Carriage of Goods Version 01

Charter-party
I. Introduction
The word charter-party is derived from the latin ‘carta partita’ meaning ‘divided document’. The trace
of the word was found at first in 1539 AD. However, the term ‘chartre de freight on endenture’ was
first used in 1375 AD. Charter party refers to the ancient latin practice of writing out the terms of
contract in duplicate, on one piece of parchment and then dividing it down the middle, thus providing
each party with a copy. This suggests that a proper charter-party must be in writing.
A charter-party is a contract between the shipowner and the charterer, by which the latter hires from
the former the use of the ship, either for the purpose of carrying the charterer’s goods or to carry the
cargo of a third party. Being a contract, it is governed by the general principles of the law of contract.
The terms of contract contained in a charter-party are various and complicated. Some of them are
common to most charterparties, while some depend on the type of trade in which the ship is engaged.
All the big shipping companies have their own form of charter-party. Similarly, very large shippers
charter ships on the terms of their own standard form.
II. Classification of charter-party
a. Charter by demise
This is a contract for the lease of a ship by which the owner grants or demises the entire control
and possession of the ship to the charterer. For instance, when a ship is leased to a company for
transport purpose, for a certain period, at the rate of Tk 1000 per ton, there is a charter by demise.
A charter by demise of a ship without master or crew is sometimes called a ‘bare boat’ charter or
net charter.
The consequence of a charter by demise are as follows:
1. The charterer takes possession and control of the ship;
2. The charterer performs and exercises the duties and rights of the shipowner;
3. The shipowner is not liable to shipper for the acts of the master and crew;
4. If the ship earns a salvage award, it goes to the charterer;
5. The master, on behalf of the charterer, signs bill of lading;
6. Unless otherwise specified, statutory duties of the shipowner bind the charterer;
7. Being in possession of the ship, the charterer can claim damages from a tortfeasor, who
damaged the ship;
8. The charterer is liable for collision caused by negligence;
9. Unless otherwise specified, the charterer may sub-charter the ship;
10. The shipowner cannot interfere with the management of the ship, except in so far as permitted
by the charter-party. He is entitled to the charter freight and to have the ship returned when the
charter-party expires;
11. It is not the shipowner, but the charterer, who can invoke special provisions as to limitation of
shipowner’s liability.
Test of Charter by demise
Whether the possession and control of the ship are to pass to the charterer depends on the
intention of the parties. The test for determining their intention is whether the master is to be the
servant of the charter. If the answer is positive, then there is a charter by demise.
Significance of Charter by demise
Charter by demise is resorted to,
1. where a charterer intends to carry his own goods, or to carry the cargo of a third party.
2. where the shipowner intends to augment his fleet.
3. where a person is desirous of obtaining full temporary possession of a ship, e.g. in the case of
exploration.
b. Charter not by demise
This is a contract which confers on the charterer simply the right to have his goods carried by a
particular vessel. Here the shipowner retains possession and control of the ship. The shipowner
exercises these rights through the master and the crew, who are employed by him.
Kinds of charter not by demise
1. Time charter
This is hire of a ship for a certain period, e.g. to carry goods for a period of six months. Time
charter is sometime called a ‘gross charter’.
2. Voyage charter
This is hire of a ship to carry cargoes between two ports or to make several voyages, e.g. to
carry goods from Chittagong port to port of New York to Chittagong port.
3. Mixed charter
This is hire of a ship for as many voyages it can perform within a certain period, e.g. to carry
goods from Chittagong port to port of New York to Chittagong port, within a period of six months.
1
III. Frustration of a charter-party
The shipowner and the charterer are discharged from their duties and obligations under the charter-
party, if it is fraustrated. Fraustration occurs in the following cases:
a. Impossibility of performance
When without the fault of either party, performance of the charter-party becomes impossible owing
to the fact that the ship or the goods, on the continued existence of which performance of the
charter-party depends, has ceased to exist, the charter-party is frustrated. For instance, a ship is
chartered for a voyage from Chittagaong port to New York port. When the ship is proceeding
towards Chittagong port, it catches fire and is destroyed. The charter-party is frustrated.
b. Delay
When without the fault of either party, an unforeseen delay postpones the performance of the
charter-party, and the delay is of such a character that its performance, when the delay is over, will
not accomplish the purpose of the charter-party, the charter-party is frustrated. In Jackson v.
Union Marine Insurance Co.1 delay was due to stranding on rocks. The charterers, judging the
delay would be considerable, rescinded the charter before the ship was refloated. It was held that
the charterers were not liable to load the ship, since the time necessary for repairing was
unreasonably long.
c. Subsequent change in the law
When due to a supervening change in the law, the charter-party is rendered illegal by the law of the
country in which performance would have taken place, the charter-party is frustrated. For instance,
a company in Bangladesh chartered a ship from a Burmese company for carriage of goods
between Chittagong and Myanmar. Myanmar waged war against Bangladesh and the latter
severed her ties with the former, and enacted law to the effect that all relations between
Bangladesh and Burma shall come to an end. The charter-party is frustrated.
---------------------------------------------------
1
(1874) LR 10CP 125.
2
Bill of Lading
I. Introduction
Bill of lading was introduced in the Sixteenth century. Since then it has become a very important part of
international business transaction by sea.
Neither the Bills of Lading Act,2 nor, the Carriage of Goods by Sea Act,3 define bills of lading. The (English)
Admiralty Court Act,4 however, in Section 6 provides that a document whereby the receipt of goods is
acknowledged for shipment on board a named ship, or on some other ship for carriage by sea and delivery to
the shipper’s order, the document being signed on behalf of the master, is a bill of lading for the purposes of the
(English) Bills of Lading Act.5
The Halsbury’s Laws of England 6 states that a bill of lading is a document of title signed by the ship-owner or by
the master, or other agent of the ship-owner which states that certain specified goods have been shipped upon
a particular ship and which purports to set out the terms on which the goods have been delivered to and
received by the ship.
According to Article 1 Rule 7 of the United Nations Convention on the Carriage of Goods by Sea 7 ‘ ”Bill of
lading” means a document which evidences a contract of carriage by sea and the taking over or loading of the
goods by the carrier, and by which the carrier undertakes to deliver the goods against surrender of the
document. A provision in the document that the goods are to be delivered to the order of a named person, or to
order, or to bearer, constitutes such an undertaking.’
A bill of lading may be defined as a document in writing signed by agent of the carrier, which states that certain
number of goods have been shipped in a particular ship and which purports to set out the terms on which such
goods were delivered to and received by the ship.
When a bill of lading contains neither any note as to any irregularity, nor any complain, as to the goods received
by the carrier, but only the statement ‘shipped in apparent good order and condition’, then it is said to be ‘clean’.
On the other hand, when it contains a note of anything appearing to be wrong with the goods received, e.g.
three packages torn and dirty, the bill of lading is said to be ‘qualified’.
In the old days, the master of the ship issued bills of lading at the time of shipment of the goods. There was also
a practice that when the goods were put on board the ship, the mate 8 issued informal receipts, called the mate’s
receipts, which were later on exchanged for bills of lading. Until the issue of the latter, the carrier used to hold
the goods on the terms of her usual bills of lading. The practice of issuing mate’s receipts has faded out. Now-a-
days, bills of lading are issued, neither by the ship owner, nor by master of the ship, but by the carrier’s agent,
after the ship, departs the port of loading, with goods on board.
II. FUNTIONS OF BILL OF LADING
The bill of lading performs three main functions:
1. it acts as a receipt;
2. it represents a document of title; and
3. it is an evidence of the contract of carriage.
1. Bills of lading as a receipt
The bill of lading acts as a receipt:
(a) as to quantity of the goods;
(b) as to apparent order and condition of the goods; and
(c) as to leading marks of the goods.
(a) Receipt as to quantity
(i) Carrier and consignee
When treated as prima facie evidence
The bill of lading shows the number of packages, or pieces, or quantity or weight, as the case
may be, of the goods shipped, as furnished in writing by the shipper. Such a bill of lading is a
prima facie evidence as to the quantity of the goods received by the carrier. The carrier is to
deliver to the consignee the very same amount or quantity of goods that have been shipped.
Where there is short delivery, i.e. where there is a difference between the amount of the goods
mentioned in the bill of lading and the amount of goods delivered, and the consignee brings an
action for damages, the burden lies on the consignee to prove the exact amount of the goods
shipped, and he can do it easily by producing the bill of lading before the court. Then the carrier
to escape liability must prove that the bill of lading was not true, and that he delivered that
quantity of goods which had been actually shipped. Such proof may be very difficult and
expensive.
2
1856.
3
1925: Act XXVI.
4
1861.
5
1855.
6
Para 314, Page 143, Vol. 5, 4th Edn. 1974.
7
(1978)
8
i.e. the person second in command in a merchant ship.
3
When not treated as prima facie evidence
If the bill of lading contains a ‘quantity unknown’ clause, meaning the carrier makes no
admission as to quantity or weight of the goods shipped, but only that he has received a
quantity which the shipper or his agents says so, then the bill of lading is no longer treated as a
prima facie evidence and the consignee has to prove what exactly had been shipped.
In New Chinese Antimony Co. v. Ocean Steamship Co. Ltd.9 the bill of lading stated that 937
tons of ore had been shipped. It also contained the clause ‘weight, measurement, contents, and
value ... unknown.’ Less than 937 tons of ore had been delivered, and the consignee claimed
damages for short delivery. The Court of Appeal held that in view of the ‘weight etc. unknown’
clause, the bill of lading was not even prima facie evidence that 937 tons of ore had been
shipped. The carrier was not liable for shortage of delivery in question, since the consignee
could not prove that in fact 937 tons of ore had been shipped.
(ii) Carrier and endorsee for value
When estopple exists
In the case where a bill of lading is transferred, and the endorsee for value, who took the
transfer of the bill of lading relying upon the information contained in it, complains shortage of
delivery, the carrier will be estopped from contending that the bill of lading was wrong.
In Rasnoimport v. Guthrie & Co.10 the bill of lading stated that 225 bales of rubber had been
shipped. In fact, only 90 bales were shipped, and this was delivered to the endorsee for value of
the bill of lading, who claimed damages for short delivery, i.e. for the value of 135 bales which
had not been delivered. It was held that the carrier was liable. Since the endorsee for value
accepted the bill of lading upon the faith of the information contained therein, the carrier was
estopped from contending that the bill of lading was incorrect. It was also immaterial that when
signing the bill of lading the defendants had been neither negligent, nor fraudulent, and had
acted according to the practice of the port of loading.
When estopple does not exists
In the hands of an endorsee for value, where the bill of lading contains a statement that the
quantity or weight of the goods are unknown, it is submitted that in such a case there in no
estopple.
In Canadian and Dominions Sugar Co. Ltd. v. Canadian National (West Indies)
Steamships Ltd.11 a bill of lading contained the qualifying clause ‘signed under guarantee to
produce ship’s clean receipt.’ The ship’s receipt was not clean as it contained the phrase ‘many
bags stained, torn and re-sewn.’ It was held that the bill of lading was a qualified bill, and the
carrier was not estopped.
(b) Receipt as to condition
When treated as prima facie evidence
The bill of lading shows the apparent order and condition of the goods shipped. Apparent order
and condition means apparently, and so far as meet the eye, and externally, the goods are
placed in good order on board the ship. 12 Such an admission applies only to the outward
appearance of the goods since the carrier has no means of judging their internal condition and
quality. Goods not properly packed are not in good order and condition. The bill of lading is
prima facie evidence as to apparent order and condition of the goods received by the carrier.
This proposition indicates that the carrier is under an obligation to deliver goods to the
consignee in the very same condition, which is stated in the bill of lading. Where goods are
received in good condition but delivered in bad condition and the consignee brings an action for
damages, the burden lies on the consignee to prove the condition in which the goods have been
shipped, and he can do so, simply by referring to the bill of lading. Then in order to escape
liability, the carrier must prove affirmatively that the bill of lading was wrong, i.e. the goods were
torn or dirty and damaged when received on board the ship. The carrier will find it very difficult
to prove error in the bill of lading.
In The Peter der Grosse13 the bill of lading contained the clause ‘shipped in good order and
condition ...weight, contents, and value unknown.’ The carrier delivered goods dirty externally,
and damaged. The consignee claimed damages. It was held that the bill of lading was evidence
that the goods had been shipped in good condition externally. Since the carrier could not prove
