Liability under the contract of carriage

The contract between Cargolines Ltd, the carrier, and Sweet, the seller, does not expressly indicate that the Hague-Visby Rules apply. Upon application of common law on the contract of carriage, Cargolines is liable for loss or damage to the goods due to its own negligence or of that of its employees. It would only be exempted from damage or loss due to force majeur, acts of the shipper, court order, or inherent characteristics of the cargo that causes its destruction.

However, it should be noted in this case that the goods were shipped from England which is a port of a contracting state covered by COGSA. Any goods shipped under a bill of lading from the United Kingdom are subject to the COGSA. Thus, the Hague-Visby Rules (HVR) apply. Under the COGSA principles, the carrier, Cargolines, is required to exercise due diligence in providing a seaworthy vessel at the start of the voyage and becomes liable for failure to use such due diligence. Such warrants of seaworthiness includes proper loading, storing, carrying and unloading of cargo unto the vessel.

When the carrier issues a clean bill of lading indicating that the goods received for shipment are in good order and condition, then a presumption that goods where indeed delivered to the carrier in such condition. The burden falls on the carrier to prove otherwise. In this case, though the seller, Sweet, had the obligation of ensuring that packaging of the cargo intended for Baxwell, the buyer, was in pursuance to their contract, nevertheless the carrier, Cargolines, had the obligation of exercising due diligence as to the seaworthy vessel.

Cargolines had the duty of ensuring the proper loading, storing, and carrying of the cargo. During the course of the loading, the crane driver negligently dropped 100 books in the water. This was already negligence on the part of Cargolines since the act of its employees can be attributed to the carrier. Even if the packaging was insufficient, the damage was apparent since the cargo got wet. Dropping the cargo into the water does not also occur at the ordinary course of business of the carrier, and for that the carrier should be held liable for damages.

Even if the condition of the cargo was unknown after it was dropped in the water, the master of the ship should have noticed superficial or apparent defect in the cargo which fell in the water. Only when the defects are not apparent will the condition be deemed “condition unknown”. When the condition of the cargo is unknown, or when the defect on the cargo is not apparent, then Cargolines will not be liable under the bill of lading. The evidentiary value of the bill of lading in this instance would be destroyed.

After all, pursuant to the COGSA 1992, a bill of lading represents that goods to have been shipped on board or received for shipment on board a vessel; and it is deemed conclusive evidence against the carrier of the shipment of the goods or receipt for shipment of such goods. However, if the defects were apparent, Cargolines will be liable under the bill of lading it issued which indicated that the good were shipped in good order and condition. And again, the mere act of dropping the cargo into the water is already negligence on the part of Cargolines since it was an act of its employee.

The bill of lading which stated that the goods were shipped in good order and condition is conclusive evidence in favour of a bona fide purchaser for value such as Baxwell. Cargolines, the carrier, will then be estopped from denying the condition as stated in the bill of lading if Baxwell can show that he relied on the bill of lading. Cargolines will be estopped particularly if the defects on the goods are apparent, as provided for in the case of Silver v. Ocean Steamship Ltd.

The case also provides that the crew of “The Banger” were recent recruits with little or no previous seafaring experience, and that the ship had intermittent engine problems. These showed Cargolines’ failure in exercising due diligence in ensuring the seaworthiness of the vessel. Furthermore, although Cargolines would ordinarily be exempted from damages to cargo due to force majeur, such as fire, such exemption will not apply if the damage was due to the negligence of its own employees. In this case, the fire broke out in the ship’s hold due to a misunderstanding between the ship’s chief engineer and its inexperienced assistant.

Cargolines is thus not exempted from liability on the damage caused to the goods brought about by negligence of its employees in starting the fire in the ship’s holds. Cargolines should have notified Sweet as to the damaged goods. If the damage was apparent, notice should have been given before or at the time the goods were taken from the carrier’s custody. If the damage was not apparent, Cargolines should have given written notice within 3 days of delivery. In either case, Cargolines was aware that one of its employees, the crane driver, dropped 100 of the books into the water while loading.

That being the case, Cargolines should have given notice thereof as to any apparent/not apparent damage to the cargo. It would have been more prudent rather than issuing a clean bill of lading. Its failure to do so, and in issuing a clean bill of lading when in fact the cargo was damaged, makes Cargolines liable. The shipper, Sweet, would have a right of recourse against Cargolines for the damage to the goods under Cargolines’ custody. Baxwell, as a holder in due course of the bill of lading, would also have a right of recourse against Cargolines.