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SVKM’S NMIMS

SCHOOL OF LAW

A PROJЕCT SUBMITTЕD ON

COASTAL AND WATERWAY TRANSPORT CONTRACT IN INDIA

IN COMPLIANCЕ TO THЕ PARTIAL FULFILLMЕNT OF THЕ MARKING

SCHЕMЕ FOR TRIMЕSTЕR IV 2014-15, IN THЕ SUBJЕCT OF CONTRACT-II

SUBMITTЕD TO FACULTY

MS. NANDA PARDHEY FOR ЕVALUATION

SUBMITTЕD BY:-KHUSHIL SHAH

ROLL NO: - A052

COURSЕ: - B.A. LL.B. (hons.)

DATЕ: - 9TH AUGUST, 2014

TIMЕ: - 4:00

RЕCЕIVЕD BY: - …………………..

ON DATЕ: - ………………………..

TIMЕ: - …………………………….

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INDEX

SERIAL

NUMBER

TOPIC NAME PAGE NUMBER

1 RESEARCH METHODLOGY 3

2 INTRODUCTION 5

3 INDIAN LEGAL CONTEXT AND PRESENT RULES AND

GUIDELINES

8

4 ROLE OF JUDICIARY 18

5 COMPARATIVE STUDY 24

6 CONCLUSION 27

7 SUGGESTION 28

8 BIBLIOGRAPHY 29

9 ANNEXURE 30

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CHAPTER 1: RESEARCH METHODOLOGY

Relevance of the topic –

Any coastal and transport contract carried on, is guided by the rules and framework

mentioned in the Carriage of Goods by Sea, 1925, Bill of Lading act 1856, The Merchant

shipping Act and The Marine Insurance Act,1963. These act governs the basics for marine

contracts. This topic is very much relevant to the Indian Contract act and these types of

contract govern each and every aspect of law. The Bill of Lading governs the documental

aspect, the insurance is as a support, the merchant shipping act governs the rights and

liabilities of the parties and the Carriage of goods act governs the disputes in matter of the

marine Contracts and the carriage of goods.

Objective of the study-

1. The objective of making this project is to study and research on Coastal and

Waterway Transport contracts in India which is very important from the point of law

of contracts.

2. The main objective of my study is to deduce and find out the procedure of how the

contracts are formed during a shipping agreement and the rights and liabilities of

different people during a same contract

3. All these concepts are different and various cases have given different judgments

upon different situations.

4. Also I came to know about how these concepts are varied in different nations like

United States of America and United Kingdom.

Research questions –

The research is mainly based on these questions:-

1. How did the coastal and waterway transport contracts evolve in India?

2. Which acts and statutes have been set up for these types of contracts?

3. Explain the procedure of how does the coastal contracts work and the documents

needed for the same.

4. What is the importance of the Bill of Lading in these types of contracts?

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5. How does insurance play an important role in these contracts?

6. Mention the Comparative study of India with US and UK in these types of contracts.

7. Please give needful suggestion for the topic and how to improve the position of

coastal and waterway transport contract in India.

Limitation of the project:-

1. The project fails to conduct a primary research through examination, interviews and

surveys due to lack of time and vague understanding.

2. The research of the project limits to books, internet, Databases, Journals and

Dictionaries.

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CHAPTER 2: INTRODUCTION

India is blessed with 7,550km of coastline and about 14,500km of navigable and inland

waterways. Yet this sector has remained neglected despite of the universal acceptance that

transportation through both waterways, both coastline and inland, is fuel efficient, environment

friendly and more economical than rail and road. Of the navigable inland waterways, 4503km

are of inland waterways, the development and maintenance of which is the responsibility of

the Indian Government while the responsibility of the rest lies with the state governments

where they are located.1

EVOLUTION

Historically, maritime law held the carrier absolutely liable for loss or damage to cargo, whether or not he was

negligent and regardless of the cause of the loss. He could escape liability only if the loss or the damage was

caused by any natural calamity or Act of God, a public enemy or inherent vice of the goods. In addition in all

contracts of carriage of goods by sea, there were implied undertakings by the carrier that the carrying vessel

was seaworthy and that the ship would commence and carry cut the contractual voyage with reasonable

diligence without unjustifiable deviation.

The Bill of lading was the basic shipping document, evidencing the contractual relationship between carrier

and shipper and forming the basis of all claims arising from the transportation of goods by sea. It was originally

a non-negotiable document but with the growth of commerce the need was felt for transferring the property in

the goods before the arrival of the goods at the destination by endorsing the bill of lading to the buyer and the

practice came to be established of issuing “negotiable” bill of lading. The early bills of lading contained only

the common law exception.

As time passed, however, ship-owners began generally to amend their bills of lading by introducing

exemption clauses and thereby limit contractually the strict liability imposed upon them by maritime law. As

and when court decision went against the carriers, they introduced more and more protective or pardoning

clauses in the bill of lading and depending upon their bargaining position at a time when the volume of world

trade exceeded the carrying capacity of shipping, there sought to exempt themselves from practically every

liability of ocean carriage. This resulted in growing dissatisfaction among shippers, bankers and underwriters

who demanded legislation to remove the abuse produced by unlimited freedom of contract enjoyed by the

1 http://www.livemint.com/Opinion/hkC9ZcvCbqlWbB141LnDwK/After-years-of-neglect-India-wakes-up-to-

coastal-inland-wa.html, last accessed on 27th July 12:15p.m.

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carriers, the result2 was that several countries enacted legislation on the subject. The Harters Act was enacted

by USA in 1893 followed by the Australian Carriage of goods by Sea Act in 1904, The New Zealand

Shipping and Seaman Act in 1908 and the Canadian Water Carriage Act in 1910. The Harter Act aimed at

protection of cargo interests, prohibited clauses exonerating the carrier or his agents from liability for faults in

the care and custody of the cargo but at the same time. The Act provided that the carrier was not to be held

liable for results of unseaworthiness if he had exercised due diligence to make the ship seaworthy and if the

damage caused to the cargo resulted from faults and errors in the navigation or management of the vessel. The

Harters Act thus established an important principle in that it settled the problem if the carriers liability by

making a distinction between faults in the management and navigation of the vessel and faults in the care and

custody of cargo. The Acts of the Dominion were broadly similar to the Harter Act.3

The Coastal and Waterway transport contracts were first formed on the basis of Hamburg and the Hague-

Visby rules and then the laws were enacted.

