1. Carriage of Goods by Sea Contracts
Dr. Iva Savić
Department for Maritime and Transport Law
Zagreb, April

2. The background
„It is well-known that Bills of Lading (hereinafter referred to as B/L) are treated as the documents of title; and the buyer takes delivery of the cargo by presenting the original B/L to the carrier. That is to say, before being fully paid, the seller should take control of the original B/L. In most circumstances, the B/L is issued by the carrier, and then be transferred to the seller by the cargo forwarder.

3. Understanding
„… Nevertheless, under an FOB contract, the cargo forwarder is entrusted by the buyer, commonly in form of an agent-principal contract…In such circumstance, the FOB buyer is the contractual shipper, and the actual shipper shall be the FOB seller.”
In 2015, the Supreme People’s Court held a judgment analyzing the issue above (2015) Min Ti Zi No. 19.”

4. Seller (consignor)
Contract of Sale
Buyer (consignee)
Incoterms®
Shipper
Freight
Forwarder
Consignee
Carrier

5. International Framework (i)
International Convention for the Unification of Certain Rules of Law relating to Bills of Lading ("Hague Rules"), and Protocol of Signature, 1924
Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading ("Visby Rules"), („Hague-Visby Rules”)
Protocol (SDR Protocol) amending the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading of 25 August 1924 (The Hague Rules), as amended by the Protocol of 23 February 1968 (Visby Rules), 1979

6. International Framework (ii)
United Nations Convention on the Carriage of Goods by Sea ("Hamburg Rules"), 1978
United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (the "Rotterdam Rules"), 2008
More information and texts available at:
otterdam_rules.html

7. International framework – scope of aplication
Hague Rules (1924)
Hague-Visby Rules (1968)
Hamburg Rules (1978)
B/L issued in a state party
Only for transport that includes issuing of B/L
B/L issued in a state party
Port of loading in a state party
Only if agreed in the contract
Port of discharge in a state party
B/L or other transport document issued in a state party

8. National legal framework
Maritime Code (Pomorski zakonik); art > national transport (Croatia)
Contracting parties*
carrier: shipowner/charterer - obligation to carry goods by sea
consignor (shipper) – pays the freight
Carriage „users”:person who has certain expectations from the carrier
Elements of the contract:
Object of carriage (type, volume)
Voyage specification (mandatory, optional)
Carriage by vessel
Freight payment

9. Seller (consignor)
Contract of Sale
Buyer (consignee)
Incoterms®
Shipper
Freight
Forwarder
Consignee
Carrier

10. Basic procedure - documentation (i)
Cargo interest => including freight forwarder, shipper …
Shipper’s (agents’) inquiry with regard the available cargo space
Cargo Booking Note – carrier’s confirmation on available cargo space
Shipper’s Note – loading disposition
Information on the cargo volume, type and designation
Shipper liable to carrier for the provided information
Shipping Order – cargo to be loaded onto vessel
Mate’s Receipt – confirmation that the cargo has been loaded
BILL OF LADING

11. carriage
Pre-Carriage, Carriage, Post-Carriage

12. Basic procedure – pre-Carriage (i)
Ensuring the vessel readiness for voyage
Due care until the commencement of voyage
Seaworthiness
Cargoworthiness
Loading and carriage preparations
Including the presence in loading port (safe port)
Ensuring the docking space (Liner trade – carrier’s responsibility; Tramp trade – shipper’s responsibility)
Notice of Readiness – Laytime commencement

13. Basic procedure – pre-Carriage (ii)
Loading of cargo
Statement of Facts (time sheet)
Laytime – cost included in freight
Reversible Laytime (both the loading and destination port)
Demurrage – cost not included in freight
(Exceptional demurrage – due to newly arrived cargo)
Despatch – time saved
Risks and Costs – determined by contract (i.e. through Incoterms)

14. Basic procedure – Carriage
Carriage of cargo
Due care with regard to the cargo
Voyage – as contracted or customary
Possible to change the destination port (consignee’s interest)
Deviation – if justifiable
Cargo discharge and delivery
To the authorized consignee
If B/L issued > to the authorized consignee (duty to receive)
If no B/L > to the person nominated as consignee in the contract > If no person nominated – consignor is the consignee

15. Basic procedure – discharge and Delivery
Possible situations:
Consignee not responding or present
Consignee cannot be located
Consignee unable to receive the cargo
More persons are claiming to be the rightful consignee
What then?

