During the sailing-ship epoch carriage of goods by sea was, in a bigger part, performed by the common carriers who agree to carry the goods of any person who choose to employ him. A common carrier was strictly liable to the good’s’ owner in the same way as a bailee for reward, i.e. was to deliver the goods at all events, subject only to the acts of God and the King’s enemies.
With the rapid growth of international trade and significant influence of laissez-faire ideology on the development of contract law in the first half of the nineteenth century, the shipowners were able to took advantage of their superior bargaining power by introducing clauses into the contract of carriage which, to an increasing extent, excluded their common law liability. Thus, with the passing of time, characteristics of a common carrier had been vanished to the bigger or smaller degree from the way shipowners conducted their business and they became private carriers.
Unrestricted application of the doctrine of freedom of contract to the bills of lading contracts (and to charterparties as well) was vigorously opposed by other involved sides, namely shippers, bankers and underwriters. Finally it led to understanding that there is no practical value in any piecemeal solution, but only internationally recognised agreement can be acceptable for all parties.
Charterers historically have had sufficient commercial power to be able to negotiate fair and reasonable commercial terms of carriage with shipowners. However, because a contract of carriage generally is concluded prior to the issue of a bill of lading, bill of lading holders other than original shippers never in fact have a chance to negotiate at all with carriers, let alone to negotiate with carriers on an equal commercial footing. It thus was deemed desirable, in the face of the increasing restrictions that were being introduced into bill of lading contracts by carriers, that international standards should be developed to ensure that bills of lading should contain contracts of carriage on essentially fair and reasonable commercial terms.
An Introduction To Bills Of Lading, by Karen Troy Davies, Senior Litigator at Forbes Hare.
First attempt to find solution between conflicting interests of the cargo owners (who insisted that absolute carrier’s liability for loss or damage to cargo, subject only to the common law exceptions was the natural state of affairs) and the shipowners (who argued in favour of freedom of contract) was passing the United States Act of Congress, 1893 (Harter Act). The Act endeavoured to make a contract for the parties, to a bill of lading, instead of leaving them to fix the terms of their own agreement. This it does by declaring that either the usual wide negligence clause, or the clauses relieving the owner from his implied contract of seaworthiness, shall be null and void, but that a diligent owner shall be relieved from liability for certain named risks.
On international level similar in spirit if not in letter agreement in form of a set of rules was drafted by the Maritime Law Committee of the International Law Association and in 1921 and formed an international convention which was signed in Brussels on 25 August 1924 by the major trading nations, also known as The Hague Rules.
It shall be said that the Hague Rules were not intended to provide a comprehensive and self-sufficient code, but were designed merely to define the basic obligations of the carrier, therefore over the years all the limitations of the Rules became a source of discontent within shipping society, which resulted in incorporation in 1968 of several amendments to the Rules, known as the Brussels Protocol and is usually referred to as the Hague/Visby Rules.
Under influence of developing countries, negotiations began at UNCITRA in 1968, resulted in the signing of a document in 1978 in Hamburg and since then known as the Hambur Rules. Development and analysis of the Hamburg Rules are beyond the scope of this overview and it is sufficient only to note that the Hamburg Rules being ratified by a number of states which have neither ships, ports nor international trade, were never broadly adopted by the world’s major trading nations.
On December 11, 2008 the final draft of the Rotterdam Rules, which was assembled by the United Nations Commission on International Trade Law, was adopted by the United Nations. The provisions under the Rotterdam Rules in respect of the basis of carrier’s liability combine the complete fault liability system of the Hamburg Rules and the allocation of burden of proof which is closer to the Hague Rules.
Another important to the final holder of bill of lading issue was related to his right to bring a direct action against the carrier for loss or damage caused to the goods during sea transit. And also the courts acknowledged negotiability of bill of lading as a result of decision in Mason v Lickbarrow (1794) 1 H. Bl. 359 but bound by the doctrine of privity of contract they refused to grant the right to sue together with passing of property to the holder of bill of lading. As Parke B stated in Thompson v Dominy (1845) 14 M. & W. 403: "It transfers no more than the property in the goods; it does not transfer the contract." It led to situation where only shipper or consignor, who had already sold the goods, therefore suffered no Loss and had no interest to sue, had a right of action against the carrier. Whereas the consignee who got these goods damaged and suffered loss, but was not a party to contract of carriage and therefore had no right to sue. In that instances when it was consignor who suffered loss he was held to be the person who made the contract with the carrier and therefore may maintain the action, though the goods may be the goods of the consignee.
First step to solve this problem was the passing of the Bills of Lading Act 1855, which indicated that it is expedient that all rights in respect of the contract contained in the bill of lading should pass with the property. So the major step was finally embodied in section 1 of the Act:
Every consignee named in a bill of lading, and every endorsee of a bill of lading to whom the 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 with himself.
It is not within the scope of this article to exploit all the developments which for period of more than a century contributed to disappointing situation where consignees finally were unable to sue in respect of loss or damage to their goods due to some gaps in the Bills of Lading Act 1855. It is sufficient to say only that examination of the problems related to application of the Act by the Law Commission led to the passing of COGSA 1992.
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