The main laws governing the coastal and waterway transport contracts in India are as follows:-

(i) The (Indian) Bills of Landing Act, 1856.

(ii) The Carriage of Goods by Sea Act, 1925.

(iii) The Merchant Shipping Act, 1958.

(iv) The Marine Insurance Act 1963

THEORIES

The Coastal and waterway transport contracts are mainly based on the concept of Bailment.

According to the Black Law Dictionary Bailment means, “A delivery of goods or personal

property, by one person (Bailor) to another (Bailee), in trust for the execution of a special

object upon or in relation to such goods, beneficial either to the bailor or Bailee or both, and

upon a contract, express or implied, to perform the trust and carry out such object, and

thereupon either to redeliver the goods to the bailor or otherwise dispose of the same in

conformity with the purpose to the trust. The Bailee is responsible for exercising due care

toward the goods.”4

2 A book on “ Carriage of Goods by Sea(Hamburg Rules)” by N.K. Gopalan Nair [M.A. Master Memorial

Trust] 3 Ibid 4 Black’s Law Dictionary, Id 95 (6th ed. 1990)

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A Contract of bailment has 3 parties viz. the Bailer, Bailee and the Guarantor, In the same

way the coastal and transport contracts have 3 parties namely the consigner, consignee and

the insurance company acting as a guarantor.

The two main theories of formation of contract for the coastal and waterway transport

contract are the Promissory and the Consent theory.

Charles Fried had given the promissory theory which described that there should be a kind

of promise from the part of the insurer to the consignee for the protection of the goods so

that there is safety as well as security.5

Consent theory mainly explains the concept of bailment by assuring that there should be

consent between the partners before the contract begins. There should be a clear

understanding between the consigner and the consignee for the contract made and to put up

to the moral aspect in the contract by assuring the safety and the security of the goods the

third party also plays an important role i.e. the insurer of the goods or the insurance

company.

5 http://weblaw.haifa.ac.il/he/Events/eveFile/BrianBixTheoriesContractLaw.pdf, last accessed on 31st July 2014

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CHAPTER 3: INDIAN LEGAL CONTEXT AND PRESENT RULES AND

REGULATIONS

Carriage or goods by Sea

Goods transported by sea are governed by Carriage of Goods by Sea Act, 1925 and the

(Indian) Bills of Lading Act, 1856 and lastly . Besides, the Merchant Shipping Act, 1958

and the Marine Insurance Act, 1963 and The Indian Carriers Act, 1865 are also applicable.

A contract of carriage of goods by sea is called a contract of affreightment and the

consideration for carriage is called the freight. A contract of affreightment may take the

form of a Charter Party where an entire ship is hired, or a Bill of Lading, where the goods

are to be carried in a general ship which can be used for this purpose by any person. In both

these contracts, the ship owner as the carrier undertakes the responsibility of carrying the

goods of the consignor safely and securely to the destination.6

Conditions Implied

In a contract for carriage of goods by sea, the following conditions are implied:

1. Seaworthiness - This means that the ship is reasonably fit to encounter the 'perils of

the sea'. This is an absolute undertaking warranted by the ship-owner. Seaworthiness

is a relative term meaning that the ship is fit to undertake the particular voyage and

to carry the particular cargo.

2. Commencement of Voyage - The ship shall be ready to load the cargo and

commence the voyage agreed on without undue delay and shall also complete the

voyage with all reasonable dispatch.

3. Non-deviation of Voyage - It means that if the ship does not carry out the voyage by

the prescribed or usual route in the customary manner, the contract becomes void

from the beginning of the voyage, no matter when and where the deviation from the

usual route took place.7

6 Supra note 1 7 http://www.helplinelaw.com/1/CARR/law-relating-to-carriage-of-goods-by-land-sea-and-air.html, last

accessed on 3rd August 2014 at 4:16p.m.

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4. Dangerous Goods not to be Shipped - If the shipper ships dangerous goods and if

on account of this, the charterer suffers any damage, he can recover the same from

the shipper.8

So now we move onto the procedural aspect of the how the shipping of goods occur in India

and the contracts formed during the procedure for the same. India has specified set of Acts

governing the Transport and the waterways contracts.

There are mainly two types of Contracts:-

(1) Charter Party

(2) A contract for Carriage of goods in a General Ship with Bill of Lading.

Charter party

As defined in the Black’s Law Dictionary, a charter party means a contract by which a ship or a

principal part of it, is led by the owner especially to a merchant for the conveyance of goods on a

predetermined voyage to one or more places; a special contract between the ship owner and charters,

especially for the carriage of goods etc.9

The characteristics of a charter party are as follows:-

1. The charter carrier is not engaged in the regular business of transportation of goods.

2. The charter carrier is not bound to transport the goods of all persons. He reserves t

accept or reject the goods offered to him for transportation

3. The Charter party transports the goods for selected persons of his own choice and

not for everybody.

4. The private carrier may also transport the goods gratuitously i.e. without any charge.

5. They are often classified under the special contracts as there are special terms and

conditions.

6. The freight charges are also more than that of the general ship because of a charter

contract.

8 ibid 9 Black’s Law Dictionary by JW Garner 9th Edition

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Liability of the owner for the Damage or Loss of Goods in charter party

Charter parties are basically excluded from the Carriage of Goods by sea act. Any disputes

between the owner and the party are governed by the agreement made by them. Most of the

matters are solved through the arbitration which is an outside court settlement. This

approach enables the parties to bargain freely and to include in the contract any stipulation

allowed by law. As such, the parties are free to incorporate the terms of the Carriage of

goods by sea Act by reference into the charter party, and they frequently do. Thus carious

provisions of Carriage of Goods by sea Act often become terms of a charter party through

contractual stipulation. The parties are, if course, free to modify, or even exclude, Carriage

of goods by sea act provisions in the contract. Such modifications are permissible as long as

it does not apply by operation of law. Even where a carrying vessel is under charter,

however, there are circumstances in which it is applicable as a matter of law. This occurs

where the owner has issued a bill of lading to the charterer who in turn has transferred the

bill of lading to a third party, such as a consignee. 10

A charter party is a contract providing for a hiring of a whole ship. Its terms may amount to

a leasing of the ship, when the master and the crew of the ship become the servants of the

charterer. A charter party may be for a particular period, or for a particular voyage. In the

former case it is called a time charter party and in the latter case, a voyage charter party has

no specific form; the form varies from trade to trade depending on the customs of the trade.