that the goods were in fact shipped in bad condition externally, the inference of the bill of lading
is that the goods were damaged while in the carrier’s possession. The carrier was, therefore,
liable.
9
(1917) 2KB 664.
10
(1966) 1 Lloyd’s Rep. 1.
11
(1947) AC 46, PC.
12
Per Sir R. Phillimore in The Peter der Grosse (1875) 1 PD 414.
13
(1875) 1 PD 414.
4
When not treated as prima facie evidence
Where in a bill of lading the words ‘shipped in apparent good order and condition’ are qualified
by other words, meaning that the carrier does not acknowledge such matters in relation to the
goods shipped, the bill of lading is not considered as a prima facie evidence. In that case the
consignee has to prove the exact condition in which the goods had been shipped.
Where a bill of lading is transferred, and the endorsee for value, who accepted the transfer of
the bill relying upon the accuracy of the statements contained therein, complains damage to
goods, the carrier will be estopped from showing that there was a mistake in the bill of lading.
In Compania Vascongada v. Churchill14 the bill of lading contained the clause ‘shipped in
good order and condition; quality unknown.’ The timber shipped was in fact badly stained and
saturated with petroleum when brought alongside for shipment. This condition was apparent,
and the master had notice thereof, but even then he signed a clean bill of lading. Stained timber
was delivered to the endorsee for value, who claimed damages. It was held that the words
‘good order and condition’ amounted to a representation as to the actual appearance of the
goods when shipped. Since the endorsee for value accepted the bill of lading upon the faith of
the representation therein, the carrier was estopped from denying that the damage was caused
on board the vessel. The carrier could not also rely on the words ‘quality unknown’. ‘Quality’
referred to something that was usually not apparent, to an unskilled person, while, ‘condition’
was something apparent. The master of the ship is expected to notice the condition of the
goods, but not the quality. The carrier was, therefore, liable.
In the hands of an endorsee for value, where in a bill of lading the words ‘shipped in apparent
good order and condition’ are qualified by other words, it is submitted that in such a case
estopple will not arise.
(c) Receipt as to shipping or leading marks
The bill of lading shows the shipping or leading marks as furnished in writing by the shipper.
Shipping or leading marks describe the goods shipped in such a way, so that they can easily be
identified at the time of discharge. Identification being the main purpose of leading marks, they
may be composed of letters, as well as, figures or marks, e.g. ‘$’. Such a bill of lading is a prima
facie evidence as to the leading marks of the goods received by the carrier. The carrier is to
deliver to the consignee goods with the very same marks with which they have been shipped.
Where there is a discrepancy between the marks mentioned in the bill of lading and the marks
on the goods delivered, and the consignee brings an action for damages, the burden lies on the
consignee to prove the marks on the goods shipped, and he can do it easily by showing the bill
of lading. Then the carrier to escape liability must prove that the bill of lading was wrong.
Where the shipping marks are material to the description of the goods, i.e. they affect or denote
the nature, quality or commercial value of the goods and are, therefore, essential to the identity
of the goods, and on the faith of those marks an endorsee for value receives the bill of lading,
the carrier will be estopped from proving that there was a mistake in the bill of lading.
Where the shipping marks are not material to the description of the goods, there is no estopple.
Section 3 of the Bills of Lading Act15 does not preclude the person who has signed the bill of
lading from showing that the goods were marked otherwise than as stated, unless the marks
are material to the description of the goods.
In Parsons v. New Zealand Shipping Co.16 frozen carcasses of lamb were marked as 622X
and 488X. On arrival some carcasses were found to be marked 522X and some other 388X.
The endorsee of the bill of lading contended that the defendants by section 3 of the Bills of
Lading Act were estopped from denying the statement in the bill of lading, i.e. the lambs marked
522X and 388X were part of the shipment, and were liable for failing to deliver the carcasses
shipped. It was held by the majority of the Court of Appeal that the carrier was not liable. The
marginal description of the goods in the bill of lading and the number of packages stated therein
did not affect or denote the nature, quality or commercial value of the goods. Here the marks
are quite immaterial, as far as, the purchaser was concerned, because the carcasses delivered
were of the same character and value as those shipped. Where the marks are immaterial to the
description of the goods, there is no estopple. ‘Suppose, by way of example, a bill of lading was
dealing with five parcels of goods of the same size, quality, and value, and, after describing
these goods accurately, it proceeded to state that the parcels were numbered consecutively one
to five. Could a purchaser refuse to accept delivery of one or two of the parcels, and hold the
14
(1906) 1 K.B. 237.
15
(1856)
16
(1901) 1 KB 548.
5
signer of the bill of lading estopped under the section, because it turned out that the two out of
the five which should have been respectively marked figure 3 and figure 4 were both marked
figure 4 ? It appears to me that he could not ...’ ‘For the purposes of the Act, a description in a
bill of lading of marks on the goods is not of necessity part of the description of the goods
themselves ..... Marks on the goods which, so far as the purchaser is concerned, have no
meaning, and could only be referred to in the bill of lading in order to assist the more sure or
speedy identification or delivery of the goods, do not, in my opinion, form part of the description
of the goods, within the meaning of section 3, so as to bind the signe4r of the bill of lading by
way of estopple.’17
2. Bill of lading as a document of title
The bill of lading is a document, not of proprietary title, but of possessory title, i.e. it has both negative and
positive components.18
(a) Negative Components
Only the holder of the bill of lading is entitled to claim delivery of the goods from the carrier. So,
where there is no bill of lading, there is no delivery of goods.
In Trucks & Spares v. Maritime Agencies Ltd.19 the consignee went to claim delivery of the goods
without a bill of lading. Due to debts owed to the carrier, the shipper did not receive one, and as such
could not deliver it to the consignee, i.e. the carrier had the bill of lading. It was held by Lord Denning
that the consignee is not entitled to claim delivery of the goods, since the bill of lading must be
produced to make a good title to the goods, i.e. to collect the goods.
(b) Positive Components
In some cases, e.g. in a Cost Insurance Freight Contract, possession of a bill of lading amounts to
constructive possession of the goods. So, by transferring the bill of lading the consignee can
effectively transfer the possession of the goods to an endorsee for value. In effect, the tendering of
the bill of lading is the same as delivery of the goods.
In Horst Co. v. Biddell Bros.20 a cargo of hops was shipped from San Francisco to London. While
the goods were abroad the ship, the shipper tendered the bill of lading to the consignee demanding
payment. The latter refused to pay for the goods until they were actually delivered. It was held by
the Court of Appeal that the shipper was entitled to payment, since the handing over of the bill of
lading to the consignee was equivalent to the handing over of the possession of the goods.
In Sanders v. Maclean21 the consignee refused to make payment simply because two out of three
bills of lading were tendered to him. It was held that the tender of one bill of lading was sufficient,
unless there was a stipulation to the contrary.
3. Bill of lading as evidence of the contract of carriage
(a) Carrier and shipper
Between the carrier and the shipper, the bill of lading is not necessarily the contract. This is logical
because the contract of carriage is concluded before the bill of lading is issued, .e.g. when goods are
accepted by the carrier for shipment. Bill of lading though not forming the contract of carriage of
goods by sea themselves are first class evidence of the contract between the parties. 22 In effect, it is
a very good evidence of the contract of carriage, and other evidence may be adduced to show that
the actual contract contained different terms, i.e. different from those contained in the bill of lading,
and hence, it is not conclusive, but only prima facie evidence.
In The Ardennes (Owner of Cargo) v. The Ardennes ( Owners) 23 there was a verbal contract
between the shipper and the carrier that the ship was to proceed directly from Cartagena to London
in a bid to evade additional import duty that was due to be increased on 1 December. However, the
bill of lading also contained a liberty clause allowing the carrier to stop on the way. The carrier did
stop at Antwerp, and thus did not get to London until 4 December. By that time the import duty was
increased and other cargoes had arrived, causing a fall in the price. The shipper sued the carrier for
deviating from the route, and the carrier relied on the liberty clause.
The issue of the case was what were the actual terms of the contract -- were they those in the bill of
lading or the verbal contract that was made.
It was held by the Court of Appeal that the bill of lading only constituted evidence of the contract of
carriage, and so other evidence could be admissible in rebuttal. The carrier was in breach of the
contract of carriage, and liable, since he was bound by what was actually agreed verbally.
(b) Carrier and consignee or endorsee for value
Between the carrier and the consignee or endorsee for value, the bill of lading is considered to
contain the full terms of the contract of carriage. The consignee or endorsee will be bound only by
17
Per Romer L.J.
18
Janette Charley, International Trade Law, 1st Edition.
19
(1951)
20
(1912) AC 18.
21
(1883) 11 QB 327.
22
M/s Abdul Rahman Abdul Gani v. M/s United Oriental Steamship Co. Karachi and others (1958) 11 DLR SC 133
23
(1951) 1KB 55.
6
the terms set out in the bill of lading as it is presumed that he accepted it subject to those terms, and
he knew nothing about any other terms agreed upon by the carrier and the shipper.
In Leduc v. Ward24 there was a verbal contract that the carrier could deviate. The bill of lading for
goods shipped from Fiume to Dunkirk gave ‘liberty to call at any ports in any order ...’ On shipowners
private business the ship deviated from her course some 1200 miles and went towards Glasgo. She
was lost in a storm in Clyde. The consignee sued for damages. It was held that the verbal contract
was inadmissible, and the liberty clause contained the terms of the contract, which merely gave a
right to call at any port in any order substantially in the course of the voyage. Glasgo was not in the
course of the voyage. Proceeding towards Glasgo was an unjustifiable deviation, and the carrier
was, therefore, liable.
(c) Carrier and holder of bill of lading
The court may imply that a contract of carriage (on the same terms as in the bill of lading) exists
between the carrier and the holder of the bill of lading, meaning a person, who is neither a
consignee, nor an endorsee for value.
In Brandt v. Liverpool Steam Navigation Co.25 a commercial bank held a bill of lading as security
for a loan it had made, i.e. the bank was a pledgee. The loan remained unpaid even on arrival of the
goods. So the bank paid the freight charges and discharged the goods, which were found damaged.
The bank, as the holder of the bill of lading, sued the carrier for compensation. It was held that a
contract of carriage could be implied between the carrier and the holder of the bill of lading, and the
holder could sue the carrier thereon. The terms of the contract of carriage were those as expressed
in the bill of lading. The carrier was, therefore, liable to pay compensation.
III. Relevant enactments
The Schedule to the Carriage of Goods by Sea Act 26
Article III Rule 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 --
(a) The leading marks necessary for identification of the goods as the same are furnished in writing by the
shipper ...:
(b) Either the number of packages or pieces, or the quantity, or weight, as the case may be, as furnished
in writing by the shipper:
(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.’
Article III Rule 4
‘Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described
in accordance with paragraph 3 (a), (b) and (c).’
Article III Rule 5
‘The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of the
marks, number, quantity, and weight, as furnished by him, and the shipper shall indemnify the carrier against all
loss, damages, and expenses arising or resulting from inaccuracies in such particulars. The right of the carrier to
such indemnity shall in no way limit his responsibility and liability under the contract of carriage to any person
other than the shipper.’
Article IV Rule 2
‘Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from --
(a) act, neglect, or default of the master, mariner, pilot or the servants of the carrier in the navigation or in
the management of the ship:
(b) fire, unless caused by the actual fault or privity of the carrier:
(c) perils, dangers and accidents of the sea or other navigable waters:
(d) act of God:
(e) act of war:
(f) act of public enemies:
(g) arrest or restraint of princes, rulers or people, or seizure under legal process:
(h) quarantine restriction:
(i) act or omission of the shipper or owner of the goods, his agent or representative:
(j) strikes or lock-outs or stoppage or restraint of labour from whatever cause, whether partial or general:
(k) riots and civil commotions:
(l) saving or attempting to save life or property at sea:
(m) wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice of
the goods:
(n) insufficiency of packing:
(o) insufficiency or inadequacy of marks:
24
(1888) 20 QBD 475.
25
(1924) 1 KB 575.
26
1925: Act XXVI.
7
(p) latent defects not discoverable by due diligence:
(q) any other cause arising without the actual fault or privity of the carrier, or without the fault or neglect of
the agents or servants of the carrier, but the burden of proof shall be on the person claiming the
benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or
neglect of the agents or servants of the carrier contributed to the loss or damage.’
Article IV Rule 3
‘The shipper shall not be responsible for loss or damage sustained by the carrier or the ship arising or resulting
from any cause without the act, fault or neglect of the shipper, his agents or his servants.’
The Bills of Lading Act27

