International sale of goods contracts where the buyer and seller are domiciled in different countries.

Secondly, it is issued by the carrier of the goods to the shipper acknowledging receipt of the goods, describing them in an itemised list – Hague-Visby Rules Art III rule 4, setting out identification marks – Hague-Visby Rules Art III rule 3(a), evidencing the fact that they have been loaded in apparent good order and condition – Hague-Visby Rules Art III rule 3(c), and stating the date of shipment.

In the instant case Anders has shipped 500 tins of smoked catfish steaks and 20,000 tins of Swedish meatballs aboard Boris’s ship, the “Petrograd”. As the bills of lading state “shipped in apparent good order and condition”, they are called ‘clean’ bills. As against Carol for value of the ‘clean’ bill, Boris is estopped from asserting as against Carol that, at the time of loading, the goods were not in apparent good order and condition – (Hague-Visby Rules Art.III rule 4). Where the contract of carriage is not governed by the Rules but rather the common law, see – (Compania Naviera Vascongada v Churchill).  

In contrast, if there is any defect in the goods apparent to Boris then the bill is called a ‘claused’ bill and Boris shall clearly qualify such defects on the bill – (Canada & Dominion Sugar Co. Ltd v Canadian National Steamships Ltd). However this applies to the condition of the goods upon a reasonable examination, as Boris is not expected to be aware of latent defects reflecting the true yet hidden quality of the goods - (Silver v Ocean Steamship Co).

The bill will help Carol confirm exactly what should have been delivered in the event of a dispute, it will enable her to determine whether Anders has tendered the correct documents and it will also determine the merchantability of the bill.

Thirdly, it is evidence of the rights of possession and title in relation to the goods – (Lickbarrow v Mason).

These rights are prima facie vested in the holder of the bill as the transfer of the bill transfers constructive possession of the goods held in the carrier’s actual possession. However, the bill does not automatically transfer ownership of the goods but merely constructive possession. It is the contract of sale and the ‘intentions’ of the buyer and seller, which dictates when ownership shall pass – s.17 (1)(2) of the Sale of Goods Act 1979, as long as the goods are ascertained which, in the instant case they are. It is presumed that property is not intended to pass until delivery of the shipping documents and payment – (The Miramichi).

Although property passes to the buyer when payment is made, the risk passes from the time of shipment – (Johnson v Taylor Bros). This is because both the seller and buyer contemplate the risk of loss or damage and cover it by the insurance.

In this scenario, it is in return for the full sale price that Anders has indorsed the first bill of lading and issued a delivery order, so we can therefore assume that it is the intention of both Anders and Carol that ownership has been transferred.

As stated, Anders must also tender a policy of insurance covering all the usual risks covered at the time of the date of the policy and the policy must also cover the goods for the entire journey – (Hansson v Hamel & Horley Ltd).

The third document to be tendered is the commercial invoice and apart from containing the obvious terms such as goods, price and time of dispatch, it will enable Carol to clear the goods through Customs. Anders is obliged to forward these documents with reasonable dispatch – (Sanders Bros v Maclean & Co). It is Boris’s duty to deliver these goods to Carol.

In the instant case Anders has indorsed the first bill of lading in favour of Carol and has issued her with a delivery order requesting Boris to deliver her 10,000 tins of the Swedish meatballs, along with policies of insurance and commercial invoices for both consignments.

Delivery orders are used where goods being shipped in bulk can be separated to allow parts to be resold in lesser quantities than that showed on the bill of lading. When the seller holding the bill of lading issues a delivery order, it amounts to an order by the seller to the carrier to deliver the goods to the person named in the order. It must be noted that a seller may only tender any other document than a bill of lading if the contract of sale stipulates so – (Biddel Bros v E Clement Horst Co).

Before 1995, a buyer receiving a delivery order in relation to goods, which were part of a bulk cargo, obtained no proprietary rights in any part of that cargo. This precocious position is now governed by s.20A of the Sale of Goods Act 1979 so that having paid for goods, which are part of an identified bulk, Carol has a proprietary interest in a share of that bulk. We have no evidence in the instant case to suggest that a delivery order is unacceptable to Carol, so on the assumption that this is, Boris can deliver the 10,000 tins to her and consequently release them.

