The Gazette 1991

GAZETTE

JANUARY/FEBRUARY 1991

Privity and Contracts for the

Carriage of Goods by Sea

I n t r oduc t i on

Con t r ac ts f or t he carriage of goods by sea are by nature dynamic.

The comme r c i al f r amewo rk in wh i ch they arise involves many

parties and d i f f e r ent legal relationships. Such con t r ac ts do not sit

easily w i t h t he strict requirements of the doc t r i ne of privity.

This

uneasy relationship has given rise t o variations and exceptions t o

the doctrine of privity that to some extent reflect commercial reality.

In wh a t f o l l ows some of these variations w i ll be examined and in

particular their consequences for t he cargo-owner vis-a-vis the

carrier, his servants, agents and independent con t r ac t o r s .

Imp l i ed con t r ac t ual relations

be tween the purchaser of a

cargo and the carrier.

There is little difficulty in the case

of the contract of carriage between

the shipper and the carrier. Both

parties can sue and be sued by

each other. However, when the

cargo is sold the shipper will have

no interest in taking any action

should the goods be subsequently

lost or damaged. The purchaser will

have no express contract with the

carrier since he will not have been

party to the original contract of

carriage. He must therefore either

establish an implied contract or sue

in tort.

International sales of goods are

commonly on F.O.B. or C.I.F. terms

or variations thereon.

These con-

tracts are such that the obligations

of the seller in relation to the cargo

cease on shipment. The risk is

passed to the purchaser. If it is

purchased while at sea, C.I.F., as

often happens, the risk passes to

the purchaser retrospectively from

shipment. In the case of successive

purchasers, the risk for the com-

plete voyage falls on the final pur-

chaser

(or his insurer under the

doctrine of subrogation

Contractual relations implied by

statute

At common law contracts were not

assignable. Hence a transfer of a bill

of lading, with the intention of

passing the property in the cargo,

did not transfer the rights and

liability under the contract of

carriage; it merely passed the

property in the goods.

A great change was brought

about by the Bills of Lading Act

1855.

Section 1 of that Act

provides:

Every consignee of goods

Mui r is O Ceidigh

B.A., LL.B.

named in the bill of lading, and

every indorsee of a bill of lading

to whom property in goods

therein mentioned shall pass,

upon or by reason of such

consignment or indorsement,

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 con t r act

contained in the bill of lading had

been made with himself.

Thus when the risk is passed to

the buyer so also will the rights of

action against the carrier if this

section applies.

However this provision has

certain limitations which result in it

not being applicable in a number of

situations.

Unascertained

goods and the

passing of property.

The Sale of Goods Act 1893

contains an absolute rule that

property in unascertained goods

cannot pass 'unless and until the

goods are ascertained'.

(F/ynn -v-

Mackin & Mahon.

)

Much of the cargo shipped on

chartered vassels is shipped as an

undivided bulk, whether in liquid or

dry cargo form. Parts of the bulk

will then be sold to a number of

different buyers, but no individual

purchaser will be able to state

which part of the bulk will be his

until it is appropriated to him.

Property will pass only when the

goods are appropriated to the

contract.

(Spicer-Cowan (Ireland)

Ltd -v- Play Print.

)

However this

will normally only occur when the

cargo is unloaded at the end of the

voyage. Thus in the case of an

undivided bulk cargo, risk will

usually pass to the buyer on

shipment, but property will not

pass until discharge.

Therefore, Section 1 of the Bills

of Lading Act 1855 will not confer

rights on the purchasers of the

cargo while the bulk is at sea.

It is to be noted that if a bulk

cargo is lost at sea the purchasers

will be unable to base a case on

Section 1 as the goods will never

have been appropriated to the

contract as it will not have been

divided.

Muiris O'Ceidigh