The Gazette 1991

JANUARY/FEBRUARY 1991

GAZETTE

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. In 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 41 ). 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 by 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 42 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. 43 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

to an agency relationship between the carrier and potential defendants. 36 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 37 and Crean -v- Nolan 38 ). 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. 39 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 40 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. . .

29