Carriage of Goods by Sea

A contract of carriage by sea is a contract entered into between a shipper (who may be a seller, a buyer, or an agent of the seller or the buyer), and the carrier (who could be a shipowner, a charterer of a vessel, or their agent), for the purpose of transporting goods from one place to another by sea. Such a contract has the following characteristics:

■ it is made between a shipper and a carrier,

■ it is a contract for providing the services of transporting goods;

■ it involves transmission of goods by sea either partly or entirely; and

■ it often involves transport of goods from one country to another, although in Australia interstate carriage of goods by sea is subject to the same law as international carriage of goods by sea.

A contract of carriage stipulates matters relating to safe conveyance of goods from one designated place to another designated place. The purpose of the contract is to ensure that the goods are carried in a safe and timely manner by the carrier. The rights and duties of the contracting parties are defined on this basis. Generally speaking, the parties should agree on the time and place of shipment and delivery, the route of voyage, the payment of freight, the liabilities of the parties in performing the necessary task of transmitting the goods from the agreed place to their destination, transhipment, liability of the carrier's servants or agents, choice of law choice of forum or arbitration, incorporation of charterparty clauses (if applicable), and any other matters which may affect the rights and liability of the parties.

The agreement on the route of the voyage is important, in order to avoid unnecessary risks, and to ascertain the scope of the carrier's liability when losses or damages arise from unauthorized stopovers. The agreed route of the voyage is also important in practice, in the sense that a certain type of cargo, such as fruits, may only stand a relatively short period of carriage before turning bad, or that the market for a certain type of product is too volatile to stand a long period of carriage. The liabilities of the carrier and shipper will be discussed in detail in the sections dealing with their liability under the Hague-Visby Rules and the Hamburg Rules.

A contract of carriage can be made orally or in writing. Although the existence of a contract of carriage is often represented by a bill of lading, a voyage charterparty, or a similar document, such as a sea waybill, consignment note or a mate's  receipt, the contract can exist independently of the bill of lading, the voyage charterparty or similar document.

In other words, the parties have an option either to conclude a written contract of carriage in addition to the bill of lading issued by the carrier, or to rely on the bill of lading to be the evidence of any prior existent oral contract. For example, article l (b) of the Hague-Visby Rules extends the meaning of a contract of carriage to any document issued or made for the purpose of carriage, and article l(6) of the Hamburg Rules defines a 'contract of carriage as 'any contract whereby the carrier undertakes against payment of freight to carry goods by sea from one port to another'.

Under the Carriage of Goods by Sea Act 1991, a contract of carriage 'means a contract of carriage covered by a sea carriage document (to the extent that the document relates to the carriage of goods by sea), and includes a negotiable sea carriage document issued under a charterparty from the moment at which that document regulates the relations between its holder and the carrier concerned'. The meaning of 'sea carriage document' is also defined in article l(1) of the modified Hague-Visby Rules, incorporated into Schedule 1 and l A of the Carriage of Goods by Sea Act l991. Therefore, it is necessary to remember that a contract of carriage means more than a bill of lading

The meaning of a contract of carriage is flexible, depending on the circumstances And the relevant law applicable. Its flexibility is illustrated by a Canadian case, Her Majesty the Queen v Purolator Courier Ltd., decided on 7 January 1997 in the Supreme Court of British Columbia.

In this case, the Crown charged the respondent for breaches of the Transportation of Dangerous Goods Act and the Transportation of Dangerous Goods Regulations. The Crown alleged that dangerous materials were found in 1995 in two separate sites in the Goods belonging to the respondent. The Crown sought to establish the alleged breaches by referring to the waybills and packing slips found with the goods. The technical argument whether the waybills and packing slips constituted shipping documents or prescribed documents under the relevant law.

The court took the view that the shipping document under the relevant law requires the document has legibly and indelibly printed on it a shipping document identification number and the name of the consignor. Such information was missing from the waybills and packing slips in question. Accordingly, the court held that the waybills and packing slips concerned did not constitute the shipping document required by the relevant law. On this technical ground, the Crown failed. This case suggests that the meaning of similar Documents may vary depending on the circumstances and the relevant law which is applicable to the document in question.

