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Carriage of Goods

LLB403: Business Law


Spring 2019
Charter Party
Charter Party
• Derived from the Latin ‘carta partita’- meaning ‘divided
document’
• 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.
• A proper charter-party must be in writing.
• A charter-party is a contract between the ship-owner 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.
Classification of Charter Party

1. Charter by demise
2. Charter not by demise
Charter by Demise
• 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
• A ‘bare boat’ charter: a charter of ship without any master or
crew
• The ship-owner is not liable to shipper for the acts of the
master and crew;
• If the ship earns a salvage award, it goes to the charterer.
• The master, on behalf of the charterer, signs bill of lading;
• The charterer-
• takes possession and control of the ship
• performs and exercises the duties and rights of the ship-owner;
Charter by Demise (contd.)
• Unless otherwise specified, statutory duties of the ship-owner
bind the charterer;
• Being in possession of the ship, the charterer can claim
damages from a tort-feasor, who damaged the ship;
• The charterer is liable for collision caused by negligence;
• Unless otherwise specified, the charterer may sub-charter the
ship;
• The ship-owner 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;
• It is not the ship-owner, but the charterer, who can invoke
special provisions as to limitation of ship-owner’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 charterer. If the answer is positive,
then there is a charter by demise.
Significance of Charter by
Demise
• Charter by demise is resorted to,
• where a charterer intends to carry his own goods, or to carry the
cargo of a third party.
• where the ship-owner intends to augment his fleet.
• where a person is desirous of obtaining full temporary possession
of a ship, e.g. in the case of exploration.
Charter not by demise
• A contract which confers on the charterer simply the right to
have his goods carried by a particular vessel.
• The ship-owner retains possession and control of the ship.
• The ship-owner 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.
Frustration of a charter party
• The ship-owner and the charterer are discharged from their
duties and obligations under the charter-party, if it is
frustrated. Frustration occurs in the following cases:
• 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 Chittagong port to New York port. When the ship is
proceeding towards Chittagong port, it catches fire and is
destroyed. The charter-party is frustrated.
Frustrations (contd.)
• 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.
delay was due to stranding on rocks. The charterers, judging the
delay would be considerable, threw up the charter before the
ship was re-floated. It was held that the charterers were not
liable to load the ship, since the time necessary for repairing was
unreasonably long.
Frustrations (contd.)
• 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
Yangoon. Burma 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 (1874) LR 10CP 125.
Bill of Lading
Introduction & Definitions
• Introduced in the 16th century
• No definition given either in the Bills of Lading Act 1856 or in the
Carriage of Goods by Sea Act 1925.
• “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 1855.”–(S. 6 of English
Admiralty Court Act 1851)
• “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.”-- The Halsbury’s Laws
of England (1974:143)
Introduction & Definitions
• ‘”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.’ (Article 1.7 of the 1978 UN Convention on the
Carriage of Goods by Sea/ The Hamburg Rules)
• 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.
Introduction & Definitions
• Clean/Qualified:
• 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’.
• 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’.
• Now-a-days, bills of lading are issued by the carrier’s agent,
after the ship departs the port of loading, with goods on
board.
Functions of Bill of Lading
• 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


① as to quantity of the goods;
② as to apparent order and condition of the goods; and
③ 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.
• 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.
as to quantity…
• New Chinese Antimony Co. v. Ocean Steamship Co. Ltd.
(1917) 2KB 664
• 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.
as to quantity…
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. (1966) 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.
as to quantity…
• 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. (1947) 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
i. Carrier and consignee
• 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. 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.
• The Peter der Grosse (1875) 1 PD 414.
as to condition…
• 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.
as to condition…
(ii) Carrier and endorsee for value
• When estopple exists
• 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.
• When estopple does not exists
• 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.
as to condition…
• Compania Vascongada v. Churchill (1906) 1 K.B. 237
• 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.
c) Receipt as to shipping or
leading marks
(i) Carrier and consignee
• 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.
as to shipping or leading
marks…
• When estopple exists
• 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.
• When estopple does not exists
• Where the shipping marks are not material to the description of
the goods, there is no estopple. Section 3 of the Bills of Lading Act
1856 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.
as to shipping or leading
marks…
• In Parsons v. New Zealand Shipping Co. (1901)
• 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.
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.
(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. (1951) 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.
as a document of title…
(b) Positive Components
• In some cases, e.g. in a Cost Insurance Freight (CIF) 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. (1912) 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. Maclean (1883) 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.’ (1958) 11 DLR SC 133
• 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.
• M/s Abdul Rahman Abdul Gani v. M/s United Oriental Steamship Co.
Karachi and others (1958) 11 DLR SC 133
as evidence of the contract of
carriage…
• In The Ardennes (Owner of Cargo) v. The Ardennes (Owners) (1951) 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.
as evidence of the contract of
carriage…
(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 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. Ward (1888) 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.
as evidence of the contract of
carriage…
(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. (1924) 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.
The 1925 Act & its Schedule
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.’
The 1925 Act
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 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 1925 Act
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:
(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.’
Bills of Lading Act 1856
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 endorsement 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.’ 
• 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.
The 1856 Act
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.’
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.
Section 2 (Contd.)
• 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 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.)
Section 3 of the 1856 Act
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.’
• 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. This 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.
Ship-owner’s undertaking to
provide a seaworthy ship
Seaworthiness: Introduction
• 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.
• Used in two senses: strict & wide
• (1) fitness of the ship to enter on the contemplated adventure of
navigation; and
• (2) fitness of the ship to receive the contemplated cargo as a carrying
receptable. (Scrutton LJ in Reed v. Page (1927) 1KB 743 (CA) 754)
Introduction
• Strict sense: refers to the fitness of the ship as an ‘efficient
means of transport’, capable of encountering the ordinary
perils of the sea.
• 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.’
Seaworthiness and bad
stowage
• A ship may become unseaworthy due to bad stowage which
endangers the safety of the ship. Thus, in The Standale (1938)
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 Thorsa
(1961) 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
stowage of chocolate and cheese in the same hold was simply
a bad stowage and it did not endanger the safety of the ship.
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.’
• McFadden v. Blue Star Line (1905) 1 KB 706.
• 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.’
• 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.