The Charter party contracts are basically the Contracts with the Private carriers.

Bill of Lading:-

According to the Black’s Law Dictionary “Bill Of Lading” is defined as, “A written

memorandum, given by the person in command of a merchant vessel, acknowledging the

receipt on board the ship of certain specified goods, in good order or “apparent good order”,

which he undertakes, in consideration of the payment of freight to deliver in like good order

(dangers of sea Expected) at a designated place to the consignee therein named to his

assigns.”11

10 http://www.scribd.com/doc/20793503/Project-on-Carriage-of-Goods-by-Sea, last accessed on 5th September,

2014 at 11:30a.m. 11 Black’s Law Dictionary by JW Garner 9th Edition page 209

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The India Bill of Lading Act was introduced in 1856. The Act contains 3 Articles.

A bill of lading is issued when goods are delivered for carriage to a general ship, which

offers to carry them. The position of the owner of a general ship is that of a common carrier.

A bill of lading may be used even when a ship is chartered. A bill of lading acknowledges

the receipt of goods is a document of title to the goods and is also a contract of carriage of

goods.

The Bill of Lading will acknowledge the quantity of goods put on board, their description

and their condition. The Bill of lading form will usually be completed by the shipper or his

forwarding agent and sent back to the carrier. As the goods are loaded they will be checked

by tally clerks and if particulars are found to be correct the bill of lading will be signed for

the carrier by his agent, the loading broker. However, the evidentiary value of the bills in all

these cases is not the same in all case and it depends upon the circumstances of the case as

whether the bill falls within the Carriage of Goods Act 1925 or not.

A bill of lading, as a document of title to the goods, can be transferred to another person by

endorsement and delivery. This characteristic of a bill of lading resembles that of a

negotiable instrument, but in the strict legal and technical sense it is not a negotiable

instrument. It may be said that it is negotiable only in the popular sense.

BILL OF LADING AS A DOCUMENT OF TITLE AN NOT AS A NEGOTIABLE

INSTRUMENT12

The standard short form bill of lading is a part of the contract of carriage of goods and it

servers a number of purposes:-

(a) It is evidence that a valid contract of carriage exists and it incorporated the full terms

of the contract between the consignor and the carrier by reference

(b) It is a receipt signed by the carrier conforming whether goods matching the contract

description have been received in good condition. It will be regarded as clean bill.

12 Supra note, 10

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(c) It is also a document of transfer, but not a negotiable instrument i.e. it governs all the

legal aspects of the physical carriage but unlike a cheque or other negotiable

instrument, it does not affect ownership of the goods actually being carried.

The Clauses of the bill of lading:-

A Bill of Lading is issued in case of a general ship contains the clauses in respect of terms if

the contract of affreightment. These are generally the same as contained in a Charter Party.

The clauses of a bill of lading should state the following particulars:-

1. Name of Parties

2. Name of the ship as registered under the Indian Ship Registry Act

3. Port of Loading

4. Port of Destination

5. Name of Consignee

6. Marks for the identification of the goods such as number of package

7. Statement regarding the condition if the goods and their quantity or quality or weight

8. Other terms and conditions of contract of affreightment such as amount of freight

expected perils etc. [ATTACHED IN ANNEXURE A THE COPY OF A BILL OF

LADING]13

Delivery of goods

The prime duty and obligation of a carrier by sea is to deliver the goods to the holder of the

bill of lading, provided proper payment of freight has been made. Bill of lading is

commonly drawn in a set of three copies, one of which is sent to the consignee, the second

is for the ship's master and the consignor retains the third.

From our study of the bill of lading, it will be appropriate to record the four functions of this

document. Broadly it is a receipt for the goods shipped, a transferable document of title to the

goods thereby enabling the holder to demand the cargo, evidence of the terms of the contract

of affreightment but not the actual contract, and a quasi-negotiable instrument.14

13 http://www.bidcal.com/forms/Bill_Of_Lading.pdf, last accessed on 6th August at 11:15p.m. 14 http://www.helplinelaw.com/civil-litigation-and-others/CARR/law-relating-to-carriage-of-goods-by-land-sea-

and-air.html, last accessed on 6th August at 11:35p.m.

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Once the shipper or his agent becomes aware of the sailing cards or some form of

advertisement, he communicates with the ship-owner with a view to booking cargo space on

the vessel or container. Provided satisfactory arrangements have been concluded, the shipper

forwards the cargo. At this stage, it is important to note that the shipper always makes the

offer by forwarding the consignment, whilst the ship-owner either accepts of refuses it.

Furthermore, it is the shipper's duty, or that of his agent, to supply details of the consignment;

normally this is done by completing the shipping company's form of bill of lading, and the

shipping company then signs the number of copies requested. 15

The goods are signed for by the vessel's chief officer or export wharfinger, and in

some trades this receipt is exchanged for the bill of lading. If the cargo is in good condition

and everything is in order, no endorsement will be made on the document, and it can be termed

a clean bill of lading. Conversely, if the goods are damaged or a portion of the consignment

is missing, the document will be suitably endorsed by the Master or his agent, and the bill of

lading will be considered unclean.

Bills of lading are made out in sets, and the number varies according to the trade.

Generally it is three of four – one of which will probably be forwarded immediately, and

another by a later mail in case the first is lost or delayed. In some trades, coloured bills of

lading are used, to distinguish the original (signed) bills from the copies which are purely for

record purposes.

