RIGHTS AND OBLIGATION OF PARTIES UNDER THE CONTRACT OF CARRIAGE OF GOODS BY SEA

RIGHTS AND OBLIGATION OF PARTIES UNDER THE CONTRACT OF CARRIAGE OF GOODS BY SEA

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ABSTRACT

Transportation is an integral factor in international trade and the contract of carriage of goods by sea, forms part of the complex web of transactions witnessed at international trade.  The purpose of this project is to illuminate the nature and the inherent features present in the contract of Carriage of Goods by Sea and to also highlight the rights as well as the duties owed by the parties.  It also seeks to point the obligations the law imposes on the parties as well as the liabilities they would incur on the event of breach in this form of contract.


CHAPTER ONE

THE NATURE OF THE CONTRACT OF CARRIAGE OF GOODS BY SEA

1.1   INTRODUCTION

Man has always been by his nature an interactive and interdependent being, and trade has been one of those means by which he interacts and shows his interdependency.  He engages in the exchange of goods and services for a valuable consideration.

The concept of international trade[1] is not new to man, only that here, this form of exchange seems to resonate on a much broader platform involving a complex web of structures and processes which makes this sort of transaction possible and one of this structure is the carriage of goods by sea, thus it is important to point out that, this form of transportation of goods is not only vital to international trade, but it also forms an integral part of it, that the absence it would make international trade very difficult to undertake.

Though our focus is the rights and obligations of parties under the carriage of goods by sea, full appreciation of this rights and duties will not be attained, if some attention is not given to highlight the nature of this form of transaction.

1.2   DEFINITION

The contract of carriage of goods by sea can easily be seen as a contract involving two parties who for an agreed sum agree to be bound by the terms reached by them. But this definition may be very misleading, for though the contract of carriage involve this important element it is not the same as the usual contracts reached and agreed by parties. 

Perhaps looking at some definitions posed by some authorities, more light would be shed on the nature of this kind of contract. Clive M. Schmitthoff[2] tried to give a vivid description as to the nature of this contract, here he said that a contract of carriage entails a situation where an exporter concludes with a ship owner to carry goods in his ship from one port to another, usually overseas, such contract is known as the contract of carriage by sea[3].  R.M. Goode[4] on the other hand sees a contract of carriage involving two parties the shipper[5] and the carrier.[6]  The shipper is the person to whom the carrier undertakes the duty of transporting the goods.

Black’s Law Dictionary[7] defines it as an agreement for carriage of goods by water, which may employ a bill of lading, a charter party or both to ship goods.

Finally, Article 1 Carriage of Goods By Sea Act[8] defines contract of carriage as those that:

“Apply only to contracts covered by a bill of lading or any similar document of title, in so far as such document relates to the carriage of goods by sea, including any bill of lading or any similar document as aforesaid issued under a pursuant to a charter party from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same”.

1.3       THE DISTINCTION BETWEEN CONTRACT OF CARRIAGE OF GOODS BY SEA FROM OTHER CONTRACTS

Usually, under all common law jurisdictions, parties to a contract are primarily the buyer and the seller, who for a consideration would accept to be bound by the agreement reached between both parties, of which liability would accrue from the breach of the said agreement, C.M. Schmitthoff[9] drew our attention to the fact that:

“…A contract is an agreement which will be enforced by the law… there must be at least two parties to an agreement.  One of them will make an offer and the other will indicate its acceptance.  When offer and acceptance correspond in every respect there is an agreement between the parties”.

Comparing this definition with the contract of carriage of goods by sea, we see a marked difference.  Here, unlike in former, the contract is not a contract between the buyer and seller, rather it is between the shipper and the carrier, who conveys the goods to the said destination.  In carriage of goods by sea the shipper could either be the buyer or seller in a usual contract, who depending on the agreement reached may be saddled with the responsibility of entering into a contract with the carrier to convey the goods to a said destination agreed upon by both parties.[10]

Still looking at the distinction, we see further that unlike in a contract where the parties involved are usually two in number, in a contract of carriage of goods by sea the reverse is the case.  This involves several parties whose role (directly or indirectly) can not be undermined.  For example, we have the shipper and the carrier who are primary parties to the transaction, also we have the agents of both parties who can act in position of the principal.  We also have financial institutions[11], such as the banks who are most often times directly involved in his form of contract and also the insurance companies whose role cannot be ignored, especially when taking into cognizance the level of risk involved in this form of transaction.

1.4   TYPES OF CONTRACT OF CARRIAGE

There are two types of contract of carriage:

i.      Charter party

ii.     Bill of Lading

Charter Party

According to Chuah[12] where the shipper intending to ship goods, wants the use of an entire vessel for that purpose, he might wish to enter into a direct contract of carriage with the ship owner, for the charter of the latter’s ship.  This transaction is known as a charter party.  Here the charterer pays freight in exchange for use of the ship.  Another authority[13] sees a charter party

as a contract for the hire of an entire ship for a specified voyage or period of time.  It is important to point out that a charter party is not subject to the Carriage of Goods Act or any other statute.  It is principally governed by the rule of common law and thus the parties are free to make any term as they wish.[14]

Bill of Lading

In circumstances where bills of lading[15] are used, usually what we see in this case is the shipper of goods not wishing to contract for the entire ship, but rather some cargo space on board.  Here he contracts with either the ship owners or the charterer, depending on the arrangement.  In cases were the latter’s applicable, the parties are not bound by the Carriage of Goods by sea Act, as already enunciated above.  But where parties to the contract reach an agreement, the trade usage in such instances is that the shipper receives a bill of lading from the carrier as evidence of the shipment contract.[16]

A bill of lading, is a document which states that certain specified goods have been shipped in a particular ship and which purports to set out the terms on which the goods have been delivered to and received by the ship.[17]

It is common practice for carriers to convey various cargoes for different shippers, in the sense the ship is said to be employed as a general ship under different bills of lading, this is in sharp contrast with the charter party where to whole ship is more often than not in the control of the charterer, who may decide whether or not to adopt the use of the bill of lading in their transactions.

It is impertinent to point out however, that this document is very important and in the eyes of the law it

is seen as such, been that in everyday international sale transactions, it possesses various functions which include:

(a)    Receipt

A bill of lading is a receipt issued by or on behalf of the carrier, whereby he acknowledges that he has shipped the goods or received them for shipment.

(b)    Evidence of Contract

A bill of lading is also an evidence of a contract of carriage.  Here it suffices to say that the bill of lading is an evidence and not the contract itself, because under normal circumstance, the contract would have been concluded before the carrier issues a bill of lading.  Though in some circumstances the terms of the contract are usually incorporated into the contract, what usually is the case, at least as between the carrier and the shipper comments only to evidence of contract of carriage.[18]

(c)    Document of Title

From the back drop of mercantile practice, the bill of lading is seen as symbol by the law of the merchant and universally accepted as such, that the endorsement and delivery of bill of lading operates as a symbolical delivery of the cargo.[19]  Some view this as perhaps the most important function of the bill of lading in that for many purposes possession of a bill is equivalent in law to possession of the goods.[20]


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