Law of Carriage of goods notes

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Law of Carriage of Goods

• Meaning of the law of carriage of goods
• Types of carriers
• Modes of carriage
• Implied terms and conditions
• Documents used in carriage
• Rights and liabilities of parties
• Remedies available to parties in the breach of a contract of carriage

Carriage of goods, in law is the transportation of goods by land, sea, or air. The relevant law governs the rights, responsibilities, liabilities, and immunities of the carrier and of the persons employing the services of the carrier.

Until the development of railroads, the most prominent mode of transport was by water. Overland transportation of goods was relatively slow, costly, and perilous. For this reason, the law governing carriage of goods by sea developed much earlier than that governing inland transportation. The preclassical Greek city-states had well-developed laws dealing with the carriage of goods by sea, along with specialized commercial courts to settle disputes among carriers, shippers, and consignees. The sea laws of the island of Rhodes achieved such prominence that a part of them was carried, many centuries later, into the legislation of Justinian.

In Roman law the contract of carriage did not achieve the status of a distinct contractual form; jurisconsults (legal advisers) dealt with it in the framework of the contractual forms known to them, such as deposit and hire of services or of goods. There was special regulation only insofar as the responsibility of the carrier was concerned: shipowners (nautae), along with innkeepers and stable keepers, were liable without fault for destruction of or damage to the goods of passengers. Nevertheless, they could be relieved of responsibility by proving that the loss was attributable to irresistible force.

 

TYPES OF CARRIERS

A ‘carrier’ can be simply defined as a person who carries cargo (or indeed carries passengers, but passenger carriage is outside the scope of this Practice Note) for the benefit of other persons, whether gratuitously or for payment (or ‘reward’).

 

THE TYPES OF CARRIER ARE:

• Common carriers
• Private carriers
• Other types of carriers with special rights and duties

For the avoidance of doubt, the following are not carriers:

• Stevedores
• Forwarding agents who merely arrange or procure carriage by others

 

MODES OF CARRIAGE

Road Transport

It incorporates transport using road bound means like Lorries, trucks, vans, tankers etc. It is suitable for transporting durable, bulk products, door to door deliveries especially where the distances covered are not long. Categories of road transport include:

1. Own fleet e.g. company Lorries, Vans etc.
2. Contract hire e.g. Swan carriers, Andy forwarders etc.
3. Public hauliers e.g. Signon freight.

Advantages of Road Transport

1. Roads are widely spread throughout the country therefore many places are accessible
2. It is a source of employment to drivers and conductors.
3. Special facilities e.g. refrigerated trucks make it possible to transport perishable goods
4. It is faster over short distances.
5. It is readily available especially in well-developed roads.
6. Promotes industrial growth.
7. Roads are widely spread throughout the country therefore many places are accessible
8. It is a source of employment to drivers and conductors.
9. Special facilities e.g. refrigerated trucks make it possible to transport perishable goods
10. Usually flexible.
11. It provides door-to-door service
12. It’s relative cheap compared with other modes of transport

Disadvantages of road transport

1. They cause environmental pollution because of gases they emit to the air.
2. Bad roads may be impassible during rainy season.
3. Causes traffic congestion and jam especially in towns and large cities.
4. It is slow and expensive when carrying bulky goods over long distances.
5. They cause environmental pollution because of gases they emit to the air.
6. They are more prone to accidents, theft and pilferage of goods
7. Bad roads may be impassible during rainy season.
8. Unreliable since road transporters don’t stick to strict time schedules
9. Not suitable for urgently required goods and perishable unless special facilities are installed.

Rail Transport

It is one of the oldest modes of transport and its popularity was fueled by the industrial revolution. The first trains were steam powered which were later replaced by diesel powered and more recently electric trains were introduced. Rail transport is suitable for bulky and durable goods to be transported over long distances, heavy /less value consignment like sand, gravel, cement, grains etc.