Meaning of carrier

General meaning of carrier

A carrier is a person (either natural or legal) who undertakes the responsibility of transporting goods from one place to another under a contract of carriage, against the payment of freight. It is crucial, for the purpose of determining the responsibilities of the parties to a contract of carriage, that the carrier is the person who is the named party under the contract of carriage. This is because the contract forms the basis of the parties' responsibilities, although the relevant international conventions, such as the Hague-VisbyRules and the Hamburg Rules, stipulate the parties' duties under a contract of carriage falling under the conventions.

The meaning of carrier may vary in different countries, depending on the relevant provisions of law The Australian Carriage of Goods by Sea Act l991 incorporates the Hague-Visby Rules, and also the definition of carrier as adopted in the Hague-Visby Rules. The Chinese Maritime Law does not expressly incorporate any international convention on the carriage of goods by sea, and thus has to provide its own definition of carrier. Article 42 of the Maritime Law defines the meaning of 'carrier' and 'actual carrier', which appears to be similar to the meaning of 'carrier' and 'actual carrier' under article 1 of the Hamburg Rules. New Zealand has also adopted the Hague-Visby Rules, but the Carriage of Goods Act 1979 (NZ) also provides its own definition of carrier. Article 2 of the Carriage of Goods Act 1979 (NZ) defines carrier as a person in the ordinary course of business who carries or procures to be carried goods owned by another person, including a person who performs any 'incidental service' in respect of the goods to be carried. This extends the definition of carrier to include persons, such as consolidators, packers, stevedores, and warehouse workers, who perform services which are undertaken to facilitate the carriage of goods pursuant to the contract of carriage.

The wording of the said provision covers a person performing certain works prior or subsequent to the loading or unloading of the cargo from the vessel. This definition of 'carrier' is much wider than that which is adopted in Australia, which is a member of the Hague-Visby Rules, or China, which has not ratified any of the three conventions on the carriage of goods by sea.

In Nederlandse Speciaal Drukkerijen v Bollinger Shipping Agency [1999], a case involving a shipping company based in Australia and two companies providing packing services in New Zealand, the owner of the printing press which was damaged in the course of shipment from Auckland, New Zealand to Delft, Holland sued in Australia the carrier, and one of the companies packing the printing press. The Supreme Court of New South Wales noted the differences between the meanings of carrier under Australian law and New Zealand law, and the fact that the carriage involved a port in New Zealand and a port in Holland. It decided that the action against the New Zealand company should be stayed in favor of an action in the New Zealand court, and implied that the whole action may as well be tried in New Zealand. The case suggests that the meaning of carrier under different laws certainly affects the liability of a person, in the sense that the person may be held to be a carrier under one law but as an agent or sub-contractor of the carrier under another law.

Meaning of carrier under the Hague-Visby Rules

The Hague-Visby Rules adopt a narrower definition of 'carrier' than the Hamburg Rules. Under the Hague-Visby Rules, a carrier 'includes the owner or the charterer who enters into a contract of carriage with a shipper'. An agent of the shipowner or charterer is not a 'carrier' under the Hague-Visby Rules, even if the agent might have issued and singed a bill of lading. In contrast, the Hamburg Rules define the meaning of a ‘carrier’ broadly as referring to 'any person by whom or in whose name a contract of carriage of goods by sea has been concluded with a shipper'.

Sometimes a domestic law may affect the meaning of carrier under the Hague-Visby Rules. For example, Canada adopts the Hague-Visby Rules. But under Canadian Law, ‘the shipowner would be liable as a carrier since the vessel was not under a demise Charter and the bills of lading were signed on behalf of the master. Carriage of goods is a joint venture of owners and charterers who should therefore be held jointly and severally responsible as carrier'. This position of the court is more certain in comparison with the position of the Australian law in similar circumstances, because, for example, articles 10(6) and (7) of the modified Hague--Visby Rules as incorporated into Schedule 1A of the Carriage of Goods by Sea Act 199l make the modified Hague--Visby Rules apply on the basis of a negotiable sea carriage document rather than impose a joint venture between the shipowner and the charterer. Another example is the Carriage of Goods Act 1979 (NZ), which also incorporates the Hague-Visby Rules. However, the meaning of ‘carrier’ under the said law may extend to a person engaged in the packing of the cargo prior to its shipment.