Where the shipper had sold the goods under a letter of credit established through a

bank, or when he wishes to obtain payment of his invoice before the consignee obtains the

goods, he will pass the full set of original bills to his bank, who will in due course arrange

presentation to the consignee against payment16.

The ship-owner or his agent at the port of destination will require one original bill of

lading to be presented to him before the goods are handed over. Furthermore, he will normally

require payment of any freight due, should this not have been paid at the port of shipment.

When one of a set of bills of lading has been presented to the shipping company, the other

bills in the set lose their value.

15 ibid 16 www.pfri.uniri.hr/~bopri/.../Unit10-BillofLading-Function_000.doc, last accessed on 7th August at 7:35a.m.

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In the event of the bill of lading being lost or delayed in transit, the shipping company

will allow delivery of the goods to the person claiming to be the consignee, if he gives a letter

of indemnity; this is normally countersigned by a bank, and relieves the shipping company of

any liability should another person eventually come along with the actual bill of lading.

Along with the Bill of Lading the Dock Warrant and Delivery Order are some of the

most important documents of title to the goods. The Dock Warrant is a document

acknowledging that the goods have been deposited with a dock or Port Company, a

wharfinger, or a warehouse. The Delivery Order is a document issued by the shipping

company to the port of discharge. By handling this document over to the ship officer the

consignee can obtain the cargo. 17

Ship owner’s Lien

In the event of non-payment of freight and other charges, the ship-owners has a right of lien

on the cargo. He is thus entitled to retain the goods in his possession until the dues are paid.

His lien exists independently of any express agreement in this regards, but ceases upon the

delivery of goods.

Indian law does not specifically define maritime lien. India is a signatory to the International

Convention on Maritime Liens and Mortgages 1993 (1993 Convention), which designates

the following claims against the owner, demise charterer, manager or operator of a vessel as

maritime liens:

a. Claims for wages and other sums due to the master, officers and other members of

the vessel's complement in respect of their employment on the vessel, including

costs of repatriation and social insurance contributions payable on their behalf

b. Claims in respect of loss of life or personal injury occurring whether on land or on

water in direct connection with the operation of the vessel

c. Claims for reward for the salvage of the vessel

d. Claims for port, canal and other waterway dues and pilotage dues18

17 Ibid 18http://r0.unctad.org/ttl/docslegal/Conventions/Liens%20and%20Mortgages%201993/maritime%20liens%20an

d%20mortgages_English.pdf, last accessed on 8th August at 10:35p.m.

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e. Claims arising out of physical loss or damage caused by the operation of the vessel

other than loss of or damage to cargo, containers and passenger's effects carried on

the vessel19

Limitation of Liability:-

The limitation period in maritime contracts are described in Article 3 clause 6 of the Indian

carriage of gods by sea act and is as follows:-

Unless notice of loss or damage and the general nature of such loss or damage be given in

writing to the carrier or his agent at the port of discharge before or at the time of the removal

of the goods into the custody of the person entitled to delivery thereof under the contract of

carriage, or, if the loss or damage be not apparent, within three days, such removal shall be

prima facie evidence of the delivery by the carrier of the goods as described in the bill of

lading. The notice in writing need not be given if the state of the goods has, at the time of

their receipt, been the subject of joint survey or inspection. In any event the carrier and the

ship shall be discharged from all liability in respect of loss or damage unless suit is brought

within one year after delivery of the goods or the date when the goods should have been

delivered20. This period may, however, be extended if the parties so agree after the cause of

action has arisen; Provided that a suit may be brought after the expiry of the period of one

year referred to in this sub-paragraph within a further period of not more than three months

as allowed by the court. In the case of any actual or apprehended loss or damage, the carrier

and the receiver shall give all reasonable facilities to each other for inspection and tallying

the goods.21

Marine Insurance Act 1963

A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify

the assured, in the manner and to the extent agreed, against losses incidental to marine

adventure. There is a marine adventure when any insurable property is exposed to maritime

perils i.e. perils consequent to navigation of the sea. The term 'perils of the sea' refers only

to accidents or causalities of the sea, and does not include the ordinary action of the winds

19 ibid 20 Indian carriage of goods by sea act, Article III Cause 6 21 http://www.law.cornell.edu/uscode/html/uscode46a/usc_sec_46a_00001303----000-.html, last accessed on 8th

August at 11:35p.m.

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and waves. Besides, maritime perils include, fire, war perils, pirates, seizures and jettison,

etc.

There are four types of marine insurance:-

Hull Insurance: - covers the insurance of the vessel and its equipment i.e. furniture

and fittings, machinery, tools, fuel, etc. It is effected generally by the owner of the

ship.

Cargo Insurance: - includes the cargo or goods contained in the ship and the

personal belongings of the crew and passengers.

Freight Insurance: - provides protection against the loss of freight. In many cases,

the owner of goods is bound to pay freight, under the terms of the contract, only

when the goods are safely delivered at the port of destination. If the ship is lost on

the way or the cargo is damaged or stolen, the shipping company loses the freight.

Freight insurance is taken to guard against such risk.

Liability Insurance:- is one in which the insurer undertakes to indemnify against

the loss which the insured may suffer on account of liability to a third party caused

by collision of the ship and other similar hazards.22

In a contract of marine insurance, the insured must have insurable interest in the subject

matter insured at the time of the loss. Insurable interest is not required to be present at

the time of taking the policy. Under marine insurance, the following persons are deemed

to have insurable interest:-

The owner of the ship has an insurable interest in the ship.

The owner of the cargo has insurable interest in the cargo.

A creditor who has advanced money on the security of the ship or cargo has

insurable interest to the extent of his loan.

The master and crew of the ship have insurable interest in respect of their wages.

If the subject matter of insurance is mortgaged, the mortgagor has insurable interest

in the full value thereof, and the mortgagee has insurable interest in respect of any

sum due to him.

A trustee holding any property in trust has insurable interest in such property.

22 http://business.gov.in/manage_business/marine_insurance.php, last accessed on 9th August at 11:35a.m.

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In case of advance freight the person advancing the freight has an insurable interest

in so far as such freight is repayable in case of loss.

