Proving that the goods discharged were not the goods stated to have been shipped, comparing the difference between the discharge and the loading snapshots, is necessary but not sufficient for the success of the cargo claim.
For the claimant to succeed, it needs to prove that its loss was the direct result of a breach by the carrier of any one of three possible sources of obligation, i.e. contract, tort or bailment. Our focus is on the proof of breach of contract. In this regard, we have two central questions;
- Where are the terms of the contract of carriage between the claimant and the carrier: are they in the bill of lading or in a charterparty?
- If the terms of the claimant’s contract of carriage are in the bill of lading, what are the carrier’s duties breach of which might give success to the cargo claimant?
Where are the terms of the contract of carriage?
If the cargo claimant needs to prove that its loss has been caused by a breach by the carrier of a particular term of a particular contract, it becomes crucial for the claimant to identify the contract on which the claim is being brought. It is easy to draw the conclusion from the fact that the claimant holds a bill of lading, whether as shipper or as transferee, that the terms of its contract with the carrier are contained in the bill of lading and that the claimant’s task is to declare the carrier in breach of a term contained in the bill of lading. This conclusion is, however, too simplistic. The re are four possible sources in identifying the claimant’s contract of carriage as will be analysed below;
- The contract itself
It may seem tautological to say that the contract of carriage on which the claim is based is in the contract of carriage: there is, however, a fundamental truth hidden in this circularity. Where a cargo claim is brought by a non- charterer shipper of goods who has actually concluded the contract of carriage with the carrier, then the terms of the contract of carriage are contained in the agreement which they have concluded. The contract pre- exists – and is not exclusively contained in any bill of lading which may later be issued.
The bill of lading is issued after the goods are shipped, performing its role as a snapshot of shipment. Shipment occurs, however, in performance of a contract which already exists and some of whose terms will already therefore have been agreed, e.g., freight and time of shipment.
Those terms will be contained in a variety of exchanges and possibly documents, e.g., telephone or email exchanges and published schedules or booking notes. Other terms will be left to the bill of lading, which will, when it is issued, provide good evidence of the parties’ agreement. It is not, however, the only or even the prevailing source of evidence, in the sense that if parties have agreed terms which do not tally with a particular term of the bill of lading, then it is the specially agreed term which prevails over the bill of lading term, not because one is special and the other general, but because the contract exists before the issue of the bill of lading.
- Who is the Shipper? First, we are envisaging here a shipper who is not also a charterer: the shipper will typically be either a shipper shipping goods for its own account, without selling the goods on, or a c.i.f. seller making the contract of carriage and actually shipping the goods it is selling to a buyer. Second, a shipper who is a charterer contracts with the carrier on charterparty terms, despite the fact that the charterer also holds a bill of lading.
In either case, the terms of the shipper’s contract of carriage are in its contract of carriage with the carrier.
2. The bill of Lading
Where the goods are carried on a chartered ship, the buyer of goods from a c.i.f. seller, or from an f.o.b. seller where the seller has agreed to conclude and to transfer a contract of carriage to the buyer, obtains, as we saw at the start of this chapter, rights of suit against the carrier through the Carriage of Goods by Sea Act and those rights of suit are in a real sense contained in, rather than simply evidenced by, the bill of lading.
Consequently, any terms of the contract of carriage specially agreed between the seller/shipper and the carrier do not travel to the buyer
3. A Charterparty
The issue here is whether either party to a cargo claim, the claimant or the carrier, can plead terms contained in the charterparty or in the bill of lading issued when the goods were shipped. It is impossible to predict which party to a claim will want which document to dictate the terms of the contract on which the claim is brought. The reality is that the parties are not after a document: they are after a particular term in a particular document which happens to suit the way the claim has progressed. Thus, for example, a carrier will want a particularly short time bar in a charterparty to prevail over the longer one- year time bar affecting the bill of lading through the Hague–Visby Rules.
The problem of which document or which contract arises because the same transaction frequently spawns both a charterparty (clearly a contract of carriage) and a bill of lading (the reverse page of which looks uncannily like a contract). Two crucial points have to be analysed here.
- First, a charterparty is and can only be a contract of carriage: it can never perform any other functions; it does not provide a snapshot of the goods on shipment, and neither can it be passed down a string of buyers, transferring rights of suit as it goes.
- Second, although a bill of lading can, in certain circumstances, contain the terms of a contract of carriage, this is not the only function it performs and it is not a function it always performs.
In the contractual shipper’s hands, the bill of lading evidences but does not contain the contract of carriage. And whether or not it does contain the terms of the contract, the bill of lading will always perform its original snapshot or receipt function and may, where the requirements of the Carriage of Goods by Sea Act are satisfied, transfer rights of suit to a succession of buyers of the goods it covers. In sum, a charterparty does one thing; a bill of lading can do different things at different times.
A charterer may hold at one and the same time two documents, a charterparty and a bill of lading, both of which look as though they contain a contract of carriage. The truth is that, in a charterer’s hands, only one of those documents contains the terms of its contract of carriage with the carrier: the charterparty. The reason the charterer also holds a bill of lading is that the charterer needs a receipt for the goods shipped, whether for its own reassurance or because it needs to tender such a snapshot under a sale contract with its buyer; a second reason the charterer needs the bill is because it may need the means whereby to transfer to its buyer rights of suit against the carrier.
4. Bill of lading incorporating charterparty terms
There is one additional complication to the issue of whether a cargo claim is brought on bill of lading or charterparty terms. What if the appropriate document is, on the basis of the principles summarised above, the bill of lading, but that bill of lading contains a clause incorporating one, some or all terms from a charterparty? In this situation, is the cargo claim subject to bill of lading or to charterparty terms?
It is common for bills of lading to incorporate terms from a charterparty, largely but not exclusively, in the commodity trades. Where commodities are shipped requiring the full capacity of a single ship, the c.i.f. seller or f.o.b. buyer will typically charter the ship and the bill of lading issued will typically be a so- called short- form bill of lading, marked “for use with charterparties” and incorporating all terms from a charterparty. These bills of lading are commonly called “charterparty bills of lading”.
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