Meaning of shipper

Meaning of shipper under the Hague-Visby Rules

A shipper is a person (whether legal or natural) who is a party to a contract of carriage with a carrier. The Hague-Visby Rules (and the Hague Rules also) do not define the meaning of 'shipper', although the word 'shipper' is used in these conventions. Under the Hague-Visby Rules, 'shipper' has its ordinary meaning, referring to anyone whose name appears as party r to a contract of carriage with a carrier.

Meaning of shipper under the Hamburg Rules

Under article 1 (3) of the Hamburg Rules, 'shipper' is clearly defined as followings:

'Shipper' means any person by whom or in whose name or on whose behalf a contract of carriage by sea has been concluded with a carrier, or any person by whom or in whose name or on whose behalf the goods are actually delivered to the carrier in relation to the contract of carriage by sea.

It appears that the word 'shipper' was intended to have a wider meaning than the word 'carrier' under the Hamburg Rules. For example, article 1(1) of the Hamburg Rules states that a 'carrier' is a person who contracts (either by him-- or herself or in his or her name) with the shipper as the carrier under the contract of carriage. A person will not be a 'carrier' under the Hamburg Rules as long as he or she is not a party to the contract of carriage, even though he or she might have rendered the services of carriage (that is, may have been an 'actual carrier'). The narrow definition of 'carrier' under the Hamburg Rules does not mean that the carrier's liability is narrow, because article 1 (2) creates a definition of 'actual carrier' and article l0 makes a 'carrier' accountable for the acts of an 'actual carrier'. In comparison with the definition of 'carrier', article 1 (3) of the Hamburg Rules makes a person ‘by whom or in whose name or on whose behalf the goods are actually delivered to the carrier’ a shipper for the purpose of the contract of carriage. This definition raises the following possible interpretation of the meaning of 'shipper' under the Hamburg Rules:

■ a shipper is a person who enters into a contract of carriage with a carrier,

■ s shipper may also be a person who delivers the goods to the carrier regardless of whether he or she is expressly or directly a party to the contract of carriage, and

■ there is a possibility that there may be more than one shipper in relation to the same contract of carriage and the same goods.

The Hague Rules, the Hague-Visby Rules and the Hamburg Rules

The Hague Rules

The Hague Rules 1924 were adopted in Brussels on 25 August 1924 as an 'international convention’ on the carriage of goods by sea and entered into force on 2 June 1931. There are 16 articles in total. Ten of them deal with legal issues relating to bills of lading and the rest are concerned with procedural issues relating to the operation of the Rules. Many jurisdictions have formally incorporated the Hague Rules into their domestic laws, while a few others have adopted the Hague Rules without having formally adopted them.

The purpose of the Hague Rules was to unify the rules governing the liability of a carrier. Under the Hague Rules a carrier has a general liability to provide a seaworthy ship and to handle the goods with care. However, the Hague Rules also list several exceptions, such as fault of the master of the ship or pilot in the navigation or management of the ship, act of God, act of war, riots, strikes, saving life or property at sea, and others, to restrict the liability of the carrier.

These exceptions remain the same under the Hague-Visby Rules, which amended the Hague Rules. The liability of a carrier under the Hague Rules was limited to ￡100 sterling per package or unit, unless the parties had agreed to a higher value. This was considered to be too low and unfair to the shippers. The limit of liability is increased in the Hague-Visby Rules. Since the Hague Rules and the Hague-Visby Rules are largely similar- except for the limits on liability and a few other provisions, and the Hague-Visby Rules' incorporation of amendments to the Hague Rules -- only the Hague-Visby Rules will be discussed.