The insured has an insurable interest in the charges of any insurance policy which he

may take.23

23 ibid

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CHAPTER 4: ROLE OF JUDICIARY AND CONVENTIONS

The Coastal and waterway transport contracts in India are signatory to some of the

convention.

The Hague Visby Rules:-

The allocation of liability for loss of or damage to goods under the Hague Rules still caused

dissatisfaction to shippers and this gradually led to a demand for the revision of the Hague

rules. Developing countries were particularly concerned and they voiced their concern

through the forum of UNTCAD in mid 1960s. But at the same time there was opposition

from several countries to any substantial revision of the Hague Rules. The result was a

compromise viz that a protocol to amend the Hague rules to a limited extent was adopted at

the diplomatic Conference held in Brussels in 1968. These amendments mainly provided for

limitation of liability of the carrier at a higher monetary limit, extension of the one year limit

for bringing suit against the carrier, action for indemnities against third parties and extension

of the scope of application if the Hague Rules. Etc. The Protocol entered into force with

effect from 23rd June. 24

UNTCAD Reports on Bill of Lading

A report on bills of lading prepared by the UNTCAD Secretariat in 1971 supported the need

for revision of the Hague Rules mainly on the following grounds:-

1. The continued retention in bills of lading if exoneration clauses of doubtful validity

and the existence of restrictive exemption and time limitation clauses.

2. Exemptions in the Hague rules which are peculiar to ocean carriage in cases where the

liability should logically be borne by the ocean carrier such as those which exempt

him from liability in respect of the negligence of his servants and agents in navigation

and management of the vessel and in respect of perils of the sea, etc.

3. Uncertainties arising from vague and ambiguous wording of the rules which lead to

conflicting interpretations.

4. The uncertainties caused by the interpretation of the terms used in the Hague rules

such as “reasonable deviation”, “due diligence”, “properly and carefully”, “in any

event”, “loaded on” etc.

24 Carriage of Goods By Sea (Hamburg Rules) by NK Gopalan, page 3

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5. The ambiguities surrounding the seaworthiness of vessels for the carriage of goods.

6. The unit limitation of liability.

7. Jurisdiction and arbitration clauses.

8. The insufficient legal protection for cargos with special storage, adequate ventilation,

etc. and cargos requiring deck shipment.

9. Clauses which apparently permit carriers to divert vessels and to tranship by land

goods short of or beyond the port of destination specified in the bill of lading at the

risk and expense of the cargo owner.

10. Clauses which apparently entitle carriers to deliver goods into custody of shore

custodians on terms which make it almost impossible to obtain settlement of cargo

claims from either the carrier or the warehouse

11. Overlapping of insurance or double insurance effected by cargo owners because of

uncertainty in the apportionment of risk and the burden of proof.

The UNTCAD report also drew the following conclusions in regard to the economic

aspects of the Hague Rules:-

1. The incidence of the costs involved is mainly on the cargo owners and only to a

limited extent on the carriers.

2. There is real income transfer from countries which are more important as cargo

owners to those which are important as carriers.

3. The developing countries as a group are among the losers in the real income

transfer.25

Rotterdam Rules

They apply to door-to-door transportation when so-contracted, instead of the tackle-to-tackle

coverage of “Carriage of good by sale Act”. They provide limitations of liability for

contracting carriers and maritime performing parties, but not for inland carriers performing

part of through carriage. Liability is based on fault, with a list of exceptions similar to

“Carriage of good by sale Act”. They contain provisions for burdens of proof, which largely

follow current, United States law, but expressly allow apportionment of liability based on

excepted and non-excepted causes of damage or loss. They contain provisions whereby

parties to volume or service contracts may avoid some of the Rules by following strict

25 Carriage of Goods By Sea (Hamburg Rules) by NK Gopalan page 10

20 | P a g e 8 1 0 0 1 1 3 0 0 5 8

procedures. They contain provisions controlling jurisdiction and arbitration, which the United

States may choose to make applicable or not. The places of jurisdiction and arbitration are

spelled out, and mandatory jurisdiction and arbitration contractual requirements have some

restrictions. There are requirements for transportation documents, e.g., bills of lading, and for

control of a shipment en route to the destination. They have rules for calculating damage, and

base a carrier’s limitation of liability on packages or units of weight, whichever is greater,

eliminating the $500 per package “Carriage of good by sale Act” limitation. There are

provisions to determine the number of packages or units in containers, including small

packages carried in larger packages. The limitations of liability apply to contracting carriers

and maritime performing parties, but not to inland carriers. Limitations of liability may be

lost for intentional or reckless acts. Delay is defined as failure to deliver the goods by an

agreed time; and, liability for loss or damage that is not physical is limited to 2.5 times the

freight charge. The statute of limitations is two (2) years, rather than Carriage of goods by

sale act’s one (1) year statute of limitations; and, there are separate provisions for time to

bring indemnity actions. They cover the liability of shippers; and, there are provisions for

dangerous goods. They contain rules covering the use of electronic communications, such as

electronic bills of lading. If freight charges are stated as pre-paid on a bill of lading, a carrier

may not look to the consignee for payment of the freight charges, unless the consignee is also

the shipper. 26

CASE LAWS

The Maori King (Cargo owners) v Hughes [1895] 2 QB 550 CA27

A ship was held to be unseaworthy in respect of a cargo of frozen meat because refrigeration

equipment was defective. In this respect the ship must be seaworthy when the cargo is loaded

and there is no breach of the implicit term if it becomes unfit for the cargo after the cargo has

been loaded. The legal effect of a breach of the term will depend on the effect of the breach

on the contract. If the breach results in unseaworthiness which is such as to frustrate the

commercial purpose of the contract of carriage the cargo owner will be entitled to repudiate

the contract. If it is not so serious he must rely on the action for damages. Under a contract

for carriage in a general ship the cargo owner will normally be in the latter position unless he

26 Carriage of Goods By Sea (Hamburg Rules) by NK Gopalan page 12 27 [1895] 2 QB 550 CA

21 | P a g e 8 1 0 0 1 1 3 0 0 5 8

is the original shipper. Also, if there is a breach of the implied term, the carrier cannot rely on

a clause forgiving him from liability for some cause of loss or damage unless the loss/

damage was actually caused by the unseaworthiness.

