The Gazette 1991

GAZETTE

JANUARY/FEBRUARY 1991

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 48 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. 49 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.

be referable to the offer. In Burke Motors Ltd. -v- The Mersey Docks and Harbour Bourd Co. 45 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. 46 This is also the case with the Hague Rules which were incorporated into Irish Law by the Merchant Shipping Act 1947. 47 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

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