Section 1
‘Every consignee of goods named in a bill of lading, and every
endorsee of a bill of lading to whom property in the goods therein
mentioned shall pass, upon or by reason of such consignment or
indorsement shall have transferred to and vested in him all rights of
suit and be subject to the same liabilities in respect of such goods as
if the contract contained in the bill of lading had been made with
himself.’28
Section 2
‘Nothing herein contained shall prejudice or affect any right of stoppage in transitu, or any right to claim freight
against the original shipper or owner, or any liability of the consignee or endorsee by reason or in consequence
of his being such consignee or endorsee, or of his receipt of the goods by reason or in consequence of such
consignment or indorsement.’29
27
1856: Act.
28Contracts are not assignable. Hence a transfer of a bill of lading with the
intention of passing the property in the goods, merely passed the property in
the goods, but did not transfer the rights and liabilities under the contract of
carriage. A great change was introduced by Section 1 of the Act of 1856.
Since the passing of the Act, with the passing of property, the rights and
liabilities under the original contract pass to the consignee or endorsee for
value, as if he was a party to it. Under Section 1, the transfer of bill of lading
assigns the contract of carriage, simultaneously with the passing of property .
Section 1 will not apply where just the possession of the goods, rather than the ownership, has passed.
Where Section 1 applies, the right to suit is vested exclusively in the

consignee or the endorsee for value. This means that in such a case the
shipper, who has concluded the contract of carriage with the carrier, cannot
claim damages for the loss sustained by the consignee or endorsee for value.
In The Albazero Case (1977, A.C. 774) crude oil was shipped from Venezuela to Antwerp under a bill of lading naming the
charterers as consignees. The bill of lading was subsequently transferred to an endorsee. Later, the vessel and her cargo
were lost. The charterers, as consignees, claimed damages from the carrier contending that the carriers were in breach of the
terms of the charterparty and that the loss had been caused thereby. It was held that the action failed, since the charterers
had no locus standi. By virtue of Section 1 the right of action was vested solely in the endorsee.
29
Shipper’s right of stoppage in transit
Section 2 preserves the right of the shipper to stop the goods in transit. By exercising this right, the unpaid seller can
resume possession of the goods as long as they are in the course of transit, and may retain them until the payment of price.
In connection with this right, four points are to be noted, namely.

(a) the buyer must be insolvent;
(b) the goods must be in transit. Generally, transit begins when the goods leave the seller’s possession, and ends when
they enter the buyer’s possession;
(c) it’s exercise does not rescind the contract of sale, but merely restores possession of the goods to the seller;
(d) it is defeated by a bona fidie transfer of the bill of lading for value.
In Lickbarrow v. Mason (1794, 1 Sm L C, 13th edn., 703.) the buyer indorsed the bill of lading to Lickbarrow, a bona fidie
purchaser for value. Later, the buyer became insolvent. The seller tried to stop the goods in transit, and sent one bill of
lading to Mason, who obtained possession of the goods. Lickbarrow sued Mason for recovery of the goods. It was held that
8
Section 3
‘Every bill of lading in the hands of a consignee or endorsee for valuable consideration, representing goods to
have been shipped, shall be conclusive evidence of such shipment as against the master or other person
signing the same, notwithstanding that such goods or some part thereof may not have been so shipped, unless
such holder of the bill of lading shall have had actual notice at the time of receiving the same that the goods had
not in fact been laden on board: Provided that the master or other person so signing may exonerate himself in
respect of such misrepresentation by showing that it was caused without any default on his part, and wholly by
the fraud of the shipper, or of the holder, or some person under whom the holder claims.’ 30
IV. Case: M/s Abdul Rahman Abdul Gani v. M/s United Oriental Steamship Co., Karachi, and others31
The plaintiffs shipped from Karachi to Chittagong 9800 bags of rape-seeds, 60 drums of rape-seed oil, 56
drums of cotton-seed oil and 50 drums of cocoanut-oil. The bill of lading contained the clause shipped in
“apparent good order and condition”, and the carrier promised to carry those goods and deliver them subject to
the terms and conditions of the bill of lading in the like good order and condition at the port of discharge. There
was another clause which was to the effect : “Attention is drawn to the packing of these goods which in the
opinion of the carrier is insufficient.” On arrival, 69 bags of rape-seeds and 1 drum of rape-seed oil were not
delivered at all, and out of 165 drums of oil delivered, 31 were found in damaged and broken condition. The
Lloyd’s surveyor surveyed the damage and find out that there was a shortage of 122 maunds 29 seers of cotton-
seed oil, 17 maunds 5 seers of rape-seed oil and 23 seers of cocoanut oil. The plaintiffs alleged that due to the
non-delivery of 69 bags of rape-seed and 1drum of rape-seed oil, they sustained a loss of Rs. 3298-3-0,
including the loss of profit at 10%, and due to the damage to the drums of cotton-seed, rape-seed and cocoanut
oil, the plaintiffs suffered a loss of Rs. 9075-13-9, including the loss of profit at 10%, and Lloyd’s survey fee of
Rs. 100. The plaintiffs in all claimed Rs. 12,474-0-9 pies as compensation.
Defendant no.1 hotly contested the suit and put up two alternative defences. They, firstly, contended that the
goods were shipped by the plaintiffs in dented and leaking containers insufficiently packed, as would be evident
from the mate’s receipt, and the loss was aggravated by rough and heavy seas, and the master of the vessel
duly entered his protest on arrival at the Port of Chittagong. Alternatively, he also contended that the damage
was due to insufficiency of packing and other latent defects not discoverable by due diligence without the fault of
the carrier, and without any fault or negligence on the part of their servants.
The learned Subordinate Judge found that the plaintiffs were entitled to recover Rs.3,298-3-0 as costs of 69
bags of rape seeds and 1 drum of rape-seed oil not delivered. He also allowed a decree for Rs.993-4-0 as costs
of rape-seed oil and drums damaged and Rs.15/- as Lloyd’s survey fee in proportion. In all, the learned
Subordinate Judge partly decreed the suit for a sum of Rs.4,026-8-0 as against defendant no.1, and he
dismissed the suit as against defendants nos. 2 and 3. The rest of the plaintiffs’ claim was also dismissed.
As regards defendant no.1’s liability for the damage of 31 drums of oil, the learned Subordinate Judge found
that the drums containing cotton-seed oil and cocoanut oil were old, dented and leaking, that the packing of the
containers was insufficient and in a bad condition; that the ship met with heavy seas on its way and that the
damage to the drums of cotton-seed oil and coconut oil were due to bad condition of the drums and packing,
aggravated by rough weather and heavy seas and, as such, defendant no. 1 was not liable for any loss and
damage to the cotton-seed oil and coconut oil.
The plaintiffs thereupon preferred this First Appeal .
Mr. S. K. Sen, the learned Advocate appearing for the appellant, contended,
(a) that the defendant no. 1, as a carrier, was in the position of a bailee and he has failed to prove that he
took reasonable care of the goods, and the loss was due to the misconduct and negligence of the employees of
the carrier and bad stowage of the consignments, and, as such, the learned Subordinate Judge was wrong in
refusing a decree for damages for the loss of balance of the oil claimed by them;
Lickbarrow was entitled to recover the goods, since the right of stoppage in transit was defeated by the bona fidie transfer
of the bill of lading for value to Lickbarrow.
Carrier’s right to freight

Section 2 preserves the right of the carrier to claim freight from the shipper, even though the bill of lading may have been
assigned to the consignee. So, the carrier can sue either the shipper or the endorsee of the bill of lading for the freight. By
shipping the goods, the shipper impliedly undertakes to pay for the freight. However, he is relieved of this obligation,
(a) where the master for his own convenience accepts a bill of exchange from a consignee, who was willing to pay cash;
(Strong v. Hart, 1827, 6 B & C 160.) or,
(b) where the bill of lading is indorsed with a clause freeing the shipper from the liability, and the carrier has knowledge
of such clause. (Watkins v. Rymill, 1883, 10 QBD 178.)
30 Section 3 does not make the master liable for non delivery of any goods represented as having been shipped. It only gives
the consignee or endorsee for value a statutory estopple. But the master is liable to an endorsee, who has relied on that
statement, for damages for breach of warranty of authority.30This is a personal liability which does not extend to the
shipowner on the ground that a master has no authority to issue a bill of lading when he has not at all received goods on
board the ship. ‘This remedy against the master, however, may be of little practical value since most masters of ships are
comparatively poor people.’ (Chorley and Giles’ Shipping Law, 7 th edn., 185.)
31
11 DLR (1959) SC 133.
9
(b) that defendant no. 1 admitted in the bill of lading that the goods were “shipped in apparent good order
and condition” and the carrier undertook to deliver the goods subject to the terms and conditions of the bill of
lading;
(c) that the containers were not dented and leaking, as was mentioned in the mate’s receipt, and that in the
bill of lading it is not stated that the drums were dented and leaking, and that the defendant no. 1 has failed to
discharge the onus on them;
(d) that the master’s protest, which is Ext. E, where he stated that he “experienced rough seas during the
voyage and fears damage to ship and cargo thereby...”, is not admissible in evidence. In the absence of the
master, it’s evidentiary value is nil.
The learned advocate Mr. S.R. Pal, on the other hand, appearing for the respondent contended,
(a) that the goods were shipped in dented, leaky and insufficiently packed containers, and this is evident from
the clause in the bill of lading which reads “Attention is drawn to the packing of these goods which in the opinion
of the carrier is insufficient ...,” and from the mate’s receipt, which is Ext. C, where it is stated that many bags
were torn and contents leaking and further the drums were “leaking, sunk, buckled”, and the damage was
occasioned by tilting and jolting on account of the heavy and rough seas and, as such, they had no liability for
any loss occasioned to the plaintiff;
(b) that the plaintiffs have failed to discharge their initial onus that the goods were shipped in good condition;
and
(c) that the defendant no. 1 has adduced evidence to show that there was no misconduct or negligence on
the part of their employees, and that the plaintiffs were not entitled to any damages on account of any
loss of profit to them.
In the Lloyds’s survey report, which is Ext. 1, the surveyor stated that he found the drums burst and out at
chimes and sides causing loss of contents and 26 drums were found empty and they were packed in
reconditioned drums, and, in his opinion, the loss of contents was due to bursting and cuts in drums apparently
due to bad stowage, and the stowage plan was not presented to him. The master mariner opined that the
damage was caused due to bad stowage.
The Supreme Court find,
(a) that the journey was taken in the month of August and it was expected that the seas would behave quite
normally in that season of the year. But except the Master’s protest, and the evidence of D.W. 1, there is no
other evidence on which reliance can be placed that the ship met with any exceptional or abnormal
circumstances during the voyage or that the seas behaved in an exceptional way during the voyage.
(b) that the position of defendant no. 1 was that of a bailee, and it is for him to prove that he used reasonable
care of the goods.
(c) that the hull survey report and the stowage plan which would have been relevant have been withheld. The
Lloyd’s Surveyor has referred that the loss was due to bursting and cuts in drums apparently due to bad
stowage. The mate’s receipt apparently, of course, shows that the containers were leaking and dented and the
survey report shows that the packing was done in reconditioned drums. But these do not explain the fact how
the drums could burst at chimes and sides. The defendant no. 1 has, therefore, withheld the best evidence on
the point.
(d) that the plaintiffs have discharged their initial onus, as would be evident from the bills of lading
themselves, where insufficient packing was definitely stated but at the same time it was also stated that the
goods were apparently in good order and condition.
The plaintiffs are accordingly entitled to damages for the loss of 122 maunds 29 seers of cotton-seed oil and 23
seers of coconut oil as claimed by them. They are also entitled to the balance of the Lloyd’s survey costs. In the
result, the appeal succeeds in part. The appeal is dismissed as against defendants nos. 2 and 3.
---------------------------------------------------
10
Ship-owner’s undertaking to provide a seaworthy ship
I. Introduction
Various undertakings are implied in charter-parties, bills of