Joseph Thorley ltd. V Orchis Steamship Co. 28

A vessel carrying goods from Cyprus to London deviated at the beginning of the voyage to

ports of Eastern Mediterranean. When the vessel arrived at London the cargo was damages

by the negligence of the stevedores’ unloading it. When the cargo owner was sued in respect

of this damage the carrier pleases a clause in the contract absolving him from the liability for

any such damage. It was held that because the vessel had deviated the cargo owner was

entitled to repudiate the contract of carriage and the carrier was not then entitled to the benefit

of the community unless he should show that the damage by stevedores in London would

have occurred even if the vessel had not deviated in the Eastern Mediterranean, a

demonstration which clearly presented some difficulties. A cargo owner is bound to repudiate

in these circumstances. He may waive the breach of the undertaking either expressly or by

implication. Any such waiver will not, however, affect the rights of a subsequent endorsee of

a bill of lading who takes it without knowledge.

East & West Steam ship Co. V. S.K. Ram lingam 29

The query that came up for consideration before the Honourable Supreme Court was whether

in saying that the ship or the carrier will be “discharged from liability”, only the remedy of

the shipper or the consignee was being barred or the right was also being terminated. Taking

in account the importance of the distinction between extinction of a right and the extinction

of a remedy for the enforcement of that right, the Honourable Supreme Court held that the

words “discharged from liability” means that the liability has totally disappeared and not only

that the remedy as regards the liability has disappeared. It was highlighted that the said words

are apt to express an intention of total extinction of the liability and should especially in view

of the international character of the legislation be construed in that sense. It was also clarified

that once the liability is extinguished, there is no scope of any acknowledgment of liability

thereafter.

28 [1907] 1 KB 660 CA 29 AIR 1960 SC 1058

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M/s Madura Co. V. Thangal Kunju Musaliar [1963 KLJ 1233]

The period of one year expired on a holiday and the suit was instituted on the court

reopening. In the said case court raised the principle that the act of the court shall not partial

to any person and since it was because the court was closed that the act of filing within the

period was incapable of compliance the suit filed when the court reopened was held to have

been filed in time.

'De Vaux v Salvador' 30

The Judges ruled in this case that an ordinary policy against perils of the sea does not cover

damage done to another vessel by collision. That exposed ship-owners insured under the

traditional hull policies to enormous potential liabilities for which they were uninsured. The

ship owners could not bear such new risk therefore they approached their Hull underwriters

and requested an amendment to cover the new risk. However the ship owners will still not

satisfied with their position and thus they wanted to seek more comprehensive 'protection'

from somewhere else to ensure that their business could be developed in a healthy way. This

is the most obvious factor leading to the creation of the early protecting clubs.

N.M. Paterson & Sons Ltd. v. Robin Hood Flour Mills, Ltd. (The Farrandoc) 31

In this case following were the deductions and then J. Noel had laid down his

1. The cargo claimant proves his loss or damage in the hands of the carrier.

2. The carrier must prove the cause of the loss.

3. The carrier must prove one of the exculpatory exceptions of art. 4(2) (a) to (q) of the

Hague or Hague/Visby Rules.

4. Then the cargo claimant must prove unseaworthiness and the carrier, presumably, must

then prove due diligence to make the vessel seaworthy before and at the beginning of the

voyage.

My order of proof differs partly from that of Noël J. and thus Thurlow J. gives his own

justification.

30 (1836) 4 Ad&E 420 31 [1968] 1 Ex. C.R. 175 at p. 188

23 | P a g e 8 1 0 0 1 1 3 0 0 5 8

1) The cargo claimant proves his loss and damage in the hands of the carrier.

2) The carrier must prove the cause of the loss.

3) The carrier must prove due diligence to make the ship seaworthy before and at the

beginning of the voyage in respect of the loss

4) The carrier must prove one of the exculpatory exceptions of art. 4(2) (a) to (q)

of the Hague or Hague/Visby Rules.

5) The cargo claimant then attempts to prove lack of care of cargo or attempts to

Disprove the above evidence of the carrier, including lack of seaworthiness and lack of due

diligence.

6) Both parties then have various arguments available to them.32

32 ibid

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CHAPTER 5: COMPARATIVE STUDY

UNITED STATES OF AMERICA

In the United States, carriage of goods by sea is governed primarily by three statutory

regimes: the Harter Act, the Carriage of Goods by Sea Act (COGSA), and the Federal Bills of

Lading Act, commonly referred to as the Pomerene Act. These statutes apply to contracts of

carriage either by force of law or by express incorporation into a bill of lading, charter party,

or other contract of carriage.

Promerene Act

The Pomerene Act applies to the bills of lading covering interstate transport and shipment

departing from US ports in the foreign trade.

It applies not only to water transport but to overland transport as well.

Bills of lading issues for shipments inbound United States are not subject to the Pomerene

Act. There are two types of bill of lading under the Pomerene Act. They are:-

1. Negotiable bill of lading: - That the goods are to be delivered to the order of a

consignee; and must not contain on its face an agreement with the shipper that the bill

is not negotiable.

2. Non Negotiable bill of lading:- A bill is non-negotiable if it states the goods are to be

delivered to a consignee. The term should be stated on the bill. 33

The Harter Act

It was enacted in 1893 and expressly applies to transportation of goods by water between US

Ports and between US and foreign ports. The Statute is applicable from the time a carrier

receives cargo into its custody until proper delivery has been made. Proper delivery is made

when the carrier or its agent discharges the cargo onto a fit wharf, gives notification to

consignee, makes the cargo accessible to the consignee and allows the consignee a reasonable

opportunity to take the possession of the cargo.34 Proper delivery also occurs when cargo is

turned over to a designated authority pursuant to a regulation or custom of the port. The

Harters Act does not apply to contracts for the carriage of animals.35

33 https://public.resource.org/scribd/8763552.pdf, last accessed on 9th August at 12:35a.m. 34 David Crystal, Inc. v. Cunard S.S. Co., 339 F.2d 295 (2d Cir. 1964), cert.denied, 380 U.S. 976 (1965). 35 Supra note 33

25 | P a g e 8 1 0 0 1 1 3 0 0 5 8

The Harter Act has three major components:

1. It prohibits carriers from incorporating certain exculpatory clauses into contracts of

carriage.