ADVANTAGES OF RAIL TRANSPORT

1. It is less affected by delays caused by extreme weather conditions such as heavy rainfall.
2. Rails occupy less space as compared to roads which are wide.
3. Causes little pollution in the environment especially where modern electric trains are in use.
4. It is economical in the use of labor i.e. one engine can pull several wagons
5. It is relatively fast especially where electric trains are in use.
6. It is convenient to clients in terms of time because trains run on a regular schedule.
7. Special cargo e.g. petrol, vehicles and cattle can be transported using specifically designed wagons. Still perishable goods are transported in refrigerated wagons.
8. It is less likely to be affected by theft and accidents
9. Most railway stations have warehouseswhere goods can be stored awaiting collection.
10. Trains have direct routes on which they move and one can predict the various stations they will pass through
11. It is more comfortable for passengers travelling for long distances as they can sleep.
12. It is reliable due to adherence of strict schedules
13. No major limitations on geographical areas.
14. It is economical for transportation of bulky and irregular goods e.g. tractors. Over long distances.

DISADVANTAGES OF RAIL TRANSPORT

1. Not flexible- It can only serve areas where there are railway lines
2. Cannot be utilized while the tracks are being constructed unlike road transport-it has to be laid out in totality for it to be used.
3. It is a slow means of transport when numerous stops to load or off-load cargo have to be made. This makes it an unsuitable means of transporting perishable goods.
4. A break down along a railway line could easily result in a buildup of goods and passengers, resulting in alternative means of transport being sought.
5. It is an expensive means of transport for small quantities of goods and for short distances.
6. The loading and offloading at the start and end of each journey present opportunities for damage and loss of goods.
7. It involves heavy capital investment to construct and maintain
8. It requires specialized skills to operate.

Water Transport

It encompasses the use of ships, barges, steamers, ocean liners, tankers, cruisers, ferries canoes and boats. It’s suitable over long distances, bulky and irregular shaped goods for the transportation of durables and for low but large cargo.

Advantages of water transport

1. The medium occurs naturally thus no construction cost expect for artificial water ways eg canals.
2. It is economical since it allows carriage of bulky goods over long distances.
3. It facilitates carriage of special cargo since there are specially built ships.
4. Large ships may be built to carry many goods thus lower carriage cost.
5. It gives access to many countries of the world so long as they are bordered by water.
6. Reliable due to adherence of strict schedules
7. It has the largest capacity to transport any quantities
8. It has a global reach since no coastline in all the continents is inaccessible.
9. It has relatively low cost of transportation
10. Its flexible i.e. the same vessel can carry variety of items

Disadvantages of water transport

1. They are expensive to construct and to maintain.
2. Artificial canals are expensive to maintain and to construct.
3. Ship transport can be affected by unfavorable weather conditions weather conditions e.g. storms.
4. It is susceptible to delays occasioned by congestion at the port if there are no adequate loading and offloading facilities
5. There are higher labor requirements since its labor intensive.
6. There are higher risks for total loss for cargo and goods in case of accident.
7. It is unsuitable for perishable and urgently required goods.
8. It is limited to only navigable area/ water bodies.
9. Slow means thus unsuitable for carriage of perishable goods and urgently required goods

 Air Transport

It comprises air bound means of transportation like aero plane and helicopters means of transport and therefore it’s suitable for urgently required light, perishable or highly valuable cargo. Air freight is commonly used in exportation business and plays significant part in international commerce.

Advantages of Air Transport

1. It is faster in nature thus perishable goods can be transported over long distances and also urgently needed goods.
2. It is not hindered by physical barriers e.g. mountains.
3. It is relatively flexible as remote areas can be reached by chattered planes/helicopter.
4. The risk of loss through theft is minimal thus very valuable items like gold can be transported safely.
5. It offers accessibility to far off places as it is limitless to stretching across continent.
6. The way does not require construction or maintenance.
7. The risk of loss through damage is minimized as there is less handling of goods.
8. Reliable due to strict time schedules
9. It provides the fastest link possible hence offsetting (cancel) the added cost.
10. It has wide reach and global presence/ appeal.
11. Guarantee of safety and security of cargo is generally higher.
12. It is suitable for emergency supply like drugs, rescue efforts, humanitarian deliveries, and emergencies.