lading and marine insurances. Such undertakings are implied
because they are so vital that without them the contract would
not function properly. One of such undertakings on the part of
the ship-owner is to provide a seaworthy ship.
In general, seaworthiness means the fitness of a vessel to
complete the contract voyage by encountering the ordinary
perils of the sea and other risks to which she may be exposed
to in the course of her voyage, and to receive and preserve
her cargo by encountering the malfunctions and problems of
the stowage system.
The ship-owner’s undertaking merely relates to the ordinary
perils and malfunctions likely to be encountered on the
voyage. He does not guarantee that the ship will withstand
any peril or malfunction.
‘Seaworthiness’ is used in two senses -- strict and wide. As
Lord Justice Scrutton observed32 ‘... the word
seaworthiness is used in two senses: (1) fitness of the
ship to enter on the contemplated adventure of navigation;
and (2) fitness of the ship to receive the comtemplated cargo
as a carrying receptable. A ship may be unfit to carry the
contemplated cargo, because, for instance, she has not
sufficient means of ventilation, and yet be quite fit to make the
contemplated voyage as a ship.’
Seaworthiness, in its strict sense, refers to the fitness of the
ship as an ‘efficient means of transport’, capable of
encountering the ordinary perils of the sea.
As an ‘efficient means of transport’, a ship is seaworthy when
her hull, tuckle, engine, equipments etc. are in good order
and condition, when she has an adequate stock of fuel and
ballast to complete the voyage, when she has necessary
papers and documents for the voyage and, of course, when
she is manned by competent and adequate number of crews.
Thus where the ship-owner, while appointing an engineer did
not enquire about his qualifications, and during the voyage the
ship’s engine broke down and the engineer, who was in fact,
32
Reed v. Page (1927) 1KB 743 (CA) 754.
11
wholly incompetent, failed to repair it33, or where the ship
proceeded on her journey with insufficient fuel and she had to
burn as fuel some of her cargo to enable her to get to the port
of destination34, or where due to the reason of taking an
avoidable excess of fuel, the ship had to incur expenses for
lightering35, it was held that the ship was unseaworthy.
Seaworthiness, in a wider sense, refers to the fitness of the
vessel as an ‘efficient floating warehouse’ for her cargo.
Obviously, this is a modern extension of the doctrine of
seaworthiness, and is often referred to as ‘cargoworthiness.’
As an ‘efficient floating warehouse’ a vessel is seaworthy
when she is properly equipped to carry the contract cargo.
Thus where the ship’s pumps were incapable of extracting
moisture from wet sugar36, or where iron armour plates broke
loose in rough weather and went through the side of the
vessel37, or where a cattle transport ship was not disinfected
after an out break of foot-and-mouth disease and failure to
disinfect the ship resulted in cattle contacting the disease38, or
where the refrigerating system, which was defective from the
very beginning, broke down during the voyage and the cargo
of meat suffered39, it was held that the ship was unseaworthy.
II. Seaworthiness and bad stowage
A ship may become unseaworthy due to bad stowage which
endangers the safety of the ship. Thus, in The Standale40 a
cargo of grain in bulk was stowed in the hold, but adequate
measures against its shifting was not taken. It was held that
the mode of stowage made the ship unseaworthy, since it
endangered its safety.
Where cargoes are damaged due to bad stowage but the safe
navigation of the vessel has not been impaired thereby, then it
does not amount to unseaworthiness. Thus in The Thorsa41
chocolate was stowed in the same hold with cheese. On
arrival at destination, the chocolate was found tainted with
cheese. It was held that the ship was seaworthy, since the
33
The Roberta (1938) 60 Ll. L.R. 85 (CA).
34
The Voltigern (1899) P. 140.
35
Darling v. Raeburn (1907) 1 KB 846.
36
Stanton v. Richardson (1874) L.R. 9 C.P. 390 (Ex. Ch.).
37
Kopitoff v. Wilson (1876) 1 QBD 377.
38
Tattersall v. National Steamship Co. (1884) 12 QBD 297.
39
Cargo per Maori King v. Hughes (1895) 2 QBD 550 (C.A.).
40
(1938) 61 Ll. L.R. 223.
41
(1961) 257.
12
stowage of chocolate and cheese in the same hold was
simply a bad stowage and it did not endanger the safety of the
ship.
III. Test of seaworthiness
To be seaworthy a vessel ‘must have that degree of fitness
which an ordinary, careful and prudent owner would require
his vessel to have at the commencement of her voyage,
having regard to all the probable circumstances of it.’42
The test of seaworthiness is ‘Would a prudent owner have
required the defect to be remedied before sending his ship to
sea if he had known of it? If he would, the ship was
unseaworthy.’43
Viscount Findlay laid down44 ‘... seaworthiness ... relates to
the condition of the vessel as regards its capacity to perform
the voyage with safety to itself and the goods and persons on
board.’ He posed the question: ‘Is the vessel fit to cope with
the perils of the sea?’ This is the vital test of a seaworthy ship
at the commencement of her voyage, since at that time she
must be fit for and capable of navigating on the contract
voyage and of safely transporting the cargoes to their port of
destination.’
Whether a vessel is seaworthy or not is a question of fact,
depending on the type of vessel, features of voyage, nature of
cargo, standards prevailing, knowledge possessed by the
parties to the contract at the time it is entered into etc. Thus
crossing the Atlantic requires stronger vessel than sailing
across the English Channel.
IV. Seaworthiness, whether a condition or a warranty
a. Charter-parties and Bills of Lading
The undertaking to provide a seaworthy vessel is one of a complex character which cannot be
categorised as being a ‘condition’ or a ‘warranty’. It embraces obligation with respect to every part
of the hull and machinery, stores, equipment and the crew. It can be broken by the presence of
trivial defects easily and rapidly remediable, as well as, by defects which must inevitably result in a
total loss of the vessel. Consequently, the problem is not soluble by considering whether the
undertaking is a ‘condition’ or a ‘warranty’.45 The undertaking is an undertaking one breach of
which may give rise to an event which relieves the charterer or shipper of further performance of
his part of the contract if he so elects, and another breach of which entitles him to monetary
compensation in the form of damages.46
b. Marine Insurances
In marine insurance, seaworthiness is always treated as an implied ‘warranty,’ and never as a
‘condition.’ Hence insurance cover does not cease on unseaworthiness. Clause 5.1 of the
42
McFadden v. Blue Star Line (1905) 1 KB 706.
43
Ibid.
44
Elder, Dempster & Co. v. Paterson, Zochonis (1924) AC 522 (HL), 539.
45
Ivamy, E. R. Hardy, Carriage of Goods by Sea, 12th Edn. (1985), 15.
46
Hong Kong Fir Shipping Co. Ltd. v. Kawasaki Kaisha Ltd. (1962) 1 All ER 474, P.487, CA.
13
standard Institute Cargo Clauses A, B and C provides that ‘In no case shall this insurance cover
loss damage or expense arising from unseaworthiness of vessel or craft or unfitness of vessel or
craft for the safe carriage of the subject-matter insured, where the Assured are privy to such
unseaworthiness or unfitness, at the time the subject-matter insured is loaded therein.’47
V. Nature of Undertaking
a. Charter-parties
The ship-owner is under an ‘absolute obligation’ to provide a seaworthy ship to the charterer,
unless otherwise agreed. In otherwords, the ship-owner is liable for unseaworthiness whether he
has been negligent or not.
The ship-owner can, however, exempt himself from the liability of unseaworthiness by using clear
and unambiguous language in the contract. Hence, general words do not afford any protection.
Thus in the Nelson Line (Liverpool) Ltd. v James Nelson & Sons Ltd.48 cargoes were shipped
under an agreement which stated that the ship-owner would not be liable for any damage ‘which is
capable of being covered by insurance.’ The cargoes were damaged due to unseaworthiness of
the ship. It was held that the clause was not sufficiently clear to exempt the ship-owner from the
obligation to provide a seaworthy ship.
Again, a mere right given to the charterer to inspect the vessel before loading and to satisfy himself
that she is fit for the contract cargo does not exempt the ship-owner from his obligation to supply a
cargoworthy vessel. Thus, in Petrofina S.A. of Brussels v. Compagnia Italiana Trasporto Olii
Minerali of Genoa 49 the charter-party of a tanker which was to carry a cargo of benzine provided
in clause (1) that the ship was to be ‘in every way fitted for the voyage and to be maintained in
such condition during the voyage.’ By clause (16) the master was bound to keep tanks, pipes and
pumps clean. Finally, under clause (27) the steamer should be clean for the cargo in question to
the satisfaction of the charterer’s inspector. The benzine was discoloured, due to the fault of the
steamer. The ship-owner, however, pleaded clause (27), and contended that he was only bound to
keep the tanks clean to the satisfaction of the charterer’s inspector, and the latter had in fact
expressed his satisfaction. It was held that the clauses (1) and (16) contained an express warranty
of sea, i.e. cargoworthiness, and that clause (27) far from derogating from that warranty, only gave
an additional right of inspection to the charterers. Without express words to this effect, the
satisfaction of the inspector could not be relied on as a discharge of the ship-owner’s obligation to
provide a seaworthy ship.
b. Bills of Lading
Before the enactment of the Carriage of Goods by Sea Act50 (unless otherwise excluded) the
carrier was under an ‘absolute obligation’ to provide a seaworthy vessel. The Act abolished the
‘absolute undertaking.’ Section 3 of the Act expressly provides ‘There shall not be implied in any
contract for the carriage of goods by sea to which the Rules apply any absolute undertaking by the
carrier of goods to provide a seaworthy ship.’
The ‘absolute obligation’ was substituted by a ‘qualified obligation.’ Article III, Rule 1 of the
Schedule to the Act provides ‘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.’
Again, Article VI, Rule 1, paragraph 1 of the Act provides ‘Neither the carrier nor the ship shall be
liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due
diligence on the part of the carrier to make the ship seaworthy, and to secure that the ship is
properly manned, equipped and supplied, and to 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 in accordance with the provisions of paragraph 1 of Article III.’
Whether due diligence has been exercised is a question of fact in each case. Thus a failure to
discover that the steelworks of a vessel was corroded51, or a failure to instruct engineers in the
operation of an oil fuel system52, or failure to see that a vessel’s sanitary water system was in
order53 is sufficient to prove absence of exercise of due diligence.
47
© Copyright: 11/08 - Lloyd's Market Association (LMA) and International Underwriting Association of London (IUA).
CL382 01/01/2009. Please visit www.lmalloyds.com.
48
(1908) AC 16, (1904-7) All ER Rep 244, HL.
49
(1937) 53 TLR 650 (CA).
50
1925 : Act XXVI, which applies only to bills of lading.
51
Aktieselskabet de Danske Sukkerfabriker v. Bajamar Compania Naviera SA, The Torenia (1983) 2 Lloyd’s Rep 210,
QBD (Com. Court).
52
The Makedonia (1962) 2 All ER 614.
53
International Produce Inc. and Greenwich Mills Co. v. SS Frances Salaman, Swedish Gulf Line AB and Compania de
Navegacao Maritima Netumar, The Frances Salman (1975) 2 Lloyd’s Rep.355.
14
Besides the carrier, due diligence is to be exercised by the employees, servants, agents and also
by independent contractors or ship repairers. In Riverstone Meat Co. Pty Ltd. v. Lancashire
Shipping Co. Ltd.54 a shipyard fitter employed by the ship repairers re-fixed some inspection
covers on some storm valves, but, due to negligence, failed to secure the nuts properly. The
omission was impossible to detect by visual inspection. The working of the ship in rough weather
loosened the nuts and sea water entered through the valve and damaged the cargo. The House of
Lords held that the negligence of the fitter was a lack of due diligence for which the carrier was
responsible.
c. Marine Insurances55
In a contract of marine insurance the law implies an ‘absolute warranty’ that the ship is seaworthy
at the commencement of the voyage, or at the commencement of any stage. Thus the insurer is
discharged though unseaworthiness arises from hidden causes which no reasonable examination
could reveal.
The rules of law and private contracts, however, have contributed much to mitigate this rigour:
1. In time policies, the absolute warranty of seaworthiness does not apply; and
2. In voyage policies of goods, when the clause ‘seaworthiness admitted’ is inserted, the insurer
promises to pay the assured, in spite of the unseaworthiness of the ship, in which goods are
being carried.
VI. Time of Seaworthiness
a. Charter-parties
In a voyage charter-party, the ship-owner must provide a seaworthy ship to the charterer at the
beginning of the voyage.
According to Mr. Justice Field56 ‘... the warranty of seaworthiness ... is a warranty that the ship is
or shall be seaworthy for the voyage at the time of sailing on it. That is the point at which the risk
commences, at which the warranty attaches ...’
It is important to note that in the case of time charters, the implied undertaking of seaworthiness
attaches at the commencement of the period during which the vessel is on hire.57
b. Bills of Lading
Article III, Rule 1 of the Schedule to the Carriage of Goods by Sea Act58 provides that a ship must