On delivery of the goods however, Carol has discovered that (1) the goods were not shipped within the contract period (2) the tins of catfish have been badly corroded rendering them unsaleable, and (3) the tins of meatballs contain microscopic perforations rendering them inedible. The seawater entered the ship’s hold because the crew failed to properly secure the storm hatches.

As discussed earlier, Anders has two specific duties; to tender shipping documents conforming to the contract and the duty to ship goods conforming to the sale contract. Therefore, in the event of any discrepancies, Carol has two rights of rejection, the right to reject the non-conforming documents and the right to reject the non-conforming goods– (Kwei Tek Chao v British Traders & Shippers Ltd).

In relation to the goods, Carol may (i) reject them and treat the contract as repudiated and sue for damages for non-delivery, (2) reject them and, instead of claiming damages, pursue a restitutionary remedy for recovery of the price, or (3) accept them and thereby treat the breach of condition as breach of warranty. We must address these issues separately.

Within a contract for the sale of goods, the shipment period is part of the description of the goods – (Bowes v Shand), and therefore as Carol has discovered that both consignments were shipped on January 31st and not within the contract period this has resulted in a breach of condition under s.13 of the Sale of Goods Act 1979. The fact that the true shipment date was not within the contractual shipping period also renders the indorsed bill of lading non-conforming, but Carol having accepted the bill of lading thus losing her right to reject it due to the fraud on behalf of Anders, may nevertheless reject both the tins of catfish and the tins of meatballs. 

Furthermore, if the seller delivers goods that are not of the contract description in relation to quality (or quantity), then the buyer may also reject such goods. This right may be exercised even though ownership of the goods has passed to the buyer, provided that acceptance has not occurred – Sale of Goods Act, s.35. In the instant case, property has passed to Carol but she has not intimated her acceptance of the goods and has not done any act inconsistent with the ownership of Anders. The Sale and Supply of Goods Act 1994, s.2 (2), provides that acceptance does not occur until Carol has had a reasonable opportunity of examining the goods to ensure their conformity with the sale contract.

In relation to the catfish, it appears that at the time of shipment their quality was satisfactory. They have however been delivered badly corroded and are ‘unsaleable’, and we are told this is a result of the crews’ failing to secure the storm hatches aboard ship.

The carrier’s duties and liabilities under the contract of carriage are governed by the terms of that contract and the Hague-Visby Rules. With reference to Art. III, r.2 of the Rules, the carrier must properly and carefully load, handle, stow, carry, keep and care for and discharge the goods carried. Upon arrival, the carrier must surrender the goods to the holder of the bill of lading. It follows therefore that the goods cannot be delivered to a person who is not the holder of the bill of lading, unless the carrier is satisfied that the person is entitled to possession and there is a valid reason for the absence of the bill of lading – (The Sormovskiy 3068). In this type of situation the carrier will release goods against a warranty of title and indemnity.

Had Anders shipped the catfish within the agreed shipment period then one remedy available to Carol would have been to sue Boris in contract. S.2 (1) Carriage of Goods by Sea Act 1992 effectively transfers the carriage rights from Anders to Carol, thus avoiding the ‘privity of contract’ impasse and abolishing the requirement within the Bills of Lading Act 1855, that transfer of the bill of lading also transferred property.  For this to take effect the appropriate bill of lading, sea waybill (s.1 (3) COGSA 1992) or delivery order (s.1 (4) COGSA 1992) must be indorsed in favour of Carol, and this has occurred. In the event of a breach of a contract of carriage that is governed by the Hague-Visby Rules, the carrier can limit his liability for loss or damage to that cargo under Art.IVRule5(a) which provides;

"that unless the nature and the value of the goods have been declared by the shipper before shipment and inserted in the bill of lading, neither the carrier nor the ship shall in any event be or become liable for the loss or damage to or in conjunction with the goods exceeding the equivalent of 666.7 units of account per ‘package’ or unit or 2 units of account per kilogramme of gross weight of the goods lost or damaged, whichever is the higher”.

With reference to the definition of the word ‘package’, Art.IV Rule 5(c) effectively holds that if the bill of lading makes reference to ‘a container said to contain 500 tins of catfish steaks’, then each tin is a ‘package’ and will attract separate liability.

