Contracts Of Affreightment

by Mary-Cynthia Okundaye

A contract of affreightment is an agreement between a charterer and a ship owner where the ship owner agrees to transport a specific number of goods for the charterer at a specified period. The entire process of carriage of goods by sea encompasses a series of bailments. The bailees include ship owners, charterers, shipping agents, stevedores, port authorities, container terminal operators and transporters operating from the Wharf.

The bailee of goods has a duty at common law to redeliver goods bailed to him to the bailor on demand. Hence, a common carrier as a bailee under common law has a higher standard of care for the goods bailed to him. The liability of a ship owner at common law varies depending on whether or not he is a common carrier. He is a common carrier when he employs his ship as a general ship and is ready to accept for transport any goods tendered to him, subject to his having available space and he is paid appropriate freight. He is a private carrier if he only carries for a particular person or persons.

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If a private carrier, he is only liable for failure to exercise due care and diligence in handling the goods. However, if he is a common carrier, he is absolutely responsible to the owner of the goods carried for any loss or damage to the goods save for such damage or loss caused by an act of God, the act of the enemies of the state, inherent vice(s) in the goods, negligence of the owner of the goods and general average sacrifice.

Following the strict liability position at common law, ship owners soon learnt the usefulness of writing exemption clauses into bills of lading or receipts issued to owners of goods shipped on board their vessels. The effect, therefore, was that where a ship owner writes a clause excluding himself from liability for loss or damage to goods however caused and the goods actually got lost or damaged, the common law courts without hesitation often dismiss the claim for damages by the owner of the goods. This is because the courts, in the spirit of freedom of contract, had no choice but to uphold such exemption clauses.

However, the manipulation of the freedom of contract enjoyed by carriers had an adverse effect not only on cargo owners but also on banking and financial interests because of the role of the bill of lading in commercial transactions. In 1893, however, the United States Congress intervened through the passage of the Harter Act. The Act prohibited any clause in a bill of lading which relieved the carrier from liability arising out of negligence or fault in proper loading, towage, custody, care and delivery of cargo as well as providing a properly equipped and seaworthy vessel.

The Harter Act eventually set the stage for a set of Unified Rules relating to Bills of Lading otherwise known as The Hague Rules of 1924. These Rules were introduced to make the liability of Cargo owners and ship owners respectively the subject of worldwide application. Owing to manifest deficiencies in these rules, an amendment was made in 1963 at Visby referred to as The Hague Visby Rules. A further amendment was again made in 1978 through the United Nations Convention on the Carriage of Goods by Sea otherwise known as the Hamburg Rules.

The Hamburg Rules though not applicable to Nigeria forms a set of existing Rules regulating the liability of cargo owners and ship owners at the moment. Under the Carriage of Goods by Sea Act, Cap 44 LFN 1990( now Carriage of Goods by Sea Act 2004), the carrier is bound, before and at the beginning of the voyage, to exercise due diligence to make the ship seaworthy; properly manned, equip and supply the ship; load and to handle and discharge goods carried with care. He is equally required to issue a bill of lading upon receipt of the goods. Upon delivery of the goods, any loss or damage should be notified to the carrier or his agent at the time of removal, or within 3 days for loss or damage, which may not be apparent, failing which the carrier shall not be liable.

Also read: The Impact Of The Lekki Deep Sea Port On The Nigerian Maritime Industry

RESPONSIBILITY FOR NEGLIGENT MISSTATEMENT IN SHIPPING DOCUMENTS

International shipments are usually supported and accompanied by several Documents. The parties to a contract of carriage are often obliged to place reliance on the accuracy of statements contained in those Documents. Sometimes though reliance on the accuracy of those documents may result in loss to one or more of the parties or even to third parties. This Article considers the incidence of misstatements in such documents and the responsibility for loss, which results thereby.