Disadvantages of air transport

1. Combustible products e.g. petroleum cannot be transported by air.
2. Construction and maintenance of airports, aircrafts are very expensive.
3. It requires highly skilled and trained personnel.
4. It is affected by extreme weather conditions e.g. mist.
5. International travel is confined to major towns and cities thus road/railway has to be used to travel to rural areas.
6. It is the most expensive mode of transport
7. There are higher risk of total loss of cargo in case of accident
8. It has limited capacity.
9. The carrying capacity is limited thus not suitable for transporting heavy and bulky goods.

  

Pipeline Transport

It comprises underground transportation of liquid and gaseous cargo in pipes. The revolution of pipeline has made it very convenient and easy to transport oil, water and milk in some countries at minimum costs.

Advantages of Pipeline Transport

1. It is a reliable and convenient means of transport-delays due to congestion or accidents are not experienced.
2. It is a relatively cheap means of transport for liquid commodities i.e. it depends only on pressure generated at the main station and booster located along the pipeline
3. It helps to reduce the number of tankers on the road thereby reducing tear and wear, congestion and the possibility of accidents on roads(less prone to accidents).
4. Environmentally friendly.
5. Low operating costs.
6. Relatively secure in relation to thefts.
7. Low maintenance costs.
8. Large volumes of oil can be transported within a given time.
9. It offers flexibility because it’s possible to switch from one fluid to another.
10. It is cheaper than air and road transport.
11. It is suitable for long distances haulage.
12. There is more security of cargo.
13. It is less labor intensive.
14. It allows a continuous flow and supply of the cargo concerned. The flow can go on for 24 hrs. With minimal involvement of labor.

Disadvantages of pipeline transport

1. It is inflexible in that once it is laid out it remains in that position.
2. It is usually owned by a specific company meaning its use is restricted to that company unlike roads which are public.
3. It is only economically justified if there is a constant supply of and demand for the commodity.
4. There is a huge capital outlay required
5. It has limited transportation i.e. only liquid and gas
6. It is unsuitable for perishable liquids.
7. It is subject to sabotage hence risk to cargo.
8. It can result in heavy losses if there is leakage.

  

CONTAINERIZATION

A container is any unit used for transporting goods. It involves putting cargo in metal containers which are easily transferred between two transportation modes. They can also be easily lifted since they have hooks. It’s part of unitization and consolidation since it combines several units which are loaded into a container for transportation. Most containers have standard length and height. Goods transported through one container are referred to as full container load (FCL). Where cargo is combined into several consigners through one container is known as less container load.

This is also a means of transport that find does not lie in each of the discussed forms.it is defined as packing of goods in containers which are of standard sizes. A container is a huge box designed in a special way for transporting goods by ship, rail or air.

 

CATEGORIES OF CONTAINERISATION

1. Full-container load-they are used by one exporter/importer.
2. Less container load-they are loaded with goods of different exporters/importers put together since the goods for each exporter may not be enough to fill the container. Mainly used in ship transport. The Kenya port authority has established a container terminal in Nairobi called dry port to serve exporters and importers leaving inland.

BENEFITS OF CONTAINERIZATION

1. Containers help to save space because they don’t take as much space as small packers
2. Use of machines for loading and offloading makes this means of transport more convenient
3. The movement of containers in and around the ports is relatively easy since they are fitted with locks which assists in their handling
4. Insurance costs are relatively low as risks are less.
5. Offers security of goods on transit and also from natural calamities e.g. rain, sun e.t.c
6. It ensure that irregular goods are smoothed into regular shape for transportation and storage.
7. It makes the handling of cargo simpler.
8. It simplifies the process of customs clearance and documentation
9. It saves time in loading and offloading
10. It is easy to locate the movement of containers because of serialization.
11. The container is very durable hence long protection of the cargo.
12. Special containers can be used to transport particular goods e.g. chemicals.
13. Containers provide simple and cheap movement of goods in the seaport because they are fitted with devices that assist handling.

