The Gazette 1991

GAZETTE

JANUARY/FEBRUARY 1991

be referable to the offer. In

Burke

Motors Ltd. -v- The Mersey Docks

and Harbour Bourd Co.

the dam-

age to the cargo occurred prior to

it being loaded by the stevedores.

The damage resulted from a motor

accident involving an employee of

the defendants. A van collided with

a container containing a corrosive

liquid which escaped and damaged

the cargo. No bill of lading had been

issued, but the plaintiffs had had

previous dealings with the carrier.

Had the bill of lading been issued

it wou ld have con t a i ned an

effective Himalaya clause. However

it was held that the bill of lading

was of no consequence, since in

any case the defendants had not

performed an act referable to the

contract that would constitute an

effective acceptance of any offer

by the plaintiffs.

It is clear that the result in this

case was dictated by the theoretical

parameters of the law of contract

rather than by commercial reality.

The Merchant Shipping Act 1947

and the Hague and Hague-Visby

Rules.

In England the amending protocol

to the Hague Rules has been imple-

mented through the Carriage of

Goods by Sea Act 1971. Article IV

bis

of the Hague-Visby Rules ex-

tends the defences and limitations

contained there in to servants and

agents of the carrier. However, the

Hague-Visby Rules work through

incorporation into the contract of

carriage.

This is also the case

with the Hague Rules which were

incorporated into Irish Law by the

Merchant Shipping Act 1947.

Since the whole problem in relation

to defendants such as stevedores

relates to being party to the

contract of carriage, this extension

is of no avail where the doctrine in

The Eurymedon

does not apply.

Ci r cu l ar i ndemn i f i c a t i on and

Himalaya Clauses.

Since Himalaya Clauses do not

represent a complete solution to

the problem of personal actions

against the agents, servants or

independent contractors of carriers

the use of circular indemnification

is advisable as a complement to it.

This involves the cargo owner

undertaking not to bring an action

against the servants agents and

independent contractors of the

carrier, and to indemnify the carrier

against the consequences of

bringing such a claim. The carrier

may also in his contract with the

potential defendant agree to

indemnify him against any claim

brought by the cargo owner.

Additionally the contract may allow

the carriér to recover from the

cargo owner any monies recovered

in any action against third parties

such as the potential defendant.

The result is that any action will

achieve nothing.

The problem with circular in-

demnification is that the initiative

to restrain an action by the cargo

owner against the po t en t i al

defendant rests with the carrier,

because it is on the carrier that the

fraud would be committed by the

taking of such an action. If the

carrier has agreed to indemnify the

potential defendant, he, if sued, can

pursue a claim against the carrier,

leaving the carrier to pursue his

own claim against the cargo owner.

This will not be the best position for

the carrier to be in if the cargo

owner turns out to be a poor or

difficult mark. Thus neither the

Himalaya Clause nor the circular

indemnification of parties is a com-

plete solution and their joint use is

advisable.

CONCLUS ION

Neither Section 1 of the Bills of

Lading Act 1855 nor the doctrine in

Brandt -v- Liverpool

is a complete

solution to the difficulties arising

owing to the strict application of

the rules of privity to the relation-

ship between the carrier and subse-

quent purchasers of a cargo. The

main reason for the difficulty arises

out of the drafting of the Bills of

Lading Act. The requirements of

property having passed and the

necessity for a bill of lading and not

any other document such as a

delivery order have given rise to

exceptions that in no way relate to

commercial reality.

The relationship between the

servants, agents and independent

contractors, and the cargo owner is

also full of uncertainty.

The real difficulty with privity of

contract lies in finding a satis-

factory accommodation between

certainty and justice. It can be

reasonably argued that the doctrine

has produced both uncertainty and

injustice in the area of the carriage

of goods and that its function in the

area should be questioned. There

has been some support recently for

the view that the application of the

doctrine of privity to contracts for

the carriage of goods by sea

should be abolished. However, this

view may be too extreme.

While English and Irish courts have

persistently, if reluctantly, restricted

the range of liability to the parties to

the contract, American courts re-

cognise an exception which provides

that, where a contract expressly

mentions third parties as intended

beneficiaries of the contract, they

will be permitted to claim the en-

visaged benefits. Furthermore, some

American courts go so far as to

permit intended beneficaries who

were not expressly mentioned in the

contract to claim benefits under

it.

Perhaps a similar approach

would be advisable.

In any case, it is clear that the

law is in need of extensive updating

and reform. The relationship bet-

ween legislation such as The Sale

of Goods Act 1893 and the Bills of

Lading Act 1855 needs extensive

clarification. The reforms in this

area should take the form of repeal

and codification as piecemeal

amendment will only be productive

of further uncertainty.

The government should use the

occasion of the enactment of the

Visby Rules as an opportunity to

undertake such reforms.

•

NOTES

1. In

Murphy -v- Bowen (1866) IR 2 CL

506 (CP)

Monahan CJ summarised the

principle as follows: " It has been

decided that where the foundation of

the right of action is rested upon

contract, no one can maintain an action

who is not party to the contract".

2. The law relating to contracts for the

carriage of goods by sea has evolved

as a response to the imbalance of

bargaining power between shipowners

on the one hand and cargo-owners on

the other. See R.M. Goode

Commercial

Law

p601. Possible actions in Tort are

outside the scope of the present

discussion.

3. There is a surprising lack of Irish case

law in relation to contracts for the

carriage of goods by sea. One possible

reason for this is the prevalance of the

"Both to Blame" clause in shipping

contracts, so that the matter can be

settled between the insurance

companies and never goes furhter than

the loss adjusters. The lack of certainty

in the law also inhibits litigation.

4 . For an Irish case involving a CIF

contract see for example,

Michel Freres

Societe Anonyme -v- Kilkenney Wollen

Mills 1929 Ltd.

[1961] IR 157.

5. For a general outline of F.O.B. and C.I.F.

contracts see R M Goode

Commercial

Law Chap. 22.