Some of the usual shipping documents are:

1. The shippers’ invoice
2. Clean Report of Findings issued by inspection Agents to confirm quality, quantity and price
3. Bills of Lading which evidence shipment and receipt of goods on board the vessel
4. Import Duty Report
5. The ship manifest shows the nature and quality of cargo on board the vessel
6. Landing Tally sheets showing the nature, quality and condition of cargo discharged
7. Ship final outturn report which confirms what the ship has discharged
8. Warehouse bills which show what is stored pending delivery to owners
9. i) Delivery bills which show what is delivered

When used properly these documents help to show the condition, quality and quantity of cargo at each stage of shipment. Inconsistencies in the information contained in these documents may indicate loss or damage between the time the goods are loaded on board and when they are discharged from the ship. However, problems may occur where inconsistencies in the statement result, not from loss or damage in the course of the shipment but from the negligence or carelessness of the maker of the statements.

For example, a Pre-shipment inspection agent may erroneously state in the Clean Report of Findings that the goods carried are a certain quality and specification whereas they are not. The general rule is that the maker of those statements is liable in negligence for the loss caused to the person to whom the statement is made. But what happens where the loss is incurred not by the person contractually entitled to the benefits of the statements but by third parties who place reliance thereto to their detriment? The broad parameters are that liability is limited by reference to;

1. persons to whom the maker of the statement owes a duty of care
2. the chain of causation
3. remoteness of consequence

Unless by some standard of projection, it is determined that the person who has suffered a loss is foreseen as likely to be affected by the statements made in the document, no duty is owed to him. And by extension, no liability attaches to the maker if such an unforeseen person suffers loss. So too, if the damage is considered to be remotely connected to the misstatement as to be adjudged as arising from it.

Some of these issues arose for consideration in the case of Rastico Nigeria Limited Vs Societe General Du Surveillance S.A. (1988) 3 NSC P.286. The court had to determine the status of a government-appointed pre-shipment inspection agent vis-a-vis an importer of goods in respect of statements made by the pre-shipment Inspection agent in a Clean Report of Findings. It was decided that the agent was under a duty to the importer and was liable for loss, which occurs from reliance on inaccurate statements in that document.

This case did not deal directly with third-party claimants. But in P Vs Rex, Rex offered P a set of imported crumb rubber manufacturing equipment for sale. Part of the documents given to P by Rex was a Clean Report of Findings issued by C, which stated that the equipment was new and that the Country of origin was Japan. P claimed to have been persuaded to buy on the strength of the CRF issued by C. It turned out that the equipment was refurbished scrap. P could not use them for the purpose for which he bought them. He suffered colossal losses and then claimed against Rex. In Rex’s opinion, he is not liable because he was never in physical possession of the equipment but merely passed on shipping documents of title including the CRF and had assumed the statements made by C therein were accurate. Rex claimed against C by third-party proceedings.

A decision is expected from a Lagos High Court in the next few months on whether C is liable to P for his losses as a result of his reliance on the CRF issued by C. Especially- considering that P was not privy to the contract of carriage of the goods and CRF issued by C was not addressed to P. Our subsequent editions of the Newsletter will hopefully review the judgment of the Lagos High Court and the consequences for the Nigerian Importer or third-party buyer of imported goods.

CONCLUSION

Although the law relating to contracts of affreightment apart from the law of Marine Insurance forms the most difficult and complex subject in the province of shipping laws, an attempt has been made in this article to explain in brief the meaning and purport of the various forms of contracts of affreightment. However, it must be pointed out that no two contracts are the same, as contracts in specific instances represent the true intentions of the contracting parties, and by the doctrine of freedom of contract, parties are at liberty to contract in the widest of terms so long as such terms represent their true intentions.

No Court however will allow a party to deviate from the terms of the contract already agreed upon by the parties to the contract. This is because the general rule of law is that parties are bound by the terms of their contract and no extrinsic evidence will be allowed to either add to or remove from the terms already agreed upon by both parties to the Contract.

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