be seaworthy ‘before and at the beginning’ of her voyage.
In Maxine Footwear Co. Ltd. v. Canadian Government Merchant Marine 59 it was laid down that
the words ‘before and at the beginning of the voyage’ cover the period from at least the beginning
of loading until the vessel starts on the voyage. The liability under Article III begins at least when
loading begins.
Seaworthiness needs only to exist ‘before and at the beginning’ of the voyage, and there is no
implied undertaking that the ship will continue to be seaworthy throughout the voyage. Where the
ship is seaworthy at the commencement of her voyage but subsequently becomes unseaworthy at
sea, and incurs loss, the liability will be determined not by reference to the implied undertaking as
to seaworthiness60, but by reference to the cause of the loss. The ship-owner will be protected if
loss was due to an excepted peril, otherwise he will not. The fact that the ship is fit for sailing at the
commencement of her voyage will not relieve the ship-owner from liability for a breach of the
implied undertaking, if subsequently, she suffers loss or damage due to an unseen defect or
weakness which had existed when she first set out.
c. Marine Insurances
In a voyage policy a ship must be seaworthy at the commencement of the voyage. On the other
hand, in a time policy a ship must be seaworthy at the beginning of the period for which the policy
is taken.
VII. Seaworthiness by Stages
a. Charter-parties
In a voyage charter where the voyage is divided into several stages, the ship must be seaworthy
at the beginning of each new stage, so as to be able to complete that part of the voyage, so that
when she commences the first stage, she need not be fit for the second or third stage. On the
completion of each stage she must have that degree of fitness which is required for the next stage.
The object of this doctrine is to mitigate the harshness of seaworthiness upon the ship-owner.
54
(1961) AC 807, (1961) 1 All ER 495, H.L.
55
For details see Giles, O.C., Shipping Law, 7th Edn., (1982),375.
56
Cohn v. Davidson (1877) 2 QBD 455.
57
Reed v. Page (1927) 1 KB 743.
58
1925 : Act XXVI.
59
(1959) AC 589.
60
since the ship had been seaworthy at the time when she sails, and as such the implied undertaking had been complied
with.
15
The stages of a voyage are usually determined by different physical conditions, e.g. river and sea,
fueling ports or ports of loading, which must be usual and reasonable. Thus in The Voltigern61 a
vessel sailed from the Philippines to Liverpool. The charter-party excluded liability for the
negligence of the master and engineers. The voyage was divided into several stages. She called at
Colombo, but did not take on sufficient coal for the next stage to Suez. When she was near a
coaling station, the master did not take on any more fuel as he was not warned by the engineer
that supplies were running short. Some of the cargoes had to be burned as fuel to enable her to
get to Suez. It was held that the ship-owners could not plead the exception clause, since he had
not made the vessel seaworthy at the commencement of each stage of the voyage.
The doctrine of stages does not apply to time charters. Hence the undertaking of seaworthiness in
such charters does not arise afresh at the commencement of each of the voyages. The
undertaking is satisfied for the whole period of hiring if at the commencement of that period the
vessel is in a seaworthy condition.62
b. Bills of Lading
The principles of seaworthiness by stages relating to voyage charter-party, applies to bill of lading.
The doctrine of stages applies only to voyage policies, and not to time policies.
VIII. Burden of proving unseaworthiness
a. Charter-parties
The burden of proving unseaworthiness is upon the charterer. There is no presumption of law that
a ship is unseaworthy because she breaks down or even sinks from any unexplained reason.
However, in exceptional cases the facts may raise an inference of unseaworthiness. Thus in
Fiumana Societa di Navigazione v. Bunge & Co. Ltd.63 an unexplained fire broke out in the coal
bunker. It was held that it could be presumed that this was due to unfitness of the coal banker, and
as such the ship was unseaworthy.
b. Bills of Lading
Article IV, Rule 1, Paragraph 2 of the Schedule to the Carriage of Goods by Sea Act64 provides
‘Whenever loss or damage has resulted from unseaworthiness, the burden of proving the exercise
of due diligence shall be on the carrier or other person claiming exemption under this Article’.
The shipper must establish a prima facie case of unseaworthiness and that he has sustained loss
or damage thereby. Then the burden of proving the exercise of due diligence to make the ship
seaworthy shall be on the carrier.65
The carrier does not discharge the burden of proving that due diligence has been exercised by
proof that he engaged competent experts to perform and supervise the task of making the ship
seaworthy. The state imposes an inescapable personal obligation.66 Hence a clause stating that a
survey certificate shall be conclusive evidence of due diligence to make the ship seaworthy is
void.67
The burden of proving unseaworthiness is upon the person who allege it.
IX. Effect of Unseaworthiness
a. As regards Contract of Carriage
Before the commencement of the voyage if the charterer or shipper discovers that the ship is
unseaworthy and the ship-owner fails to make it seaworthy by the date named in the contract for
the commencement of loading, or where no date is fixed within a reasonable time, then the
charterer or shipper’s obligation to load is conditional upon the ship being seaworthy at the port of
loading. Thus in Stanton v. Richardson68 a ship was chartered to take cargo including wet sugar.
When the bulk of the sugar had been loaded, it was found that the pumps were not of sufficient
capacity to remove the drainage from the sugar and the cargo had to be discharged. Adequate
pumping machinery could not be obtained within a reasonable time, and the charterer refused to
load. It was held that the ship was unseaworthy for the cargo agreed on, and as she could not be
made fit within a reasonable time, the charterer was justified in refusing to load.
In Hong Kong Fir Shipping Co. v. Kawasaki 69 Solmon J. and all the members of the Court of
Appeal were clearly of the view that unseaworthiness by itself was not a breach of a condition
61
(1899) P.140.
62
Giertsen v. Tunbull & Co. (1908) SC 1101.
63
(1930) 2 KB 47.
64
1925 : Act XXVI.
65
Minister of Foods v. Reardon Smith Line (1951) 2 Lloyd’s Rep 265.
66
Per Lord Keith of Avonholme (1961) AC 807.
67
The Australia Star (1940) 67 Ll. 2 Rep.110, 116.
68
(1874) LR 9 CP 390 (Ex. Ch.).
69
(1962) 2 QBD 26.
16
entitling the charterer at once to rescind the charter : to justify that, the delay must be so great as
to frustrate the commercial purpose of the charter.
After the commencement of the voyage, if the charterer discovers that the ship is unseaworthy,
then he cannot rescind the contract, however, he can claim damages, but for such damage as is
actually caused by unseaworthiness.
b. As regards Freight
Where the charterer or shipper rescinds the contract of carriage, the ship-owner is not entitled to
any freight. On the other hand, the charterer or shipper must pay full freight, where inspite of
unseaworthiness the contract subsists, or where the unseaworthiness is waived.
c. As regards general average
The ship-owner cannot claim general average contribution from the charterer or shipper where
unseaworthiness was the cause of the common danger.
d. As regards limitation of liability
Where his ship has been unseaworthy, and causes loss or damage, the ship-owner can neither
rely on any clause in the charter-party or in the bill of lading entitling him to limit his liability, nor
claim demurrage.
e. As regards carrier’s immunities
If a ship is unseaworthy, and there is a connection between unseaworthiness and subsequent loss
or damage, then the ship-owner cannot rely upon any exception clause, since it only applies to
perils of the voyage and not to initial defects. Thus in Tattersal v. National Steamship Co.70 a
ship, which on a previous voyage had carried cattle suffering from foot-and-mouth disease, was not
properly disinfected, with the result that a subsequent cargo of cattle contacted the disease. The
bill of lading stated that the ship-owners were not to be responsible for disease or mortality and
limited their liability in any event to five Pound Sterling per head. The ship-owners sought to rely
upon this clause, but it was held that they could not do so since they had failed to provide a
cargoworthy ship.
But the ship-owner can rely upon exception clause where the connection between
unseaworthiness and subsequent loss cannot be proved. This rule also applies to a case where in
spite of the ship being unseaworthy, the damage was caused by another peril. Thus in The Europa
71
there was a clause in the charter-party excepting collision. At the start of her voyage the vessel
was unseaworthy by reason of the fact that two upper holes had been imperfectly plugged. While
entering the port of destination the ship collided with a dock wall, and a water-closet pipe was
broken. Water passing through the broken pipe entered the tween decks and damaged some
sugar which was stowed there. Water also flowed through the upper holes onto sugar in the lower
hold. It was not disputed that this imperfect plugging existed before the cargo was loaded and
thereby the ship was unseaworthy. The owners of the Europa did not, therefore, dispute their
liability for the damage to the sugar in the lower hold, admitting that it was caused by the
unseaworthiness. But they did dispute their liability for the damage to the sugar in the tween decks.
It was held that they were not liable for this damage. The damage to the sugar in the tween decks
was caused not by unseaworthiness, but by collision, and so the owners were entitled to rely on
the exception clause.
The Europa was approved and followed by the House of Lords in Kish v. Taylor, Sons & Co.72
The carrier’s immunities are as follows:
1. Charter-parties
The ship-owner is responsible for any loss or damage to the goods which he is carrying, unless
it is covered by the exception clauses contained in the charter-party. If the charter-party is silent
on this matter, then the court will presume the following exceptions:
(a) act of God;
(b) act of foreign enemies;
(c) act of war;
(d) inherent vice in the goods themselves;
2. Bills of Lading
The Carriage of Goods by Sea Act73 sets out a list of ‘excepted perils.’ But the ship-owner
cannot rely on them if he has not carried out his obligation under Article III, Rule 1 of the
Schedule to the Act, to exercise due diligence to make the ship seaworthy and its non-fulfillment
causes the damage.74
70
(1884) 12 QBD 207 : 5 Asp MLC 206.
71
(1908) P. 84, 93.
72
(1912) AC 604.
73
1925 : Act XXVI.
74
Maxine Footwear Co. Ltd. v. Canadian Govt. Merchant Marine Ltd. (1959) AC 589.
17
Article IV, Rule 2 of the Schedule to the Act75 provides ‘Neither the carrier nor the ship shall be
responsible for loss or damage arising or resulting from --
(a) act, neglect, or default of the master, mariner, pilot or the servants of the carrier in the
navigation or in the management of the ship:
(d) act of God:
(e) act of war:
(j) strikes or lock-outs or stoppage or restraint of labour from whatever cause, whether partial
or general:
(m) wastage in bulk or weight or any other loss or damage arising from inherent defect, quality,
or vice of the goods:
(q) any other cause arising without the actual fault or privity of the carrier, or without the fault or
neglect of the agents or servants of the carrier, but the burden of proof shall be on the
person claiming the benefit of this exception to show that neither the actual fault or privity of
the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the
loss or damage.’
3. Marine Insurance
Various losses for which the insurer is not liable to indemnify the assured are as follows:76
(a) losses not proximately caused by the perils insured against;
(b) losses caused by the willful misconduct of the assured;
(c) losses caused by delay;
(d) losses caused by ordinary wear and tear;
(e) losses caused by inherent vice;
(f) other losses e.g. those caused by vermin.
XI. Conclusion
We may conclude that the standard of seaworthiness raises with the change of time. The invention
and development of modern equipments e.g. life saving appliances, equipments for detecting,
controlling and extinguishing fire, weather forecast equipments, tele-communication installations etc.
and their efficiency and accuracy when considered reveal that they are indispensable for ships built
today. Hence a modern ship without these equipments would be unseaworthy in today’s context,
though a wooden ship with sails built a hundred years ago without these equipments was perfectly
seaworthy in those days. Although the standard of seaworthiness raises with the change of time, yet
the basic principles of seaworthiness remain the same, i.e. the capability of the ship to complete the
voyage by encountering the ordinary perils of the sea and to receive and preserve the cargo by
encountering the ordinary malfunctions of the stowage system.
-----------------------------------------
75
1925 : Act XXVI.
76
Ivamy, E. R. Hardy, General Principles of Insurance Law, 6th Edn. (1993), 285.
18
Ship-owner’s undertaking to proceed without deviation
I. Introduction
The undertakings implied in charter-parties, bills of lading and marine insurances are various. Such
undertakings are implied because they are so vital that without them the contract of affreightment
would not function properly. One of such undertakings on the part of the ship-owner is that the ship
shall proceed on the contract route without deviation. Naturally, if the ship is to reach destination on
