Carriage of Goods By Sea

 Historical background
 Contract of carriage by sea
 Liability Scheme - Ship owner's liability in
contract of carriage of goods
 Liability of seaworthiness & cargo worthiness
 Liability of non deviation
Historical background
 The 19th century witnessed the rise of the
laissez faire philosophy which promoted
unrestricted freedom in commercial
agreement.
 The court were reluctant to intervene in the
contract made between parties & this led to
the situation whereby those in a better
bargaining position (the ship owner; i.e.
carrier) were able to strike extremely
beneficial deals.
…
 In the context of contracts of carriage of
goods by sea, the ship owners, the
stronger of the contracting parties, inserted
all-embracing exclusion clauses whereby
the entire risk of carrying the cargo was borne
by cargo owners.
 The clauses in BOL exempting the carriers
from liability became so complex & diffuse the
usefulnes of BOL as “currency of trade”
…
 This inevitably led to growing
resentment among the cargo owners(as
well the holders of the BOL who
were not the original parties to the
contract, i.e the Buyer or the Bank).
…
 It was felt that an international convention
was required to redress the
imbalance/inequities caused by the laissez
faire philosophy ; the Hague Rules were
drafted & signed by major trading nations in
1924.
 The Hague Rules 1924 set a minimum level
of liability that could not be contracted out of
by the carriers. (the Rules was the first
attempt made with the purpose of creating a
standard set of contract terms in the
carriage of goods by sea.)
..
 The UK implemented the Hague Rules 1924
with the Carriage of Goods by Sea Act
1971) (COGSA 1971).
 Previously, it was COGSA 1924 but it has
been repealed by COGSA 1971.
 Failing of the Hague Rules 1924 surfaced
over time; e.g the defences & limitation of
liability afforded by the Rules did not extend
to the carriers’ servants or agents etc.
…
 Later, the Hague-Visby Rules 1968 were
drafted.
 The Hague-Visby Rules 1968 & its
predecessor, the Hague Rules 1924 (still in
force), were to redress the imbalance caused
by the extensive use of exclusion clauses
operating in favour of ship owning interests in
bill of lading.
…
 Both sets of Rules are said to operate in
favour of cargo interests.
 The Hague-Visby Rules 1968 introduce a
few amendments to the Hague Rules 1924.
This include availability of liability limits to
servants & agents of carrier & increase in
liability amounts.
 Recently, Hamburg Rules came into force on
1 Nov 1992 which exists along side with the
other two well established Conventions:
Hague Rules 1924 & Hague-Visby Rules
1968.
….
 Further development to the British
COGSA was also subsequently made
by the British Parliament vide the
COGSA, 1992 in order to remedy the
many inequities caused by the existing
laws at that point of time as well as to
keep abreast with fast motion of
international trade.
Malaysian position
 The present Malaysian Carriage of Goods
by Sea Act, 1950 (COGSA) applies
throughout Malaysia.
 Malaysian COGSA has never been amended
(except in 1994 with minor changes), altho’
the British COGSA 1971 has undergone
major development pursuant to Visby
Protocol of 1968.
 Malaysian Carriage of Goods by Sea
Ordinance, 1950, which was initially
applicable only in West M’sia, adopted the
Hague Rules 1924 as it schedule.
…..
 The Ordinance & it’s content remained in tact
until it was later revised (1994) whereby very
minor changes to the wordings were made.
Comment:
Efforts to adopt the Hague-Visby Rules is
timely for our benefit since in maritime law,
conformity with the international conventions
& practices is deemed pertinent.
Contract of carriage of goods by
sea
Introduction:-
 The cont. is governed by: COGSA, Hague
Rules 1924, Hague Visby-Rules 1968 &
Hamburg Rules 1992.
 The statutes were to redress the imbalance
caused by the extensive use of exclusion
clauses operating in favour of ship owning
interests in bill of lading.
…
Parties in a Contract of carriage:-
i. Shipper – a party who is shipping the goods
ii. Carrier – a party who is prepare to carry & convey
goods on behalf of some person for a fee (he can be
the owner / charterer). The carrier is the person who
enters the contract of carriage with the shipper.

There are 2 types of contract of carriage by sea:-

(a) Contracts evidenced by BOL
(b) Contracts contained in charterparties (C/parties)
…
NOTE:
 C/parties are governed by the rules of
common law. The principle liberty of
contracting parties applies to them.; i.e. ship
owner may, by agreement with charterer,
modify his normal liability as a carrier without
any limitations.
