892M3 – Law of International

Business Transactions
Week 7– Carriage of Goods by Sea I
Prescribed and Recommended Readings
 Prescribed reading:
 Goode et al, Transnational Commercial Law, chapter 9
Recommended reading:
 Baskind et al Commercial Law 4 ed (2022) chapters 19 & 21
 Available on OUP Law Trove
 Todd Principles of the Carriage of Goods by Sea (2016)
 Wilson Carriage of Goods by Sea 7 ed (2010)
 Further reading:
 Girvin Carriage of Goods by Sea 3 ed (2022)
 Scrutton on Charterparties and Bills of Lading 24 ed (2019)
 Treitel and Reynolds Carver on Bills of Lading 4 ed (2017)
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 Introduction I
 This area of maritime law is often referred to as dry
shipping and is primarily an aspect of contract law.
 In general, charterparties are contracts for the carriage of
goods by sea (sometimes called contracts of
affreightment) i.e. contracts for the services of the
shipower and his/her equipment. Charterparties are the
prinicpal document of the tramp shipping industry and
they are of three types:
 Voyage charterparties [e.g. “Gencon” Charter (As Revised
1994)]
 Time charterparties [e.g. “Baltime 1939”]
 Demise or bare boat charters [e.g. “Barecon 1989”]
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 Introduction II
 Unlike contracts evidenced by bills of lading,
charterparties are not subject to the mandatory application
of the Hague or Hague-Visby Rules.
 Also the statutory assignment provisions in the Carriage
of Goods by Sea Act 1992 doesn’t apply.
 The problem of transaction costs means that most
charterparties are entered into on standard forms and most
of the leading texts on the key forms of charterparty
(voyage, time and demise) are merely commentaries on
one of the standard forms.

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 Voyage Charterparties
 Under a voyage charterparty, the ship is chartered on a
voyage or a series of voyages (a ‘consecutive voyage
charterparty’ – a time cp on voyage charter forms?), the
freight payable being either a lump sum or calculated by
reference to the size of the cargo.
 Since the shipowner has in effect quoted a fixed price,
s/he includes in this a certain period for loading and
unloading (‘laytime’) and a charge for keeping the ship
beyond this time (‘demurrage’).
 Big texts devoted solely to the concepts of laytime and
demurrage exist due to the sums involved.

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 Time charterparties
 Under a time charterparty, the ship is chartered to proceed
on a particular period of use by the charterer, often within
stated geographical limits with a place for redelivery. Hire
is calculated on time basis.
 A standard term is the ‘off-hire’ clause - the charterer does
not have to pay freight when the ship is not working.
 The Law Reform (Frustrated Contracts) Act 1943 does
apply to time charterparties (not voyage cps).
 The “trip charter” is for a specific voyage but it uses the
form of a time charter – no laytime or demurrage.

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 Common Law – Duties of the carrier
 At common law, the duties of the common carrier are
normally taken to be strict (i.e. not fault based) and the
main duties of the carrier include:
 To provide a seaworthy ship which is cargoworthy on
loading and seaworthy on sailing;
 At common law this obligation is an absolute one.
 The Hague Rules have made this a due diligence obligation
 To take reasonable care of the goods;
 To proceed with reasonable dispatch;
 Not to deviate;
 To contribute in general average.
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Common Law – Duties of the Charterer
 The duties of the charterer include:
 Not to ship dangerous goods;
 To have the cargo ready so that delay is not
caused to the ship;
 To designate in a reasonable time a discharging
port where appropriate.

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The Three functions of a Bill of Lading
 A receipt in the hands of the shipper for
 (i) the quantity of the goods received
 (ii) the condition of the goods received
 (iii) the leading marks
 It is evidence of the contract of carriage
 See section 1(6) COGSA 1971
 The clause paramount
 It is a document of title
 The development of negotiable bills of lading (i.e. the need for
an “order” bill) - a named consignee or to his/her order. See
Sanders v Maclean (1883) 49 LT 462