time, she must not deviate. The Courts have given effect to this very reasonable proposition in a
number of judicial decisions, which have established the doctrine of deviation, under which the master
is held strictly, as a general rule, to follow the proper route.
In general, deviation means departure from the prescribed or ordinary route, which the ship should
follow in fulfilment of the contract of carriage. In the absence of express stipulations to the contrary,
the ship shall proceed on her contract voyage without making any unjustifiable deviation from her
usual, reasonable or proper route and without unreasonable delay.77 Where the route of adventure is
laid down in express terms in the contract of carriage, then that is the proper route. On the other hand,
where the route is not prescribed and the contract simply stipulates the port of loading and the port of
discharge, the proper route between these two termini is that which is nautically usual78 or ordinary
trade route. ‘If no evidence be given, that route is presumed to be the direct geographical route, but …
evidence may always be given to show what the usual route is … In some cases there may be more
than one usual route.’79
In Reardon Smith Lines Ltd. v. Black Sea and Baltic General Insurance Co. Ltd.80 a vessel bound
from Poti (in the Black Sea) to Sparrow’s Point (in the USA) stopped for bunkering at Constanza,
which was not on her direct geographic route. She was stranded at Constanza, and the cargo-owner
sustained loss due to the delay. There was evidence that about 25% vessels proceeding from Black
Sea ports to Bosphoras bunker at Constanza. It was held by the House of Lords that no deviation has
occurred, since the ship was on a customary route.
Again, in Al-Sayer Navigation Co. v. Delta Int. Traders81 the respondent, a Bangladeshi firm,
imported salt from North Yemen. The salt was shipped from Hodeidah port of North Yemen, and the
bill of lading was issued on 31st December 1977. Normally, a voyage from the Hodeidah port to the
Chalna port of Bangladesh takes 3-4 weeks, and the expected date of arrival was 27th January 1978.
The ship, instead of proceeding towards Chalna port, travelled in the opposite direction to a port of
Dar-es-Salam. Such travelling was inconsistent with the contract of carriage. The ship reached
Chalna port on 1st April 1978. The respondent, amongst others, claimed that there was undue delay
and deviation. The Appellate Division of the Supreme Court of Bangladesh held that the proceeding of
the ship in the opposite direction towards Dar-es-Salam was in violation of the bill of lading and was
an unauthorised deviation. The carrier must be held responsible for such deviation, as it was one of
the causes of undue delay in arrival of the ship at the port of Chalna.
II. No deviation, whether a condition or a warranty
a. Charter-parties and Bills of Lading
The undertaking of no deviation is a ‘condition,’ and not a ‘warranty.’ It can be broken by trivial
unjustifiable deviation, as well as, by unjustifiable deviation which may inevitably result in a total
loss of the vessel. Breach of this undertaking relieves the charterer or shipper of further
performance of his part of the contract, if he so elects.
Fletcher Moulton, L.J. laid down82 ‘…a deviation is such a serious matter, and changes the
character of the contemplated voyage so essentially, that a ship-owner who has been guilty of a
deviation cannot be considered as having performed his part of the bill of lading contract, but
something fundamentally different. He therefore cannot claim the benefit of stipulations in his
favour contained in the bill of lading.’
Similarly, Lord Atkin observed83 that ‘I venture to think the true view is that the departure from the
voyage contracted to be made is a … breach of such a serious character that, however slight the
deviation, the other party to the contract is entitled to treat it as going to the root of the contract,
and to declare himself as no longer bound by any of the contract terms.’
b. Marine insurances
In marine insurance, deviation is treated as a ‘warranty’, and not as a ‘condition.’ Hence insurance
cover does not cease on deviation. Clause 8.3 of the standard Institute Cargo Clauses A, B and C
provides that ‘This insurance shall remain in force … during delay beyond the control of the
77
Davis v. Garrett (1830) 6 Bing. 716.
78
Evans v. Cunard S.S. Co. (1902), 18 T.L.R. 374.
79
Reardon Smith Lines Ltd. v. Black Sea and Baltic General Insurance Co. Ltd., The Indian City (1939) AC 562, 584.
80
Ibid.
81
Appellate Division (Civil) 34 DLR 1982, 110.
82
Joseph Thorley, Ltd. V. Orchis S.S. Co. (1907) 1 K.B., 660.
83
Hain SS Co. Ltd. v. Tate and Lyle Ltd. (1936) 2 All ER 597 HL 601.
19
Assured, any deviation, forced discharge, reshipment or transhipment and during any variation of
adventure arising from the exercise of a liberty granted to carriers under the contract of carriage.’84
It is obvious that Clause 8.3 covers deviation and other situations. For example where during
repairs, the cargoes are warehoused, the insurance cover continues. When the events listed in
Clause 8.3 occurs, the insured is not required to give notice to the insurer or to pay any extra
premium.
III. JUSTIFIABLE DEVIATIONS
Apart from any express terms of the contract, in certain cases, deviations are justified and, therefore,
the ship-owner will incur no liability. Such deviation, however, must not defeat the main object of the
contract of carriage.
The justifiable deviations are as follows:
a. Deviation in saving human life or property at sea
1. Charter-parties
Previously, deviation to save human life at sea was justified, but not to save property, unless
there was an express stipulation in the carter-party to that effect. Thus in Scaramanga v.
Stamp85 a ship deviated from her course to assist another in danger. But instead of saving the
crew only, she attempted to earn salvage by towing the distressed ship into port. In doing so,
she went ashore and was lost with her cargo. It was held that the deviation was unjustifiable and
the ship-owner was liable for the loss of the cargo.
Now, the BIMCO General Time Charter-party (Code name Gentime) contains express provision
justifying deviation in saving life or property or both at sea. Clause 9(b) of the Gentime provides
that ‘In the event of the Vessel deviating … for reasons other than to save life or property the
Vessel shall be off-hire from the commencement of such deviation …’86
2. Bills of lading
Article IV, Rule 4 of the Schedule to the Carriage of Goods by Sea Act87, which applies only to
bills of lading, provides that ‘Any deviation in saving or attempting to save life or property at sea
or any reasonable deviation shall not be deemed to be an infringement … of the contract of
carriage, and the carrier shall not be liable for any loss or damage resulting therefrom.’
Lord Atkin laid down88 that to be reasonable, a deviation need not only be made in the joint
interests of the ship and the cargo, or to avoid an imminent peril. ‘A deviation may, and often
will, be caused by fortuitous circumstances never contemplated by the original parties to the
contract; and may be reasonable though it is made solely in the interests of the ship or solely in
the interests of the cargo or indeed in the direct interest of neither: as for instance where the
presence of a passenger or of a member of the ship’s crew was urgently required after the
voyage had begun on a matter of national importance; or where some person on board was a
fugitive from justice, and there were urgent reasons for his immediate appearance. The true test
seems to be what departure from the contract voyage might a prudent person controlling the
voyage at the time make and maintain, having in mind all the relevant circumstances existing at
the time, including the terms of the contract and the interest of all parties concerned, but without
obligation to consider the interests of any one as conclusive.’
Whether a deviation is reasonable or not is a question of fact in each particular case. In Stag
Line Ltd. v. Foscola, Mango & Co. Ltd.89 mangoes were shipped from Swansea to
Constantinople. The ship deviated from her contractual route and went to St. Ives for the
purpose of dropping two engineers, who had been testing her fuel-saving apparatus. Before the
vessel regained the contract route, she struck a rock and wrecked. It was held by the House of
Lords that the deviation was unreasonable, since the dropping of two engineers do not fall
within purposes connected with the contractual voyage.
Again, a deviation is reasonable where it is made in order to comply with any orders given by
the government of the nation under whose flag she sails.90
b. Deviation necessary for safety of adventure
Deviation is justified when it is necessary for the prosecution of the voyage, or for the safety of the
adventure, because one of the main duties of the master is bring the voyage to a successful
conclusion by protecting the ship and the cargoes from undue risks. Thus where the ship sustained
84 © Copyright: 11/08 - Lloyd's Market Association (LMA) and International Underwriting Association of London (IUA).
CL382 01/01/2009. Please visit www.lmalloyds.com.
85
(1880) 5 CPD 295.
86
Gentime is published by the Baltic & International Maritime Council (BIMCO), Copenhagen and issued in September
1999. Please visit www.infomarine.gr/bulletins/chartering_forms/gentime.pdf .
87
1925 : Act XXVI.
88
Stag Line Ltd. v. Foscola, Mango & Co. Ltd. (1932) A.C. 328.
89
(1932) A.C. 328.
90
Luigi Monta of Genoa v. Cechofracht Co. Ltd. (1956) 2 QB 552.
20
damage and repairs became indispensable, and the ship was taken to the nearest port for effecting
such repairs,91 or where the master made a deviation on receiving reliable information that by
pursuing the contract route the ship or cargo will run into imminent danger by ice-burgs, heavy fog,
hurricanes, pirates or hostile capture,92 there it was held that the deviation was justifiable. Again,
deviation is justified, though caused by the initial unseaworthiness of the ship, where it would be
dangerous to keep her at sea without effecting necessary repairs. Thus in Kish v. Taylor, Sons &
Co.93 a ship became unseaworthy due to overloading. During the voyage this unseaworthiness
obliged her to deviate from her normal route and to proceed to a port for repairs. It was held that
the deviation was justifiable. The fact that it was caused by initial breach of contract did not make
an otherwise reasonable deviation unreasonable.
Lord Atkinson laid down94 ‘…must the master of every ship be left in this dilemma, that whenever,
by his own culpable act, or a breach of contract by his owner, he finds his ship in a perilous
position, he must continue on his voyage at all hazards, or only seek safety under the penalty of
forfeiting the contract of affreightment? Nothing could, it would appear to me, tend more to increase
the dangers to which life and property are exposed at sea than to hold that the law of England
obliged the master of a merchant ship to choose between such alternatives.’
c. Liberty to deviate clause
Deviation is justified when it is covered by the liberty clause contained either in the charter party,
bill of lading or marine insurance95. The liberty clauses must be construed in such a way so that
they do not defeat the object of the contract of carriage. If the terms of contract give the carrier
‘liberty to call at any port,’ off the ordinary route, it must be construed as meaning the right to call at
any port substantially in the course of the voyage. Vague general terms, however, do not justify
such deviation. In Leduc v. Ward96 the bill of lading for goods shipped from Fiume to Dunkirk gave
‘liberty to call at any port in any order …’ On ship-owner’s private business the ship deviated from
her course some 1200 miles and went towards Glasgo. She was lost in a storm in the Clyde. It was
held that the liberty clause merely gave a right to call at any port in the course of the voyage.
Glasgo was not in the course of the voyage. Proceeding towards Glasgo was an unjustifiable
deviation and the ship-owner was, therefore, liable.
Again, in Stag Line Ltd. v. Foscola, Mango & Co. Ltd.97 it was held by the House of Lords that
where the bill of lading gave ‘liberty to call at any port in any order for bunkering or other purposes
…,’ the word ‘other purposes’ should be construed as meaning to call at any port for some purpose
having relation to the contract voyage.
The deviation clause most commonly met with, viz. ‘with liberty to call at any port or ports in any
order,’ gives comparatively little latitude, for it has been construed to mean only any ports which
are normally passed in the ordinary course of the voyage. More than that, the clause has proved a
broken reed to the ship-owners.98 That is why a very comprehensive deviation clause is
recommended for more protection of the ship-owner. In Connolly Shaw Ltd. Nordenfjeldske S. S.
Co.99 the bill of lading for lemon shipped from Palermo to London gave ‘liberty, either before or
after proceeding towards the port of delivery of the said goods, to proceed to or return to and stay
at any ports or places whatsoever (although in a contrary direction to or out of or beyond the route
of the said port of delivery) once or oftener in any order backwards or forwards for loading or
discharging cargo passengers coals or stores or for any purpose whatsoever … and also such
ports places and sailing shall be deemed included within the intended voyage of the said goods.’
Before proceeding to London the ship deviated to Hull. In spite of the delay, the lemons arrived in
London in good condition, but in the interval the price of lemons had fallen. The endorsee of the bill
of lading sued the ship-owner for the damages they had sustained due to the dropping of price