 Contracts of carriage evidenced by BOL
are regulated by statute law; i.e COGSA
1971.
Method of transport: – carriage of
goods by sea.
The methods are determined by the nature of
the goods .
A. Charterparties:
Example: If the goods are in bulk (i.e
grain, coal or oil), shipper may hire the
whole vessel (entire ship) by means of
charterparties.
• The exporter who has chartered a whole
ship may issue BOL under the charterparty
& terms from the charterparty may be
incorporated in the BOL.(NOTE: BUT the
cont.of carriage is concluded prior to the
issue of the BOL)
…cont
There are 3 basic forms of
charterparties:
1. Voyage Charter
2. Time Charter
3. Bareboat or demise charter
…cont
A. Voyage Charter
• s/owner allows the charterer to use the vessel
for a specific voyage (i.e. from a specific port
of loading to a name port of discharge)
• Charterer undertakes to pay freight to the
s/owner.
• A specific time of loading & discharge
operations will be provided (i.e is called
laytime)
…cont
 If the charterer were to exceed this pre-
agreed time when loading or
discharging the cargo, he is liable to pay
demurrage (liquidated damages).
…cont
B. Time Charter
 Hire of the vessel by the charterer for a
specified period of time.
 Payment is by hire; hire will be payable from
the time the ship is delivered & will cease
when the ship is re-delivered.
 When & where delivery shd take place wld
normally be contractually provided for.
 Hire, in many case is pre-paid.
…cont.
 As the ship is at the charterer’s full disposal,
any loss of time would normally be borne by
the charterer.
 Time charters are entered into where the
charterer needs a vessel for a period of time
without undertaking fully the financial
commitments & risks of ownership or the
responsibilities of navigation & the ship
management. (i.e. He has the complete use &
management of the vessel)
…cont
C. Bareboat or Demise Charter
 When a ship is leased to the charterer who assumes
full responsibility for the crew, the equipping of the
vessel, the navigation and management of the ship.
 He acts as the owner in all material aspects of the
shipping operation.
 Bareboat charters are popular with governments who
might from time to time need to provide ships to meet
times of emergency. (e.g. where the navy is unable to
provide sufficient capacity at times of war)
General Illustration
Scenario:
 M’sian seller (exporter), via cont. of sales
with the buyer (importer) has arranged
contract of carriage by sea.
 M’sian exporter entered into a contract of
carriage with the shipowner; where
shipowner undertakes to carry the goods in
his ship from M’sia (port of loading) to
overseas (port of discharge).
….
 This contract is known as contract of
carriage by sea; the remuneration
(bayaran) to the shipowner is the
freight; the shipowner is the carrier, &
the exporter (as a party to the contract
of carriage by sea) , is referred to as the
shipper.
…
 Shipper instruct his agent (forwarder) will
procure freight space (in the case where
smaller cargo is being shipped).
 Shipowner, on the other hand, thru’ his agent
(loading broker) will obtain cargoes for his
ship.
 Shipowner thru’ his loading agent (loading
broker) will advise the shipper of:-
a) The name of the ship
…
b) Place where the goods should be sent
for loading.
c) Time when the ship is ready to receive
the goods
d) Closing date (i.e. last date for loading)
They are all printed in – the sailing card.
NOTE:
Exporter/Shipper has to decide whether
the nature & quantity of the goods to be
exported warrants the charter of a
complete ship; in such a case, the terms
in the contract of carriage will be in the
document known as charterparty.
…
 In most cases, the goods form part of
the intended cargo of the ship (i.e. they
are carried in the ship together with
other goods belonging to other
shippers), & in this case, the terms of
the contract of carriage will be in the
bills of lading.
Conclusion of the contract of
carriage by sea
 Cont. of carriage bet shipper & carrier is
concluded prior to the issue of BOL (i.e.
BOL is only issued AFTER the goods
have been placed on board).
 Thus, BOL is merely an evidence of
the contract of carriage (i.e. NOT a
contract of carriage itself).
….
 Thus, the term of the cont., even if
agreed upon orally, may override the
general clauses printed in the BOL.
 Therefore, in the case of conflicting of
terms in the BOL & the CONTRACT,
then the term in the CONTRACT will
prevail) Case: Ardennes [1951] 1 K.B
55; oranges was shipped in a Spanish..
…
 port on the understanding that the ship wld
sail directly to London ( shipper made an oral
agreement with the carrier), so that they
would reach London before the govt increase
the import duty on these goods. The ship
called at Antwerp & the delay in arrival at
London caused loss to the shipper. The BOL
contained a term which would have permitted
the carrier to call at Antwerp & the carrier
relied on this term.