16. Basic procedure – Unloading and DElivery (iii)
Carrier is under an obligation to:
Seek instructions from consignor
If instructions not given or unenforceable – at the end of demurrage the carrier is entitled to unload the cargo and store it (personal storage or contracted storage)
Right of retention – including the right to sell the goods in order to settle the freight and related costs

17. Case law EXAMPLE (i) Undisputed facts
Issued Bill of Lading, carriage of jute (natural fiber) from Calcuta (India), via Rijeka (Croatia), to Valparaiso (Chile; port of delivery per B/L)
Goods discharged at San Antonio (Argentina; usual port of discharge*)
First stored in customs warehouse, then carried by road to Valparaiso
Both customs and road carrier declared the goods damaged

18. Case law EXAMPLE (ii) Disputed facts
Whether the carrier has notified the consignee of the discharge
Whether the carrier is liable until the goods are delivered to the port of delivery
Whether the carrier can limit his liability in case he is held liable for the breach of contract

19. Case law EXAMPLE (iii) First and second instance courts
Carrier liable for the cargo until delivered at the B/L stipulated port of delivery
Carrier in breach of the contract
Did not deliver the undamaged goods to the port of delivery
Carrier’s liability not affected by the fact that the cargo on that route is usually discharged at a different port and then carried by road
Unless specifically agreed by the parties, consignee has a duty to receive the goods at the port of delivery
“Notify address” that the goods are discharged at the port of discharge does not affect this general obligation
Consignee was never actually notified

20. Case law EXAMPLE (iv)
If the cargo is stored at the port of discharge, carrier is liable both for the choice and work of the storekeeper
Carrier did not follow the specific rules with regard the storage of goods
Carrier had previous knowledge of the warehouse capacity in port of discharge (scarce closed facilities)
Thus, his conduct constitutes not just a breach of due diligence, but also a breach of general duty of reasonableness and fairness, as well as a duty to act in accordance with fair trade customs

21. Case law EXAMPLE (v)
Carrier found liable for the damage and was not allowed to limit his liability
Carrier knew that the closed storage capacity is small, and that, therefore, the discharged goods will be kept in open (based on previous experience)
Carrier knew that the nature of the goods demands closed storage in order to prevent the goods from being damaged
Carrier knew that keeping the goods in open creates a real and high possiblity of damage occuring
The courts found that the carrier knew and had to know that the damage will most probably occur, and nevertheless acted in a way that obviously exposed the goods to the danger and the subsequent damage

22. Contract termination Contract Fulfilment
Ex lege (Vis Major caused inability to perform the contract)
Mutual agreement
Individual choice by each party to a contract (Consignor or carrier)

23. Documents
Carriage Documents

24. Basic documents Bill of Lading (B/L) Seaway Bill E-commerce
Other transportation documents

25. Bill of Lading (i)
Confirmation that the goods have been accepted for carriage
Obligation to deliver the goods to the consignee
Proof that the contract of carriage exists (and its main features)*
Negotiable document
Issued and signed by the Master of Vessel or Agent, based on shipper’s instructions and on shipper’s request, after the loading has finished
One or more originals

26. Bill of Lading (ii) – Main types
Time of Issuance
Loaded – standard
Accepted for Loading (typical for liner trade, goods delivered to the carrier prior to the arrival of vessel, followed either by a new B/L, or a „loaded” clause in the original B/L)
Port B/L – goods accepted in loading port, vessel already in the port
Assignment
On Name – named consignee
On Order
On Delivery

27. Evidentiary effect Hague Rules (1924) Hague-Visby Rules (1968)
Hambrug Rules (1978)
disputable (always)
disputable
BUT
Conclusive when in hands of a conscientious (diligent) third party holder
(different rules on signature)

28. Bill of Lading (iii) – Main types
Clean B/L – no annotations
Relevant for consignee in a good faith
Goods accepted as entered into the B/L
Relevant for banks, insurers and buyers
Foul B/L – with annotations (marginal clauses)
If justifiable doubt with regard the shipper’s note OR when no reasonable possibility to check the validity of data in the shipper’s note
If data on cargo unclear or not enduring
Guarantee Letter
Shipper liable to carrier for carrier’s liability towards the consignee and other interested parties

29. Seaway bill Confirmation of receipt of goods for carriage
Presumption that the contract of carriage has been signed into
Non-negotiable, only On Name, one original follows the goods, issued by carrier