which occurred during the delay. It was held that the endorsee was not entitled to damages, since
the deviation to Hull was covered by the liberty clause.
IV. EFFECTS OF UNJUSTIFIABLE DEVIATION
a. As regards contract of carriage
An unjustifiable deviation relieves the charterer or shipper of further performance of his part of the
contract, if he so elects. Unjustifiable deviation does not of itself abrogate the contract of carriage.
It is open to the party not in default either to treat the contract as repudiated or to waive the breach
and treat it as subsisting.
91
James Phelps & Co. v. Hill (1891) 1 QB 605.
92
The Teutonia (1872) LR 4 PC. 171.
93
(1912) AC 604.
94
Ibid.
95
Clause 8.3 of the standard Institute Cargo Clauses A, B and C provides that ‘This insurance shall remain in force …
during any variation of adventure arising from the exercise of a liberty granted to carriers under the contract of carriage.’
For source, see footnote 8.
96
(1888) 20 QBD 475.
97
(1932) A.C. 328.
98
Chorley & Giles’ Shipping Law, 7th Edition, 211.
99
(1934) 50 TLR 418.
21
Lord Atkin observed100 that ‘I venture to think the true view is that the departure from the voyage
contracted to be made is a breach by the ship-owner of his contract, a breach of such a serious
character that, however slight the deviation, the other party to the contract is entitled to treat it as
going to the root of the contract, and to declare himself as no longer bound by any of the contract
terms … If this view be correct, then the breach by deviation does not automatically cancel the
express contract, otherwise the ship-owner by his own wrong can get rid of his own contract.’
Where the contract of carriage is for more than one voyage, and the ship deviated on her first
voyage, the charterer or shipped is justified in refusing to load on the second voyage. Thus in
Compagnie Primera v. Compania Arrendataria101, where a voyage charter-party contained the
clause that it should remain in force for ‘two consecutive voyages at the same rate of freight and
upon the same terms and conditions’ and the vessel made deviation on the first voyage, it was held
by the Court of Appeal that since the charter party was not indivisible, a deviation on the first
voyage relieved the charterers of further performance of their part of the contract on the second
voyage, if they have chosen to treat the contract as repudiated.
The charterer or shipper may, however, waive the unjustifiable deviation and treat the contract as
subsisting. In that case his acts must clearly show that he intended to treat the contract as still
binding.102 ‘A waiver to be operative so that a party’s claim is estopped must be unequivocal,
definite, clear, cognate and complete.’103
It was held by the House of Lords104 ‘For this purpose the case is like any other breach of a
fundamental condition, which constitutes the repudiation of a contract by one party; the other party
may elect to treat the repudiation as being final, but to treat the contract as subsisting…’
Where the charter or shipper waives the deviation and treat the contract as subsisting, he will be
entitled to damages for loss actually caused by the deviation.105
b. As regards freight
Where the charterer or shipper rescinds the contract of carriage, the ship-owner is not entitled to
any freight. However, where the contract is repudiated, but even then the goods reach their
destination safely, the ship-owner is entitled to a reasonable sum as freight on the basis of
quantum meruit, as he has essentially performed his obligation to carry.106 On the other hand, the
charter or shipper must pay full freight, where in spite of unjustifiable deviation the contract
subsists, or where the unjustifiable deviation is waived.
c. As regards general average
The ship-owner cannot claim general average contribution from the charterer or shipper where
unjustifiable deviation was the cause of the common danger. Again, where initial unseaworthiness
forced the ship to deviate, the ship-owner cannot recover general average contributions in respect
of expenses at the port of refuge.107
d. As regards limitation of liability
Where unjustifiable deviation has occurred, the ship-owner can neither rely on any clause in the
charter-party or in the bill of lading entitling him to limit his liability,108 nor claim demurrage.109
e. As regards carrier’s immunities
Where there has been an unjustifiable deviation, the ship-owner cannot rely on immunitiy clauses,
or exception clauses or any clause exempting his liability. Unjustifiable deviation is regarded as a
fundamental breach and the carrier is deprived of the protection of the exclusion clauses on the
principle that some breaches of contract are so contrary to the basic requirements of a particular
contract that the benefit of any clause is lost to the party in breach. Thus in Joseph Thorley, Ltd.
v. Orchis S.S. Co.110 the bill of lading exempted the ship-owner from liability for loss arising from
negligence of stevedores, appointed by them. Later the ship deviated from the proper route. The
ship-owner was held to be debarred from relying on the exemption clauses.
The carrier’s immunities are as follows:
1. Charter-parties
The ship-owner is responsible for any loss or damage to the goods which he is carrying, unless
it is covered by the exception clauses contained in the charter-party. If the charter-party is silent
on this matter, then the court will presume the following exceptions:
100
Hain SS Co. Ltd. v. Tate and Lyle Ltd. (1936) 2 All ER 597 HL 601.
101
(1940) K.B. 362.
102
Ibid.
103
McCormick v. National Motor Insurance (1934) 40 Com. Cas. 76, 93.
104
White & Carter v. McGregor (1962) A.C. 413 (H.L.).
105
Hain S.S. Co. v. Tate & Lyle. Ltd. (1936) 2 All ER 597, 601 HL.
106
Ibid.
107
Schloss v. Heriot (1863) 14 CBNS 59.
108
Cunard SS Co. Ltd. v. Buerger (1927) AC 1 HL.
109
United States Shipping Board v. Bungey Born Ltda Sociadad (1925) 134 LT 303.
110
(1907) 1 K.B., 660.
22
(a) act of God;
(b) act of foreign enemies;
(c) act of war;
(d) inherent vice in the goods themselves; and
(e) the negligence of the owner of goods;
2. Bills of Lading
The Carriage of Goods by Sea Act111 sets out a list of ‘excepted perils.’ But the ship-owner
cannot rely on them if he has committed unjustifiable deviation and such deviation is the cause
the damage.
Article IV, Rule 2 of the Schedule to the Act112 provides that ‘Neither the carrier nor the ship shall
be responsible for loss or damage arising or resulting from --
(a) act, neglect, or default of the master, mariner, pilot or the servants of the carrier in the
navigation or in the management of the ship:
(d) act of God:
(e) act of war:
(j) strikes or lock-outs or stoppage or restraint of labour from whatever cause, whether partial
or general:
(m) wastage in bulk or weight or any other loss or damage arising from inherent defect, quality,
or vice of the goods:
(q) any other cause arising without the actual fault or privity of the carrier, or without the fault or
neglect of the agents or servants of the carrier, but the burden of proof shall be on the
person claiming the benefit of this exception to show that neither the actual fault or privity of
the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the
loss or damage.’
3. Marine Insurances
Various losses for which the insurer is not liable to indemnify the assured are as follows:113
(a) losses not proximately caused by the perils insured against;
(b) losses caused by the wilful misconduct of the assured;
(c) losses caused by delay;
(d) losses caused by ordinary wear and tear;
(e) losses caused by inherent vice;
(f) other losses e.g. those caused by vermin.
V. Conclusion:
We may conclude that the ship-owner’s implied undertaking to proceed without deviation play a very
important part in international maritime law. When time is the essence, strict adherence to this
undertaking is very important. It can be broken by trivial unjustifiable deviation, as well as, by
unjustifiable deviation which may inevitably result in a total loss of the ship. The standard of no
deviation has gone up-gradation with the advent of time, yet the basic principles remained the same,
i.e. the ship should follow the proper route and must reach destination on time.
-------------------------------------------------------
111
1925 : Act XXVI.
112
1925 : Act XXVI.
113
Ivamy, E. R. Hardy, General Principles of Insurance Law, 6th Edn. (1993), 285.
23
Particular average and general average
Particular average
When the ship or the cargoes suffer damage to a situation beyond control or due to an accident, for
which nobody is responsible, the loss falls on the owner of the concerned property. This is particular
average. For instance, where bad weather causes damage to the ship and the ship has to put in for
repairs at a nearby port, the expenses of such repairs must be borne by the ship-owner. Again, where,
owing to over-heating, it becomes necessary to sell cargoes at an intermediate port at price less than
its value, the cargo-owners will have to bear the loss arising from such sale.
General average
When the ship and the cargoes are exposed to a common danger and to avert that danger some part
of the ship, or cargoes are intentionally sacrificed, or any extra-ordinary expenditure is incurred, then
the parties whose interests are thus saved shall be liable to contribute, in proportion to their interest
saved, to reimburse the parties, who have suffered the loss or incurred the expenditure. This is the
doctrine of general average. It is so called because the loss is borne proportionately by all the parties
involved.
Historical development of general average
In the old days, the merchants travelled with their goods. When common danger arose, general
average was agreed between the master and the merchants. Later, general average was founded on
an implied contract between the ship-owner and the cargo-owners, or on principles of equity and
natural justice.
General average was known to the Greeks and probably to the Phoenicians.114 This a very ancient
rule of maritime law. It originated in the law of Rhodes,115 reproduced in Justinian’s Digest,116 and
through the customs and usages of maritime trade and commerce, it became part of the common law
of England. Later general average was incorporated in section 66 of the (English) Marine Insurance
Act of 1906.
There exists a standard set of rules relating to the adjustment of general average, called the York-
Antwerp Rules, resulting from a series of International General Average Conferences. The name
‘York-Antwerp’ is derived from the places where conferences were held which brought the Rules into
existence. The Rules were first formulated in 1860. They have been revised on several occasions.
The latest version was introduced on 4th June 2004. The York-Antwerp Rules are not a complete or
self-contained code and are supplemented by the principles of the law of contract.117
General principles of general average
a. As regards danger
1. The danger must be common to the whole adventure and not to any particular cargo or any part
thereof. Thus in Nesbitt v. Lushington118 during a period of great scarcity, a ship was stranded
on the coast of Ireland. The inhabitants compelled the master to sell wheat, at less than its
price. It was held that no general average loss has occurred, since the mob endangered only
the wheat and they intended no harm either to the ship or to any other cargo.
2. The danger must be real and not imaginary, however reasonable such apprehension may be.
Thus in Watson v. Fireman’s Fund Insurance Co.119 the master of a vessel mistakenly, but
reasonably believing that there was a fire in the hold, turned steam into it, for the purpose of
extinguishing it. There was in fact no fire. It was held that there was no general average loss,
since the fire was imaginary.
On this point, the York-Antwerp Rules 2004 differ from the common law. According to Rule A, it
is sufficient, if there is a reasonable apprehension of danger and the ‘extra-ordinary sacrifice or
expenditure is …reasonably made …’
3. The danger must be imminent and not too remote in time.
4. The danger must not have arisen due to any default of the person claiming contribution. Thus in
Schloss v. Heriot120 extra-ordinary expenditure was incurred due to initial unseaworthiness of
114
The Phoenicians came from the eastern shore of the Mediterranian Sea, a land now called Lebanon. The land was
inhospitable for farming. So they turned to sea to become the greatest travelers and traders of their time. They extended
their influence across North Africa and settled in Carthage, now called Tunisia.
115
An island belonging to Greece in the Mediterranian Sea near Turkey.
116
De lege Rhodia de jactu, Book XIV, Title 2, para 1: This is provided in Rhodian Statue on jettison: If goods are thrown
overboard in order to keep the ship afloat, the loss incurred for the benefit of all concerned shall be made good by a
contribution of all co-adventurers.
117
Goulandris Bros. Ltd. V. Goldman & Sons Ltd. (1958) 1 Q.B. 74.
118
(1792) 4 Term Rep. 783.
119
(1922) 2 K.B. 355.
120
(1863) 14 C.B. N.S. 59.
24
the ship. It was held that the ship-owner cannot claim general average contribution from the
cargo-owners.
b. As regards sacrifice or extra-ordinary expenditure
1. The sacrifice or extra-ordinary expenditure must be real. Rule IV of the York-Antwerp Rules
2004 provides that ‘Loss of damage sustained by cutting away wreck or parts of the ship
which have been previously carried away or are effectively lost by accident shall not be made
good as general average.’
Thus is Shepherd v. Kotten121 the main mast of the ship, which was already a wreckage and
virtually useless, was sacrificed in the interest of the whole adventure. It was held that the
sacrifice was not real. But in Johnson v. Chapman122 during a storm, a deck cargo broke
loose and it endangered and interfered with the working of the pumps. It was jettisoned. It
