behalf of the consignee. As the
consignee can take delivery any time after the goods are discharged,
it would not be fair on the carrier to postpone the commencement of
the time limit to a date of the consignee’s choice.
One reason for imposing a time limit is to enable carriers to assess
the outstanding claims against them after a given period, or the
possibility of such claims. It is unlikely that the Rules would have
envisaged that period being extended at the discretion of the
consignee.
Non-delivery
According to the Hague Rules the time limit for claims of non-
delivery starts running from the time when the goods should have
been delivered. That is, the date on which the goods should have
been delivered to the port authority or shore handling company. This
date would usually be considered as the date on which the ship
completed discharging cargo destined for that port.
Arbitration
If the claim is referred to arbitration within the time limit, that would
amount to suit being brought under the Hague or the Hague Visby
Rules.
Activity
There is no Activity for this lesson.
2. List the five parties who may bring a claim against a carrier.
a. _________________________________
b. _________________________________
c. _________________________________
d. _________________________________
e. _________________________________
4. When does the time start running for claims regarding non-
delivery of cargo?
_____________________________________________
Answer keys
Lesson 1
1. A reservation is a notice given by the consignee to the carrier at
the time of delivery preserving the right of the consignee to
claim against the carrier at a later date in the event that damage
or loss is discovered later.
Lesson 2
1. The consignee must show that the goods were shipped in good
order and received with damage or loss.
4. b. false
Although the Hague Rules do not require it as long as there
has been a joint survey, in practice joint surveys are not
done unless damage is serious. Often the consignee doesn’t
give notice of damage for a short while after delivery, and a
joint survey may be called after this.
5. a. yes, under the Hague Rules, the carrier and receiver must
accommodate each other
6. d. no, the carrier does not usually attend even though he/she
may do so
Lesson 3
1. − the claimant must be entitled to bring action against the
carrier
− the claim must be brought to court within the time limit
− the court must be competent to deal with the case
4. From when the goods should have been discharged from the ship
into the custody of the port.