The Gazette 1991

GAZETTE

JANUARY/FEBRUARY 1991

to an agency relationship between

the

carrier

and

potential

defendants.

If an agent is appointed and

given authority to contract on

behalf of a principal then any

transaction within the scope of

such authority will include and bind

the principal. (In this instance we

are characterising the carrier as

agent of the defendant).

In Ireland the courts have held

that such a relationship can arise by

implication from the conduct of the

parties (see

Kearney -v- Cullen

and

Crean -v- Nolan

However,

before any agency exception can

operate there must normally exist

an i n t en t i on to create the

relationship of principal and agent:

Sheppard -v- Murphy.

For New Zealand the Privy

Council has determined that the

concept of agency was successful

in arriving at a Himalaya Clause that

would protect third parties such as

stevedores. In

The Eurymedon

machinery was to be transported by

ship from England to New Zealand.

The consignors in England contract-

ed with a carrier. The Carrier em-

ployed the defendant stevedores to

unload the machinery. The machin-

ery was damaged while being

unloaded owing to the stevedores

negligence. The consignees sued

the defendant stevedores personally

in Tort, in order to avoid an exempt-

ion clause in the carriage contract

(a one year time limit clause on

bringing actions, incorporated by

article III (6) of the Hague rules). The

stevedores were not party to

the contract of carriage, into which

the time limit clause was incor-

porated.

" . . . if t he p a r t i es t o t he

c on t r a ct envisage t hat t h i rd

parties are t o be p r o t ec t ed,

comme r c i al expectations must

be respected.

The Himalaya clause expressly

purported to protect the stevedores

and also declared that the carrier

was an agent of the defendants:

" I t is hereby expressly agreed that

no servant or agent of the carrier

(including every independent

contractor from time to time

employed by the carrier) shall in any

circumstances whatsoever be under

any liability whatsoever to the

shipper, consignee or owner. . .

and . . . every exemption, limita-

tion, condition and liberty therein

contained . . . shall also be available

and shall extend to protect every

such servant or agent of the

carrier. . . and for the purpose of

all the foregoing provisions of this

clause the carrier is or shall be

deemed to be acting as agent or

trustee on behalf of or for the

benefit of all persons who are or

might be his agents from time to

time (including independent con-

tractors as aforesaid) . . . "

The effect of such an agency

clause is that the defendant third

party, in this case the stevedores,

can rely on the protection of the

contract of carriage provided that

the agency in the carrier is deemed

to exist. It is not sufficient that the

carrier merely declare himself an

agent; he must be one in fact. The

third parties must authorise the

carrier to act as their agent (or at

least ratify the action). This requires

a knowledge of the terms of the

contract and they must provide

consideration themselves for the

contract with the owner of the

cargo.

The Eurymedon

the Privy

Council held that the clause

constituted an offer by the cargo

owner to the stevedores (using the

carrier as an agent to convey the

offer) to exonerate the stevedores

from liability, beyond the period of

limitation in the Hague Rules. That

offer was accepted by the steve-

dores unloading the ship, in reliance

on the offer. A unilateral contract

was therefore formed, with no

communication of acceptance

being required. The stevedores

provided consideration by carrying

out their contract to unload the

ship.

It is an established principle in

Irish law that an agreement to do an

act, which one is already under an

obligation to a third party to do, can

amount to valid consideration

because the promisee will receive a

direct obligation, which he can

enforce. (This line of argument was

accepted in the Irish case of

Saunders -v- Cramer

In other

words, he can sue the stevedores

for breach of contract should they

fail to unload the ship, or perform

the task badly.

However, the reasoning in

The

Eurymedon

does not stand up to

examination. The cargo owner can

only sue the stevedores in contract

if they have a contract with them.

One cannot construct a contract on

the foundation of a right to sue

which only exists if the contract is

already there in the first place.

On the other hand if the carrier is

able to sue the stevedores in Tort,

after the time limitations set down

by the Hague Rules, the doctrine of

privity is being preserved at the

expense of the convention's aims

and in defiance of commercial

reality. In any case if the parties to

the contract envisage that third

parties are to be protected, com-

mercial expectations must be res-

pected, even at the cost of doctrinal

or legal niceties.

The requirement that the princi-

pal should have some knowledge of

the terms of the carriage contract

was satisfied in

The Eurymedon

the fact that the carrier was a

subsidiary of the defendant, and an

inference of knowledge could be

made. The Privy Council in

The New

York Star

held it was not a

requirement that the relationship be

one as close as that in

The

Eurymedon

in order that a know-

ledge of terms be assumed for the

purpose of implying the existence of

a relationship of agency.

It could be argued that third

parties such as stevedores should

benefit from immunities which are

'notorious in the trade' and that this

should be assumed to be the normal

situation.

This would accord with

commercial reality and would be a

logical extension of the "business

efficacy" concept in contract law.

The idea of 'matters recognised in

the trade' is not a new notion. It has

been trite law for some time that

the custom of a trade can be implied

as a term in a contract relating to

that trade (see for example O'

Connaill -v- The Irish Echo **)

and

the related concept of 'course of

dealing' is well established.

However, where it is clear that the

defendant could not have been

aware of the terms of the contract

the doctrine in

The Eurymedon

cannot operate. In such a situation

it would not be possible to infer

acceptance by the stevedores of

any offer by the shippers or any

authorisation for the carrier to act

as their agents in the negotiations

with the shipper.

A serious limitation to the use of

a Himalaya clause is the require-

ment that the unilateral offer be

accepted and that that acceptance