was held that the jettison amounted to a real sacrifice, since the cargo was not virtually lost
at the time of jettison.
2. Rule A of the York-Antwerp Rules 2004 provides that the extra-ordinary sacrifice or
expenditure must be ‘intentionally’ made.
3. The sacrifice or expenditure must be ‘extra-ordinary’, i.e. it must lie outside the normal
activities. Thus in The Bona123 a ship was stranded and in an effort to re-float her, the
engines were intentionally overstrained and additional fuel was burnt. It was held that the
expenditure was extra-ordinary.
4. The extra-ordinary sacrifice or expenditure must be reasonably made. Whether the quantity
of sacrifice or amount of expenditure is reasonable or not is a question of fact.
5. The sacrifice or expenditure must be necessary to avoid the common danger. The master will
decide whether a sacrifice or expenditure is necessary or not. With the sanction of the
master, any other person may also give the order to make the sacrifice. Thus in Papayanni
and Jeronica v. Grampian S.S. Co.124 a ship caught fire and was taken to the nearest port.
The fire increased and the captain of the port ordered to scuttle the ship. The master,
believing this course to be the best in the interest of the ship and the cargoes, raised no
objection. It was held that the loss must be adjusted as a general average sacrifice, since the
mater had impliedly sanctioned the scuttlement.
6. The sacrifice or expenditure must have been made for avoiding the common danger and not
to save any particular interest.
7. The endangered property must have been actually benefited by the sacrifice125 or
expenditure.
8. The extra-ordinary sacrifice or expenditure must have succeeded in avoiding the common
danger and saving the adventure. Where the whole adventure is lost, no contribution claim
lies, since there is nothing upon which to base such claim and the owner of respective
interests shall have to bear the loss.
9. The loss or damage on which the contribution claim is based must arise directly from the
sacrifice or extra-ordinary expenditure. Rule C of the York-Antwerp Rules 2004 provides that
‘Only such losses or damages or expenses which are the direct consequence of the general
average act shall be allowed as general average. Demurrage, loss of market and any loss or
damage sustained or expense incurred by reason of delay whether on the voyage or
subsequently and any indirect loss whatsoever shall not be admitted as general average.’
General average sacrifice
In marine adventure three interests are involved – the ship, the cargoes and the freight. Consequently,
general average loss may only arise from them:
a. As regards cargo
Jettison, i.e. intentional throwing over-board of cargo, is the most common instance of general
average sacrifice;
b. As regards any part of ship
With a view to avoid the common danger, if any part of the ship or tackle or stores are
sacrificed, then the ship-owner is entitled to general average contribution. For example, where
the ship is in danger of sinking and the master deliberately runs her ashore for the purpose of
121
(1877) 2 CPD 585
122
(1865) 19 CBNS 563.
123
(1895) P. 125.
124
(1896) 1 Com. Cas. 448.
125
Pirie v. Middle Dock Co. (1881) 44 426
25
saving the cargoes and also the ship, the loss of or damage to the ship is a general average
sacrifice;
b. As regards freight
Jettison of cargoes, involve not only sacrifice of goods, but also loss or freight. Consequently,
the ship-owner or charterer is entitled to claim contribution from the owners of the interest
saved.
General average expenditure
Where extra-ordinary expenditure is incurred for the purpose of avoiding a common danger, which
threatens the ship and the cargoes, then such expenditure is the subject of a general average
contribution. For example extra-ordinary expenditure incurred in re-floating a ship, which has sunk or
gone ashore with her cargoes is a general average expense.
Damage done to third party and general average
Damage done to the property of persons not concerned in the adventure can be the subject of general
average. Thus in Austin Friars v. Spillers and Bakers126 a ship had been stranded and was leaking
badly. The master knew that in taking the ship into a dock, they were liable to cause damage. It was
held that their action was reasonable and prudent in the interests of the ship and the cargoes, and
damage done to the dock was the subject of general average.
Adjustment of general average contribution
Unless otherwise agreed, the adjustment of claims to contribution takes place after the conclusion of
the voyage and it is governed by the law of the place of delivery of the cargo.127 The ship-owner
cannot claim contribution from the cargo-owners, if after general expenditure has been incurred, the
ship and the cargoes are lost before the conclusion of the voyage.128
Rule G of the York-Antwerp Rules 2004 provides that ‘General average shall be adjusted as regards
both loss and contribution upon the basis of values at the time and place when and where the
adventure ends.’
---------------------------------------------------
126
(1913) 3 K.B. 586.
127
Simonds v. White (1824) 2 B & C 805.
128
Chellew v. Royal Commission on Sugar Supply (1921) 2 K.B. 627, affd (1922) 1 K.B. 12.
26
Carriage of goods by land and inland waterways
I. Common carrier
Section 2 of the Carrier’s Act (1865) provides that ‘Common carrier denotes a person, other than the
Government, engaged in the business of transporting for hire property from place to place, by land or
inland navigation, for all persons indiscriminately.
Person includes any association or body of persons, whether incorporated or not.’
A common carrier has the following characteristics:
a. It may be an individual or firm or a company;
b. It carries goods only. Passenger carriers are not covered by the Carrier’s Act (1865);
c. It carries goods, as business, for money. Therefore, occasional carriers are not common carriers;
d. It carries goods by land or inland waterways; and
e. It carries goods without making any discrimination between consignors.
II. Private carrier
A private carrier carries goods occasionally for money. Carrying goods is not his business. He is in the
position of a bailee. For instance, a building developer has a truck which he uses to carry his own
goods. Sometimes he lets it out for hire to others. The contractor is a private carrier. Since he carries
goods occasionally, he can discriminate between consignors. A private carrier reserves to himself the
right of accepting or rejecting the offer to carry goods.
The distinctions between a common and private carriers are as follows:
a. A common carrier is a regular carrier, while a private carrier is an occasional carrier;
b. A common carrier carries goods indiscriminately, whereas a private carrier can make
discriminations between consignors;
c. The liability of a common carrier is determined by the Carriers Act (1865), while the liability of a
private carrier is determined by the Contract Act (1872), Chapter IX of Bailment; and
d. The person, who does not qualify as a common carrier is to be regarded as a private carrier but not
vice versa.
III. Duties of common carrier
a. A common carrier must accept goods without discrimination. Discrimination makes him liable for
civil, as well as, criminal actions. Refusal, however, to carry goods is justified,
1. if no room is available;
2. if the goods are not of the type, which he professes to carry, i.e. dangerous for example
petroleum, explosives etc. or exceptional in character, for example radio-active material, or too
large exposing the carrier to undue risk;
3. if the goods are inadequately packed;
4. if the goods are to be carried over an uncovered;
5. if the consignor refuses to pay advance freight or refuses to pay reasonable freight;
b. He must not make unjustifiable deviation from the contract route;
c. He must deliver the goods within the fixed or reasonable time;
d. He must deliver the goods in the agreed place. If no place is fixed, then at the usual place;
e. He must deliver the goods against submission of documents only, for example Chalan;
f. He must carry out the reasonable instructions of the consignor, for example to stop the goods in
transit;
g. He must indemnify the consignee for loss or damage to the goods, unless it is covered by the
excepted perils contained in the Chalan. When the Chalan is silent on this issue, the Court will
presume the following exceptions:
1. act of God;
2. act of war;
3. act of foreign enemies;
4. inherent vice of the goods;
5. inadequacy of packing;
6. misconduct or default on the part of the consignor, for example where the consignor
concealed the dangerous nature of the goods.
IV. Liability of common carrier for goods over Tk. 100 and scheduled goods
Section 3 provides that the common carrier shall not be liable for loss or damage to goods, unless
a. in the case of goods exceeding Tk 100 in value, the value thereof has been declared; and
b. in the case of scheduled goods, the description thereof has been declared.
Section 4 provides that the carrier may charge extra for undertaking the risk, provided that notice to
that effect is exhibited.
Section 5 provides that where loss of or damage to goods occur, the consignee is entitled to recover,
not merely the value of the goods, but also the charges paid for carriage.
27
V. Liability of common carrier for non-scheduled goods
Section 6 provides that the liability of the common carrier for loss or damage to non-scheduled goods
shall not be deemed to be limited or affected by any public notice. The carrier, however may limit
liability by special contract with each consignor.
Section 8 provides that the carrier shall be liable for loss or damage,
a. to any goods, where it is caused by a criminal act; and
b. to any non-scheduled goods, where it is caused by negligence.
VI. Burden of proof & notice of loss
Section 9 provides that in suits for loss, damage or non-delivery of goods, the plaintiff need not prove
criminal act or negligence.
When loss, damage or non-delivery of goods occurs, the presumption is that it was due to negligence
or some other fault of the carrier. The consignee is to prove only that the goods were either lost or
damaged or not delivered. Then the burden lies on the carrier to prove that there was no negligence
or fault on his or his agent’s part.
Section 10 provides that no suit shall be instituted against a carrier, unless notice in writing of loss or
injury has been given within six months.
VII. Rights of common carrier
a. The carrier is entitled to a reasonable charges for carriage of goods;
b. He has lien on goods for the unpaid charges. He can retain the goods, until the dues are paid;
c. If the consignee fails to take delivery of the goods, the carrier may take reasonable steps and
entitled to recover reasonable expenses so incurred;
d. The carrier is entitled to recover damages for loss or damage sustained by him owing to the
fault of the consignor.
-----------------------------------------
28
Carriage of goods by railways
Duties of railways
These duties are similar to that of a common carrier.
Liabilities of railway administration under the Railways Act (1890)
I. General liability
Section 72 provides that the liability of the railway administration for loss, destruction or deterioration
of animals or goods shall be that of a bailee under section 151, 152 and 161 of the Contract Act 1872:
a. Section 151 provides that the bailee must take prudent man’s care;
b. Section 152 provides that the bailee is not responsible for loss, destruction or deterioration of the
thing bailed, if prudent man’s care has been taken;
c. Section 161 provides that if by the default of the bailee, the goods are not returned at the proper
time, he is responsible for the loss, destruction or deterioration from that time.
II. Liability for animals
Section 73 provides that the liability of railway administration for loss, destruction or deterioration of
animals shall not exceed:
a. in the case of elephants: Tk. 1,500/- per head
b. in the case of horses: Tk. 750/- per head
c. in the case of mules, camels or horned cattles: Tk. 200/- per head
d. in the case of donkeys, sheep, goats, dogs etc: Tk. 30/- per head
Where higher value has been declared, the railway administration may charge extra for the risk
undertaken.
Where loss, destruction or deterioration occurs, the person claiming compensation must prove that
the declared value is the true value of the animal or prove the extent of injury, as the case may be.
III. Liability for luggage
Section 74 provides that the railway administration shall not be liable for loss, destruction or
deterioration of luggage of any passenger, unless the railway servant has booked and given receipt
thereof.
Where the value has been declared, the railway may change extra for the risk undertaken.
Where loss, destruction or deterioration occurs, the person claiming compensation must prove that
the declared value is the true value of the luggage. The compensation will not exceed the declared
value.
IV. Liability for accidents at sea
Section 82 provides that where the railway administration contracts to carry animals or goods partly
by railway and partly by sea, the administration shall be responsible for loss or damage thereto, which
may happen during carriage by sea under the Merchant Shipping Act (1894).
-----------------------------------------
29

Carriage of Goods Version 01

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Carriage of Goods Version 01

Uploaded by

Copyright:

Available Formats

Charter-party

The Bills of Lading Act27

Where Section 1 applies, the right to suit is vested exclusively in the

In connection with this right, four points are to be noted, namely.

Carrier’s right to freight

Various undertakings are implied in charter-parties, bills of

You might also like