In this scenario 500 tins have been rendered unsaleable due to the Boris’s negligence and therefore he would be liable to pay damages based on the above equation - (equalling 333.35 tins or £6670 if my maths are correct?). However, it is apparent that this remedy would leave Carol with less than the original contract price of £10,000 and therefore her contractual remedy against Anders for breach of s.13 Sale of Goods Act 1979 is greater.

Another remedy available is to sue in Tort. It was held in The Aliakmonthat the buyer must have either constructive possession or ownership before the damage to the goods occurs in able to sue the carrier in negligence. As established, Carol had ownership of the goods before shipment. The bill of lading stated that the goods were shipped in apparent good order and condition and therefore Boris is estopped from denying this fact by Art III, rule 4 of the Hague-Visby Rules which states that the bill of lading is conclusive against Boris. However, as aforementioned, the enactment of the Carriage of Goods by Sea Act 1992 means that Carol would not need to rely on a claim in negligence.  

As to the meatballs, it appears they were not of a satisfactory quality – (s.14 (2) Sale of Goods Act 1979) prior to shipping, as the microscopic perforations were obviously results of bad manufacturing. These perforations would not have been apparent to Boris and therefore the statement on the bill of lading testifying to their apparent good order and condition does not include latent defects – (The Peter der Grosse). This is breach of a condition. Carol, after refusing to accept the meatballs, is not bound to return them but should intimate to Anders that she rejects them – (Sale of Goods Act 1979, s.36). As these tins of meatballs are ‘inedible’, I would advise Carol to reject them and claim for the full contract price for total failure of consideration – (Sale of Goods Act 1979, s.54).

We must now examine the contract of sale between Anders and Pierre.

Anders has agreed to sell and Pierre agreed to buy 20,000 litres of Swedish Carrot Juice for F.F 50,000, c.i.f. Bordeaux, February shipment and yet after having shipped the goods onboard Gunter’s vessel The Hamburg Express, Gunter has issued Anders with a bill of lading stating:

“Shipped in apparent good order and condition 20,000 litres of carrot juice on 5th February 2003. To be delivered to one safe port, west coast of France. Freight payable on delivery. If the goods are to be transhipped this carrier’s liability ceases upon transhipment.”

As previously discussed the bill of lading, the insurance policy and the commercial invoice must reflect the same terms as the sale contract description. The bill of lading must be consistent with the sale contract as regards the date and place of shipment  – (S.I.A.T Di Del Ferro v Tradax Overseas S.A). Where transshipment is prohibited, the bill of lading must indicate continuous carriage by the same vessel to the port of destination as opposed to a ‘through bill’ or ‘combined transport bill’. Consequently, the clause within the bill of lading permitting Gunter to deviate from the sale contract route will render the bill of lading as bad tender to Pierre – (Bergerco v Vegoil).

Furthermore, Anders is required to tender a ‘policy’ of insurance. This should cover all the usual marine risks at the time of the date of the policy. Pierre must be able to take the benefit of this policy and in the absence of any agreement to the contrary a ‘certificate’ of insurance will not give Pierre a direct right of action against the insurer – (Diamond Alkali Export Corp v Bourgeois).

Even if Anders had tendered a policy as opposed to a certificate, it must also cover the goods for the entire journey. Gunter has excluded liability should the goods be transhipped and therefore in the plausible event that the goods are delivered to ‘one safe port, west coast of France’, thus requiring further shipment or multi-modal transport, Pierre would be left without continuous documentary cover - (Hansson v Hamel & Horley Ltd), thus rendering the insurance insufficient.

Also, Anders has agreed to a C.I.F contract yet Gunter has stipulated in the bill of lading that freight is payable on delivery? It is established that if freight is not to be pre-paid, but rather payable on delivery, then Anders must procure the issue of a ‘freight collect’ bill of lading and the commercial invoice must reflect the deduction of this freight – (Ireland v Livingstone), so as to avoid the potential requirement that freight is due twice.

Due to the fact that the market value of the carrot juice has fallen, I would advise Pierre to reject these documents as non-conforming with the contract of sale and treat this breach as a repudiation of the contract. He may however, re-negotiate a new contract for the sale of the goods at a lower cost.

 

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