2. It provides certain defences to the carrier

3. It requires the carrier to issue a bill of lading to the shipper upon request.

Carriage of Goods by Sea Act

In 1936 the United States enacted the Carriage of Goods by Sea Act which adopted Articles I

through VIII of the Hague Rules, with some minor variation. It applies by the force of law to

contracts for the carriage of goods by sea, to or from foreign ports and U.S. Ports. It expressly

anticipates the Harters Act with respect to all contracts of carriage pertaining to foreign trade.

However, unlike the Harter Act, it doesn’t apply by force of law to voyages between U.S.

Ports and foreign ports, such as those made for intercostal and coastal trade, or to voyage on

inland waters. In those situations the Harters Act continues to govern.

A charter party may incorporate the terms of the Carriage of Goods by Sea Act in whole or in

part.It applies to the carriage of all goods, wares, merchandise, articles, or cargo other than

live animals and goods carried on deck related to the agreement of the parties. It is doubtful

that the “on deck” prohibition applies to containerized cargo carried on a vessel that has been

constructed or adapted to carry containers.36

UNITED KINGOM

Carriage of goods by sea Act 199237

The Carriage of Goods by sea Act 1971 incorporates the Hague Visby rules into English

Law. These rules require that on demand the carrier must provide the shipper with a bill of

lading that meets the requirements of Article III. Although the Carriage of Goods by sea 1992

cannot amend The Hague Visby rules, which are as International Convention, Section 4 of

the 1992 Act upgrades the status of a bill of lading to be conclusive evidence of receipt for

shipment.

36 Supra note 33 37 http://www.legislation.gov.uk/ukpga/1992/50/contents, last accessed on 9th August at 10:05a.m.

26 | P a g e 8 1 0 0 1 1 3 0 0 5 8

The Carriage of Goods by Sea Act 1992 is a UK Statute that repeals and replaces the Bills of

Lading Act 1855. The Statute makes provision for Bills of Lading and other documents of

carriage, as follows:

S.1: The CoGSA 1992 now applies to: bills of lading, sea waybills, and ship's delivery orders.

A bill of lading must be negotiable, and includes a “received for shipment” bill.

S.1 also empowers the Minister to make regulatory provision (by way of a Statutory

Instrument) in respect of electronic transactions and electronic bills of lading.

S.2: A person who becomes the lawful holder of a bill of lading (or sea waybill, or delivery

order) shall have transferred to and vested in him all rights of suit under the contract of

carriage as if he had been a party to the contract.

S.3: Where such a person (s.2) takes or demands delivery of the goods (or makes a cargo

claim), that person becomes subject to the same liabilities under that contract as if he had

been a party to that contract.

S.4: A bill of lading which represents goods to have been shipped, and which is signed by the

ship’s master or his agent is conclusive evidence of receipt for shipment.

Bill of Lading Act 185538

Under the English law a contract is made between two parties each of which has rights and

obligations under the contract. In the case of carriage of goods by sea the contract of carriage

is usually between the carrier and the shipper. This contract can be evidenced by a bill of

lading. When a bill of lading is transferred to a consignee or endorsee these persons are the

third parties to the original contract and under the English Law the third parties do not have

any benefit of the original contract. It is said that contracts under English Common law are

not assignable.

The Bills of Lading Act 1855 were passed in England as an attempt to cure this and other

problems related to trade. The Preamble reads as follows:-

“WHEREAS by the Custom of Merchants a Bill of Lading of Goods being transferable by

Endorsement the Property in the Goods may thereby .pass, - to the Endorsee, but nevertheless

all Rights in respect of the Contract contained in the Bill of Lading continue in the original

Shipper or Owner, and it is expedient that such Rights should pass with the Property:” The

Marine insurance in UK is governed by the English Marine insurance act of 1906

38 http://www.legislation.gov.uk/ukpga/Vict/18-19/111/introduction/enacted, last accessed on 8th August at

11:35p.m.

27 | P a g e 8 1 0 0 1 1 3 0 0 5 8

CHAPTER 6: CONCLUSION

The coastal and the waterway transport contract are governed by the Indian Carriage of

Goods by sea Act, The Merchant shipping Act, The Indian Bill of Lading Act and The

Marine Insurance Act. The Act were adopted from the various conventions such as Hague

Visby rules, Hamburg rules and the Rotterdam rules.

In the ancient times maritime law held the carrier absolutely liable for loss or damage to cargo, whether or

not he was negligent and regardless of the cause of the loss. He could escape liability only if the loss or the

damage was caused by any natural calamity or Act of God, a public enemy or inherent vice of the goods. In

addition in all contracts of carriage of goods by sea, there were implied undertakings by the carrier that the

carrying vessel was seaworthy and that the ship would commence and carry cut the contractual voyage with

reasonable diligence without unjustifiable deviation.

A contract of affreightment may take the form of a Charter Party where an entire ship is

hired, or a Bill of Lading, where the goods are to be carried in a general ship which can be

used for this purpose by any person.

In both these contracts, the ship owner as the carrier undertakes the responsibility of carrying

the goods of the consignor safely and securely to the destination.

The Bill of lading was the basic shipping document, evidencing the contractual relationship between carrier

and shipper and forming the basis of all claims arising from the transportation of goods by sea. It was originally

a non-negotiable document but with the growth of commerce the need was felt for transferring the property in

the goods before the arrival of the goods at the destination by endorsing the bill of lading to the buyer and the

practice came to be established of issuing “negotiable” bill of lading.

The early bills of lading contained only the common law exception.

The marine insurance Act also plays an important role during the contract and also saves

many shippers from the liability and is also regarded as an important aspect.

Thus Coastal and waterway transport contracts should be given more and more emphasis and

steps should be taken to promote cargos through waterways.