The Hague-Visby Rules

The Hague-Visby Rules are based on the 1968 Brussels Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of lading. The protocol was adopted in Brussels in February 1968 and entered into force on 23 February 1968. The amended Hague Rules (the Hague--Visby Rules) have 16 articles in total. While about 25 jurisdictions have formally incorporated the Hague--Visby Rules in their domestic laws, about seven jurisdictions have adopted the Hague Visby Rules without having formally acknowledged them.

Australia is now a party to the Hague--Visby Rules, and the Carriage of Goods by Sea Act 1991 incorporates articles 1--10 of the Hague--Visby Rules. The Hague--Visby Rules operate in those countries or jurisdictions which have ratified the protocol, and were intended to redress the unfairness to the shipper in the Hague Rules. The exceptions are the same under the two conventions, however, the Hague--Visby Rules set out the limitation of the liability as 666.67 units of account per package, or two units of account per kilogram of the gross weight of the goods, whichever is higher, unless the parties have agreed on a higher value. These amendments are still regarded by many developing countries and cargo-owners' countries as being unfair to shippers: thus the creation of the Hamburg Rules in 1978.

The Hamburg Rules

The Hamburg Rules were adopted by the United Nations in Hamburg on 30 March 1978. There are 34 articles in total. Twenty-six articles deal with substantial legal issues and eight deal with procedural issues. Having been ratified by 27 countries, the Hamburg Rules entered into force on 2 November 1992.

The Hamburg Rules impose wider liabilities upon the carrier and are relatively even-handed in comparison with the Hague Rules or the Hague Visby Rules. Australia has not ratified the Hamburg Rules, although articles l--26 of the Hamburg Rules have been incorporated into Schedule 2 of the Carriage of Goods by Sea Act 1991. Under the Hamburg Rules, the carrier is liable for the risk in goods from the moment the goods are put under his or her care until the time they are delivered as agreed. Depending on the construction of the expression 'the carrier is in charge of the goods' in article 4(1), the carrier could be liable for any losses of or damage to goods under his or her care, regardless of whether the goods are on board a vessel.

Under the Hague Rules or Hague-Visby Rules, the carrier is only liable for the risk in goods during the 'carriage of goods' -- the period after the goods pass the ship's rail for loading and before the goods pass the ship's rail for discharge.

Carrier's liabilities under the Hague-Visby Rules

Carrier’s liabilities and the meaning of ‘carriage of goods’

Under the Hague--Visby Rules, a carrier is liable for the risk arising from the 'carriage of goods'. The expression 'carriage of goods' is defined in article 1 (e) of the Hague-Visby Rules. It refers to the period of time in which goods are carried by a carrier. The period (the carriage) commences from 'the time when the goods are loaded on to the time they are discharged from the ship'. Although the definition of carriage of goods in article 1(e) implies that the Hague--Visby Rules intend to limit the carrier's liability under the rules to the period when the goods are on board a vessel, the period of the carrier's liability can also be determined by the terms of the bill of lading or contract of carriage.

This is illustrated by Port Jackson Stevedoring Pty Ltd v Salmond Spraggon Pty Ltd (1977-1978). In this case, the majority of the High Court held that the terms of the bill of lading suggested that the carrier's liability ceased when the goods passed the ship's rail.

By reading the relevant provisions of the Hague-Visby Rules (or the Hague Rules, as the case may be), and the relevant provisions of a bill of lading, we can argue that the carrier's liability within the period of carriage as defined in the Hague--Visby Rules cannot be reduced by the bill of lading, but can be extended by it. The carrier may be liable for the safety of the goods prior to the loading and after the discharge if the contract of carriage so stipulates. But the liability of the carrier in such a case is defined by the terms of the contract, rather than the provisions of the Hague-Visby Rules, because the Hague-Visby Rules normally cover only the period of time defined as 'carriage of goods’. In conclusion, we may argue that the meaning of 'carriage of goods' in the Hague-Visby Rules implies that the carrier has the benefits and liabilities of the Hague-Visby Rules during the 'carriage of goods' period, but the carrier may have a contractual liability to the goods during the time which is outside the 'carriage of goods'.