…
HELD: The BOL was only evidence of the cont.
of carriage & that the cargo owner was
entitled to prove that the cont. the parties had
in fact made contained a term that the voyage
would be direct. (damages was awarded)
 The recent judgement from the Court of
Appeal, in Cho Yang Shipping Co Ltd v
Coral (UK) Ltd (1997), affirms the above
view.
Liability scheme
This sub-topic will be discussed according to
these headings:-
 Implied duties of the carrier at common law
(i.e. where there is a charterparty, the rules
are governed by the common law).
 Duties of the carries under the Hague-Visby
Rules (i.e. where a shipper simply procure
shipping space from the shipowner)
Carrier duties at common law
A. Duty to provide a seaworthy ship.
 Definition of ‘seaworthiness’: “…the
shipowner is,….held to warrant that the
ship is good, and is in a condition to
perform the voyage about to be
undertaken, …that is, fit to meet &
undergo the perils of the sea & other
incidental risks..”Field J. in Kopitoff v
Wilson (1876) 1 Q.B.D.377
…
 The nature of the duty refer to the:-
i. Physical condition of the vessel (e.g. in
Stanton v Richardson (1875) LR the
pumping equipment in the ship cld not
adequately deal with the surplus of
water from a cargo of wet sugar – this
rendered the ship unseaworthy).
ii. Incompetent @ insufficient crew (e.g. in
..
 ..Hongkong Fir Shipping Co. Ltd v
Kawasaki Jisen kaisha Ltd [1962] 2
QB Ct of Appeal held: that shipowners
had employed insufficient crew to
operate the engines & this was
aggravated by the fact that the chief
engineer was addicted to drink & had
repeatedly neglected his duties).
…
iii. Inadequate documentation (e.g. in
Ciampa v British Steam Navigation
Co. Ltd [1915] 2 K.B 774; the ship had
to sail from Mombasa without a clean
bill of health & had to be fumigated in
France. Held: Failure to supply a clean
bill of health made it impossible for the
vessel to perform the charterparty).
…
iv. Cargoworthiness – the fitness of the
ship to receive & hold the cargo is part
of the general fitness of the vessel. (e.g.
in Owners of Cargo on Ship “Maori
King” v Hughes [1895] 2 Q.B; failure of
the ship’s refrigeration system was
tantamount to unseaworthiness.
Carrier’s duties under Hague-
Visby Rules
1. 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 & supply the ship
c) make holds, refrigerated & cool chambers, & all
other parts of the ship in which the goods are
carried, fit & safe for their reception, carriage &
preservation (Art III, r 1)
In Riverstone Meat Co Pty Ltd v Lancashire
Shipping Co Ltd. – the defts. Had engaged a firm..
…cont
 …of reputable repairers to repair the ship
before sailing but the repairers were negligent
& caused water to enter the ship’s hold
damaging the claimants’ goods. HELD:
carriers duty is to exercise due diligence in
ensuring that the ship is seaworthy, not due
diligence in securing the services of a
reputable professional to fulfill that task.
…cont
 It wld appear that the nature of the non-
delegable duty of Art.III(1) would prevent the
cargo owner from taking action against a
classification society for negligent surveys or
repairs carried out on the vessel.
 The carrier’s obligation to provide seaworthy
vessel is personal – i.e he cannot escape
liability by delegating work to a reputable
contractor: The Muncaster Castle (1961)
…
 The issue of whether due diligence has
been exercised or not is one of fact :
The Amstelslot (1963)
 Whether due diligence has been
exercised or not is determined by
looking to the action of other skilled men
in similar circumstances : The Toledo
(1995).
…
 Due diligence must be exercised BEFORE
and AT THE BEGINNING of the voyage – i.e.
the period from the beginning of the loading
until the ship started on her voyage: Maxine
Footwear Co Ltd v Canadian Government
Marine Insurance (1959) HELD: that
although the fire broke out after loading but
before the beginning of the voyage, the
carriers were still liable under the rules.
…
 Once due diligence has been exercised
to make the ship seaworthy before she
sets sail, the carrier is not in breach of
the seaworthiness obligation should
faults develop during the voyage:
Leesh River Tea Co v British India
Steam Navigation Co (1966).