• CASE: Elder, Dempster & Co. v. Paterson, Zochonis (1924) AC 522 (HL),
539.
Seaworthiness, whether a condition or a
warranty
a. Charter-parties and Bills of Lading
• complex character, cannot be categorised as being a ‘condition’ or a
‘warranty’.
• 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’.
• 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.
• Hong Kong Fir Shipping Co. Ltd. v. Kawasaki Kaisha Ltd. (1962) 1 All ER 474,
P.487, CA.
Seaworthiness, whether a condition or a
warranty

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.
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 other words, 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. (1908) 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.
• Petrofina S.A. of Brussels v. Compagnia Italiana Trasporto Olii
Minerali of Genoa (1937)
• 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.
Nature of undertaking
b. Bills of Lading
• Before the enactment of the Carriage of Goods by Sea Act 1925 (unless
otherwise excluded) the carrier was under an ‘absolute obligation’ to provide
a seaworthy vessel (applies only to bills of lading)
• 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.’
• 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.
• Besides the carrier, due diligence is to be exercised by the
employees, servants, agents and also by independent
contractors or ship repairers. (Riverstone Meat Co. Pty Ltd. v.
Lancashire Shipping Co. Ltd. (1961)
Nature of Undertaking
c. Marine insurances
• 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.
Time of Seaworthiness
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 Justice Field ‘... 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...’ (Cohn
v. Davidson (1877) 2 QBD 455)
• 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. (Reed v. Page (1927) 1 KB 743.)
Time of Seaworthiness
b. Bills of Lading
• A ship must be seaworthy ‘before and at the beginning’ of her voyage. (Article
III, Rule 1)
• In Maxine Footwear Co. Ltd. v. Canadian Government Merchant Marine (1959)
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
seaworthiness, 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.
Time of seaworthiness
• Marine insurance
• 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.
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.
• 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 (Giertsen v. Tunbull & Co. (1908) SC 1101).
b. Bills of Lading
• The principles of seaworthiness by stages relating to voyage
charter-party, applies to bill of lading.
c. Marine Insurances
• The doctrine of stages applies only to voyage policies, and not
to time policies.
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. (1930) 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 Act 1925 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. Minister of Foods v. Reardon Smith Line (1951) 2
Lloyd’s Rep 265.
• 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.