Carrier’s liability under Article 3

The general duty of due diligence: The carrier's responsibilities are set out in article 3(l) of the Hague-Visby Rules. This provision provides the following responsibilities:

■ to make the ship seaworthy;

■ to staff, to equip and supply the ship properly; and

■ to make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried, fit for their reception, carriage and preservation.

There are two qualifications to the above responsibilities: ‘due diligence’ and seaworthiness of the ship at the 'commencement of the voyage'. Under the Hague-Visby Rules (and the Hague Rules), a carrier does not have an obligation to make the ship absolutely seaworthy or fit and safe for carrying the goods concerned. He or she, however, has an obligation to exercise 'due diligence' to make the ship seaworthy and fit for carrying the goods concerned. The duty to provide a seaworthy vessel is not discharge merely because of the existence of a certificate of seaworthiness issued by a firm of surveyors. By the same token, the carrier's duty to 'man, equip or supply the ship’ properly is not absolute. In addition, the carrier's duty to exercise due diligence to make the ship seaworthy is limited to the 'commencement of the voyage'." These qualifications are necessary because perils at sea can be unavoidable and unpredictable. Therefore, it would be unreasonable and unrealistic to require a shipowner to guarantee the ship to be absolutely seaworthy to stand all perils at sea. The distinction between losses caused by the unseaworthiness of a ship and by perils at sea is illustrated by Phillips Petroleum Co. v Cabaneli Naviera SA.

The carrier’s liability under article 3(1) of the Hague--Visby Rules is sometimes mixed and interchangeable. For example, making the vessel fit to carry the goods concerned is one of the obligations to make the vessel seaworthy. On the other hand, it may stand on its own to impose upon the carrier a specific obligation to provide refrigeration to the goods carried, if the contract of carriage or the bill of lading expressly so states. In Pacific Composites Pty Ltd v Transpac Container System Ltd., the bill of lading expressly stated that the goods were refrigerated, but in fact they were not refrigerated during carriage. The court held that the carrier had breach this clause of the contract, and also its obligation to provide refrigeration under article 3(1) of the Hague-Visby Rules. The carrier was ordered to compensate the cargo-owner under the relevant provision of the Hague-Visby Rules. In this case, the carrier might have also been found to have breached the duty of providing a seaworthy vessel in the circumstances concerned.

The seaworthiness of a vessel has wide meanings. A vessel is unseaworthy if it is not fit to carry the particular cargo concerned. A vessel is also unseaworthy if it is not properly manned by a qualified shipmaster and staff A vessel can be unseaworthy if it is not equipped with an adequate chart for the areas it is meant to sail.

A duty of properly and carefully dealing with goods

This duty is set out in article 3(2) of the Hague-Visby Rules. This provision states that 'the carrier shall properly and carefully load, handle, stow carry, keep, care for, and discharge the goods carried'. The meaning of this provision is explained by Mason and Wilson JJ in Shipping Corp of India Ltd v Gamlen Chemical Co. Pty Ltd. This provision requires the carrier to handle and carry goods in a proper and careful manner. The 'propriety' and 'carefulness' of the carrier's act must be construed in the circumstances concerned, taking into account the nature of the goods, established commercial practices, the contract terms, and the reasonableness of the carrier in loading, handing, stowing, carrying, keeping and discharging the goods. Stephen J observed in Shipping Corp v Gamlen Chemical, that the meaning of property stowage depends 'on all the circumstances, including the nature of the particular goods and the conditions of the weather and of sea likely to be encountered on the voyage'. In Wistrac Equipment Pty Ltd v ‘Assets Venture’, the court held the defendants liable for the loss of the cargo, a Caterpillar bulldozer, carried on deck by the decision of the defendants, as the bulldozer was not secured adequately on deck to endure rough seas. It must be pointed out, however, that while the carriers had apparently breached their obligation under article 3(2), the court held them to be liable largely under the law of tort in the present case.

V.       Question can answered

1. What characteristics does a contract of carriage by sea have?

2. What should the contracting parties agree on normally when entering into a contract of carriage by sea?

3.What is the definition of carrier under the Hague-Visby Rules? What may affect the meaning of carrier under the Hague-Visby Rules?

SOURCE: INTERNET