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Bills of Lading and the Privity Problem
 Most international sales transactions are concluded on CIF terms
i.e. the seller enters into the contract of carriage with the carrier
ships conforming goods and delivers conforming documents
(commercial invoice, bill of lading and policy of marine cargo
insurance) to the buyer.
 If the goods are lost or damaged in transit, the buyer will want to
sue the carrier BUT the carrier has not entered into the contract
of carriage with the buyer and English law of contract has a
concept of privity i.e. only the parties to a contract can sue and
be sued on the contract.
 This led to the passing of the Bills of Lading Act 1855 now
replaced by the Carriage of Goods by Sea Act 1992.
 Former British colonies may still have the 1855 Act in force!
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 Carriage of Goods by Sea Act 1992, s
2(1)
Subject to the following provisions of this section, a person who
becomes—
(a) the lawful holder of a bill of lading;
(b) the person who (without being an original party to the contract
of carriage) is the person to whom delivery of the goods to which a
sea waybill relates is to be made by the carrier in accordance with
that contract; or
(c) the person to whom delivery of the goods to which a ship’s
delivery order relates is to be made in accordance with the
undertaking contained in the order,
shall (by virtue of becoming the holder of the bill or, as the case may
be, the person to whom delivery is to be made) have transferred to and
vested in him all rights of suit under the contract of carriage as if he
had been a party to that contract.
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Controlling the carriers’ contractual power
 The US Harter Act 1893
 The Hague Rules (1921-23)
 The Carriage of Goods by Sea Act 1924
 The US Carriage of Goods by Sea Act 1936
 The Brussels Protocol 1968 (aka the Hague Visby rules)
 The Carriage of Goods by Sea Act 1971
 The Hamburg Rules 1978 – 35 parties (in force I
November 1992) – most parties are landlocked!
 The Rotterdam Rules (opened for signature 23 September
2009) – 25 signatories, 5 parties
 20 parties required for the treaty to enter into force
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 Scope of application I
 “‘Contract of carriage’ only applies to contracts of
carriage covered by bills of lading or any similar
document of title” Article I (b) Hague Visby Rules
 Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB
402
 Summarised in Baskind et al at page 598
 The Happy Ranger [2002] EWCA Civ 694; [2002] 2
Lloyd’s Rep 357
 The Rafaela S [2005] UKHL 1; [2005] 2 AC 423
 The European Enterprise [1989] 2 Lloyd’s LR 185
 If no B/L is issued the parties may still incorporate the Hague
or HV Rules contractually by means of a clause paramount
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 Scope of application II
 All goods except live animals and cargo stated as being
carried on deck and so carried. Article I(c) Hague Visby
Rules.
 What about unauthorised deck cargo?
 Svenska Traktor v Maritime Agencies [1953] 2 QB 295;
[1953] 2 All ER 570
 Encylopaedia Britannica v Hong Kong Producer [1969] 2
Lloyd’s LR 536
 Daewoo Heavy Industries Ltd v Klipriver Shipping, The
Kapitan Petko Voivoda [2003] EWCA Civ 451; [2003] 2
Lloyd’s Rep 1 - “in any event” Art IV Rule 5

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 Scope of application III
 Section 1(2) COGSA 1971 states that the Hague Rules as
amended by the Brussels Protocol “shall have the force of
law” and Article IV bis Rule 1 of the Hague Visby Rules
clearly states that “[t]he defences and limits of liability…
shall apply in any action… whether the action be founded
in contract or in tort.”
 Thus the application of the Hague Visby Rules is now
mandatory for any sea voyage covered by a bill of lading
where the port of shipment is a port in the United
Kingdom. See further The Morviken (also known as The
Hollandia) [1983] 1 AC 565

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CARRIER’S DUTIES AND LIABILITIES I
 “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 III Rule 1 Hague Visby Rules
 Maxine Footwear Ltd v Canadian Government Marine Ltd
[1959] AC 589, [1959] 2 All ER 740, [1959] 2 Lloyd’s LR
105 (PC)
 Alize 1954 v Allianz Elementar Versicherungs AG (The CMA
CGM Libra)[2021] UKSC 51, [2021] 2 Lloyd‘s Rep 637
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CARRIER’S DUTIES AND LIABILITIES II
 As defined in Article III, the obligation to provide a
seaworthy ship embraces three distinct aspects, namely
 The physical condition of the vessel
 The Muncaster Castle [1961] AC 807 (HL)
 The Amstelslot [1963] 2 Lloyd’s LR 223 (HL)
 The Hellenic Dolphin [1978] 2 Lloyd’s LR 336 (QBD)
 The efficiency of the crew and equipment
 The Farandoc [1967] 2 Lloyd’s LR 276
 The CMA CGM Libra [2021] UKSC 51
 The cargoworthiness of the particular vessel
 The Good Friend [1984] Lloyd’s LR 586 (QBD)
 The due diligence obligation cannot be delegated!
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Afterthought - The Container Revolution

 “[In 1956] when it cost

$5.83 per ton to load loose
cargo on a medium-sized
ship, the cost of loading a
ton onto McLean’s
container ship, the Ideal-X,
was 15.8 cents.”
 Witold Rybczynski
“SHIPPING NEWS” NEW
YORK REVIEW OF
BOOKS, 10 AUGUST
2006
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