c. Marine Insurances
• The burden of proving unseaworthiness is upon the person who allege
it.
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.
• 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.
• In Tattersal v. National Steamship Co. (1884) 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.
Carrier’s immunities
• 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 Act 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.
• Article IV, Rule 2 of the Schedule to the Act 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:
(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:
(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.’
3. Marine Insurance
• Various losses for which the insurer is not liable to indemnify
the assured are as follows:
(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.
Ship-owner’s
undertaking to
proceed without
deviation
Introduction
• 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.
• 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 usual 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.’
• In Reardon Smith Lines Ltd. v. Black Sea and Baltic General Insurance Co. Ltd.
(1939) 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. Traders (1982) 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.
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.
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 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.’ 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.
Justifiable deviations
a. Deviation in saving human life or property at sea
b. Deviation necessary for safety of adventure
c. Liberty to deviate clause
Effects of unjustifiable
deviations
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.
• 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. Compagnie Primera v.
Compania Arrendataria (1940) K.B. 362.
• 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. Hain S.S. Co. v. Tate & Lyle. Ltd. (1936).
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. 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. Schloss v. Heriot (1863) 14 CBNS
59.
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, nor claim demurrage.
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. 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.
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.
General average: history
• In ancient times, 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.
• Origin: Law of Rhodes
• York-Antwerp Rules (YAR): standard set of rules relating to the
adjustment of general average, introduced in 1890; latest
version- YAR 2016
• The York-Antwerp Rules are not a complete or self-contained
code and are supplemented by the principles of the law of
contract.
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.
• In Nesbitt v. Lushington (1792) 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.
• In Watson v. Fireman’s Fund Insurance Co. (1922) 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 2016 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.
• In Schloss v. Heriot (1863) extra-ordinary expenditure was incurred due to initial unseaworthiness of
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
• The sacrifice or extra-ordinary expenditure must be real. Rule IV of the York-
Antwerp Rules 2016 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.’
• in Shepherd v. Kotten (1877) 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. Chapman 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.
• Rule A of the York-Antwerp Rules 2016 provides that the extra-ordinary sacrifice
or expenditure must be ‘intentionally’ made.
• The sacrifice or expenditure must be ‘extra-ordinary’, i.e. it must lie outside the
normal activities.
• In The Bona (1865) 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.
• 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.
• 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. (1895) 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.
• The sacrifice or expenditure must have been made for avoiding the
common danger and not to save any particular interest.
• The endangered property must have been actually benefited by the
sacrifice or expenditure.
• 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.
• The loss or damage on which the contribution claim is based must arise
directly from the sacrifice or extra-ordinary expenditure. Rule C, YAR 2016
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:
1. As regards cargo
• Jettison, i.e. intentional throwing over-board of cargo, is the most common
instance of general average sacrifice;
2. 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 saving the cargoes and also
the ship, the loss of or damage to the ship is a general average sacrifice;
3. 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.
• In Austin Friars v. Spillers and Bakers (1913) 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. 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.
• Rule G of the York-Antwerp Rules 2016 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.’
Freight
Different types of freight:
• Advance freight
• Freight payable on delivery
• Lump sum freight
• Pro rata freight: payable proportionately to the part of the
voyage accomplished or to the part of the cargo delivered.
• Back freight: The carrier’s remuneration for carrying the goods
beyond their original destination, where the consignee has
failed to take delivery or to forward instructions as to disposal
of the goods is back freight.
• Dead freight: Where the charterer has failed to fulfil his
contract to provide full and complete cargo, the carrier is
entitled to damages, called dead freight.
By whom freight is paid:
1. By shipper of goods under the bill of lading or by charterer
under a charter party;
2. By the consignee or endorsee for value of a bill of lading;
3. By seller of goods, who stops the goods in transit.

To whom freight is payable


4. The ship-owner or the Master;
5. Loading broker, if agreed;
6. Charterer in the case of a Charter by Demise;
7. As assignee of the ship, to whom ownership of the ship has
passed;
8. A mortgagee of the ship, who has actual or constructive
possession of the ship.
Carriage of goods by land
and inland waterways
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.’

Characteristics:
• It may be an individual or firm or a company;
• It carries goods only. Passenger carriers are not covered by the Carrier’s
Act (1865);
• It carries goods, as business, for money. Therefore, occasional carriers
are not common carriers;
• It carries goods by land or inland waterways; and
• It carries goods without making any discrimination between consignors.
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.
Common Carrier vs. Private
Carrier
• A common carrier is a regular carrier, while a private carrier is
an occasional carrier;
• A common carrier carries goods indiscriminately, whereas a
private carrier can make discriminations between consignors;
• 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
• The person, who does not qualify as a common carrier is to be
regarded as a private carrier but not vice versa.
Duties of common carrier
• 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,
• if no room is available;
• 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;
• if the goods are inadequately packed;
• if the goods are to be carried over an uncovered;
• if the consignor refuses to pay advance freight or refuses to pay reasonable freight;
• He must not make unjustifiable deviation from the contract route;
• He must deliver the goods within the fixed or reasonable time;
• He must deliver the goods in the agreed place. If no place is fixed, then at the usual place;
• He must deliver the goods against submission of documents only, for example Chalan;
• He must carry out the reasonable instructions of the consignor, for example to stop the goods in
transit;
• 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:
• act of God; act of war;
• act of foreign enemies;
• inherent vice of the goods;
• inadequacy of packing;
• misconduct or default on the part of the consignor, for example where the consignor concealed the dangerous
nature of the goods.
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-
• in the case of goods exceeding Tk 100 in value, the value thereof
has been declared; and
• 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.
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,
• to any goods, where it is caused by a criminal act; and
• to any non-scheduled goods, where it is caused by negligence.
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.
Rights of common carrier
• The carrier is entitled to a reasonable charges for carriage of
goods;
• He has lien on goods for the unpaid charges. He can retain the
goods, until the dues are paid;
• If the consignee fails to take delivery of the goods, the carrier
may take reasonable steps and entitled to recover reasonable
expenses so incurred;
• The carrier is entitled to recover damages for loss or damage
sustained by him owing to the fault of the consignor.
Carriage of goods by railways
Duties of railways
• These duties are similar to that of a common carrier.

i. 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:
• Section 151 provides that the bailee must take prudent man’s care;
• 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;
• 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:
• in the case of elephants: Tk. 1,500/- per head
• in the case of horses: Tk. 750/- per head
• in the case of mules, camels or horned cattles: Tk. 200/- per
head
• 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).