…
NOTE: the seaworthiness undertaking
under Art III, r 1 is an overriding
obligation. This means that where there
is a breach, the carrier loses the benefit
of the immunities available in Art IV :
Maxine Footwear Co Ltd v Canadian
Government Marine Insurance (1959);
The Fiona (1993)
…
 The burden of proof is initially on the
shipper to establish that the vessel was
unseaworthy, upon which, the burden
shifts to the carrier to show that the due
diligence was exercised (Art IV, r1: The
Hellenic Dolphin (1978).
Carrier’s responsibility… (cont’)
2. To properly & carefully to load, handle, stow,
carry , keep, care for & discharge goods carried
(Art III, r 2).
 The word ‘carefully’, is construed as requiring
reasonable care.
 The period of responsibility is from tackle to tackle.
 The obligation to take care of cargo personal to the
carrier. Reliance on advice of a competent surveyor
will not reduce the carrier’s liability (International
Packers v Ocean SS Co (1955)
Carrier’s responsibility… (cont’)

3. On shipper’s demand, to issue a

BOL showing, among other things:
a) Leading marks;
b) The number of packages, pieces,
quantity & weight; &
c) The apparent order & condition of
goods.
….
NOTE:
 Statements made on BOL are regarded as
prima facie evidence of goods as described
(Art III, r 4). On transfer, such statements
become conclusive evidence.
 The carrier is allowed to make reservations
on BOL, regarding weight, quantity &
condition of goods.
Carrier’ responsibility … (cont’)
4. To pursue the contract voyage; UNLESS:-
a) For purposes of saving life or property at
sea; or
b) Reasonable deviation (Art IV, r 4)
Note: The concept of reasonable deviation is
a source of uncertainty, since it is not
elucidated in the Hague-Visby Rules. But
base on judicial opinion, the test for
reasonable deviation, according to Lord
Atkin in Stag Line v Foscola Mango & Co
(1932), is ‘what departure from the ...
….
 …contract voyage might a prudent
person controlling the voyage at the
time make & maintain, having in mind
all the relevant circumstances existing
at the time, including the terms of the
contract & interests of all the parties
concerned but without any obligation to
consider the interest of each as
conclusive”.
…
 Thus, reasonable deviation should not be
confined simply to the question of:
a) Deviation to avoid some imminent peril;
b) Deviation in the joint interest of cargo-owner
or ship; or
c) Deviation as would be contemplated by
both cargo-owner & ship
(i.e the scope is broader than the above).
…
 E.g: Deviation may be regarded as
reasonable, even though it is made
solely on the interests of the ship, or
solely in the interests of the cargo, or
indeed in the direct interests of neither
as, for instance, where the presence of
a passenger, or a member of the ship’s
crew was urgently required after the…
 …voyage had begun on a a matter of
national importance or where some
person on board was a fugitive from
justice & there were urgent reasons for
his immediate presence.
Exception to Carrier’s Liability at
Common Law
1. Act of God
Case: Nugent v Smith (1876), the owner of two
horses had shipped them onboard a ship
belonging to the defendant company from
London to Aberdeen. During the voyage, one
of the horses died from injuries caused by a
violent storm. Defendant was not
negligent on his part in the care of the horses.
However, the defendant must prove that the
“damage…
…cont
 …or loss in question must have been
caused directly & exclusively by such a
direct & violent & sudden & irreversible
act of Nature as the defendant could
not, by any amount of ability, foresee
would happen or if [they] could foresee
that it would happen, [they] could not by
any amount of care & skill resist, so as
to prevent its effect”.
…cont
2. Act of Queen’s enemies – e.g. war
3. Inherent vice – where it is proved that the
cargo had been lost or damaged as a result
of its own inherent nature & that this was
something beyond the control of the carrier.
4. Fault or fraud of consignor – if the
damage is caused by an act or omission of
the consignor, the carrier is freed from
liability. E.g. where the goods had been
inadequately packed & that caused the goods
to be damaged, the carrier shld not be liable.
Shipper’s responsibilities
 1. To guarantee the accuracy of marks,
number, quantity & weight (Art III, r.5); & to
indemnify the carrier for loss, damage or
expenses incurred due to incorrect
information.
 2. To inform the carrier of any dangerous
nature of the goods & is liable for any
damage arising directly or indirectly as a
result of such shipment.
Shipper’s responsibilities
 3. The shipper’s obligation in respect
of dangerous goods is an absolute
obligation.
Words related to the topic
 Ship owner/carrier – empunya kapal
 Cargo owner – empunya barang @
muatan
 Freight charges – tambang muatan
 Exclusion clauses/ exemption clauses –
fasal pengecualian
 Charterer – pencater ( org yg menyewa
kapal)