28 | P a g e 8 1 0 0 1 1 3 0 0 5 8

CHAPTER 7: SUGGESTION

India has a long coastline of 7516.6 kilometres forming one of the biggest peninsulas in the

world. It is services by 13 major ports and 187 minor notified and intermediate ports. These

ports account nearly 90% of India’s International Trade. Yet, Coastal shipping accounts for

only 6% of the country’s total domestic freight

.

There are some facts as well as suggestion put down by me after completing this research

project. They are listed down as follows:-

1. The importance in India about coastal and waterway transport shipping is

decreasing but this alternate mode will help us to solve many problems.

Coastal shipping as a mode of transportation is much safer, more economical

and less polluting. Facts state that Waterways are 50% cheaper than road and

nearly 30% cheaper than rail.

2. The coastal shipping and transport contracts should be given more and more

emphasis as the coastal leg, apart from being more fuel efficient can also carry

larger parcel sizes and provide a great opportunity for consolidation of loads.

3. The future of the port sector in India, especially for the minor ports centres a

lot on coastal movement and inland waterways. Minor private ports have to

play an extremely critical role in development of coastal shipping. While the

debate on cargo and infrastructure is going on, the port developers need to

build capacity for attracting domestic cargo and by doing so reduce waiting

time and improve operating efficiencies.

4. Awareness should be made to promote general cargo contracts.

5. Fuel is an exhaustible source of energy so we should take every step to save it

and thus in order promote coastal transport contracts in India.

29 | P a g e 8 1 0 0 1 1 3 0 0 5 8

CHAPTER 8: BIBLIOGRAPHY

Books referred:-

1. Carriage of goods by Sea, Hamburg Rules by NK Gopalan Nair

2. Indian Shipping in perspective by H.M. Trivedi

Dictionaries/Journals referred:-

1. J.W Garner’s Black’s Law Dictionary 9th Edition

2. Manupatra Database

Bare Acts referred:-

1. Indian marine insurance Act,1963

2. Indian Merchant Shipping Act

3. Indian Carriage of Goods by Sea Act, 1925

4. Indian Bill of Lading Act, 1856

5. Indian Carriers Act, 1865

6. Indian Contract Act, 1872

Website referred:-

1. http://www.livemint.com/

2. http://weblaw.haifa.ac.il/

3. http://www.scribd.com/

4. http://www.bidcal.com/

5. http://www.helplinelaw.com/

6. www.pfri.uniri.hr/

7. http://r0.unctad.org/

8. http://www.law.cornell.edu/

9. http://business.gov.in/manage_business/marine_insurance.php

10. https://public.resource.org/

11. http://www.legislation.gov.uk/

30 | P a g e 8 1 0 0 1 1 3 0 0 5 8

ANNEXURE

Date: BILL OF LADING Page 1 of ______SHIP FROM

Name: Bill of Lading Number:__________________Address:City/State/Zip: B A R C O D E S P A C E SID#: FOB: o

SHIP TO CARRIER NAME: _________________________________

Name: Location #:____ Trailer number:Address: Seal number(s):City/State/Zip: SCAC:CID#: FOB: o Pro number:

THIRD PARTY FREIGHT CHARGES BILL TO:

Name: B A R C O D E S P A C E Address:City/State/Zip: Freight Charge Terms:SPECIAL INSTRUCTIONS: Prepaid ________ Collect _______ 3rd Party ______

o(check box)

Master Bill of Lading: with attachedunderlying Bills of Lading

CUSTOMER ORDER INFORMATIONCUSTOMER ORDER NUMBER # PKGS WEIGHT PALLET/SLIP

Y or NADDITIONAL SHIPPER INFO

GRAND TOTALCARRIER INFORMATION

HANDLING UNIT PACKAGE COMMODITY DESCRIPTION LTL ONLYQTY TYPE QTY TYPE WEIGHT H.M.

(X)

Commodities requiring special or additional care or attention in handling or stowing must beso marked and packaged as to ensure safe transportation with ordinary care. NMFC # CLASS

R E C E I V I N G S T A M P S P A C E

GRAND TOTALWhere the rate is dependent on value, shippers are required to state specifically in writing the agreed ordeclared value of the property as follows: COD Amount: $____________________

“The agreed or declared value of the property is specifically stated by the shipper to be not exceeding

__________________ per ___________________.”

Fee Terms: Collect: ¨ Prepaid: o Customer check acceptable: o

NOTE Liability Limitation for loss or damage in this shipment may be applicable. See 49 U.S.C. - 14706(c)(1)(A) and (B).RECEIVED, subject to individually determined rates or contracts that have been agreed upon in writingbetween the carrier and shipper, if applicable, otherwise to the rates, classifications and rules that have beenestablished by the carrier and are available to the shipper, on request, and to all applicable state and federalregulations.

The carrier shall not make delivery of this shipment without payment of freightand all other lawful charges._______________________________________Shipper Signature

SHIPPER SIGNATURE / DATE Trailer Loaded: Freight Counted: CARRIER SIGNATURE / PICKUP DATEThis is to certify that the above named materials are properly classified,packaged, marked and labeled, and are in proper condition fortransportation according to the applicable regulations of the DOT.

p By Shipper

p By Driver

p By Shipper

p By Driver/pallets said to contain

Carrier acknowledges receipt of packages and required placards. Carrier certifiesemergency response information was made available and/or carrier has the DOTemergency response guidebook or equivalent documentation in the vehicle.

p By Driver/Pieces

SUPPLEMENT TO THE BILL OF LADING Page _________

Bill of Lading Number: __________________

CUSTOMER ORDER INFORMATIONCUSTOMER ORDER NUMBER # PKGS WEIGHT PALLET/SLIP

Y or N ADDITIONAL SHIPPER INFO

PAGE SUBTOTALCARRIER INFORMATION

HANDLING UNIT PACKAGE COMMODITY DESCRIPTION LTL ONLYQTY TYPE QTY TYPE WEIGHT H.M.

(X)

Commodities requiring special or additional care or attention in handling or stowing mustbe so marked and packaged as to ensure safe transportation with ordinary care.

NMFC # CLASS

PAGE SUBTOTAL