SHORTCOMINGS OF CONTAINERIZATION

1. They are only suitable for transporting large volumes of commodities
2. It contributes to unemployment since they are capital intensive (usage of machines).
3. Not suitable for bulky goods which are of awkward or irregular shape.
4. They require special handling equipment for loading and offloading
5. They are not recommended to transport very fragile commodities
6. They require big space for packaging and offloading.
7. The cost of manufacturing containers is very high since they are made of expensive materials e.g. steel.

 

IMPLIED TERMS AND CONDITIONS

IMPLIED TERMS

In the absence of specific (or express) agreement on my matter in a particular contract, certain terms may be treated by law as governing the matter in question. These are known as implied terms. Terms may be implied in a contract by statute (e.g. the Sale of Goods Act implied certain terms in every contract of sales of goods); by custom (e.g. trade customs); or by court (e.g. in contracts of employment in master/servant relationship). Sometimes, an implied term is excluded in the express terms of the contract.

CONDITIONS

Not all terms of a contract carry the same weight. Some are important than the others. Those which are regarded as major terms of the contract are known as conditions, while those which are minor or of less consequence are called warranties.

DOCUMENTS USED IN CARRIAGE OF GOODS

Enquiry/Inquiry. A letter sent by an importer to the exporter asking about the supply of the goods and the terms of sale.

Order of Indent. This asks the supplier to supply goods. It may specify the goods to be supplied and suggest the preferred mode of transport for them. An indent may be open or closed

 Open Indent.

Here the importer does not specify the supplier and the goods to be bought and therefore the exporter or export agent is free to choose the supplier

Closed Indent.

Here the importer specifies the supplier and the goods to be bought.

• Letter of Credit. A document issued by the importers bank to the exporter‟s bank to assure the exporter of the payment for the goods ordered. The exporter can then be paid by his bank on the basis of this letter.
•  Import License. A document issued by the country to allow the importer to buy goods from abroad.
• Bill of Lading. A document of title to goods being exported issued by the shipping company to the importer who should use it to have goods released at the port of entry.
• Freight Note. A document prepared by the shipping company to show the transportation charges for goods.
• Certificate of insurance. A document issued by the insurance company or agent, undertaking to cover the risk against the loss or damage to goods being exported.
• Certificate of Origin. A document that shows the country from which the goods are being imported have originated from.
• Commercial Invoice. A document issued by the exporter to demand for the payment for the sold on credit to the importer. It shows the following;

• The name and address of the exporter
• The name and the address of the importer
• The price charged
• The terms of sale
• The description of the consignment
• The name of the ship transporting the consignment

Consular Invoice. A document that shows that the prices of the goods that have been charged is fair as certified by the consul with the embassy of the exporting country.

Proforma Invoice. A document sent by the exporter to the importer if he/she is not willing to sell goods on credit. It may be used to serve the following purposes;

• Serve as a formal quotation
• Serve as a polite request for payment before the goods are released for the customer
• To enable the importer to initiated the clearing of the custom duty early enough to avoid delays
• Used to by the importer to obtain permission from the Central Bank to import goods

Airway Bill. Issued by the airline company to show the charges for the goods being transported

Letter of Hypothecation. A letter written by the exporter to his/her bank authorizing it to resell the goods being exported. This occurs if the bank fails to get payment on the bill of exchange drawn on the importer that it has discounted for the exporter. Should there be a deficit after the resale, the exporter pays the deficit

Weight note. A documents that shows the weight and other measurements of the goods being delivered at the dock

Shipping advice note. A document issued by the exporter to his/her shipping agent containing instruction for shipping goods.

 

RIGHTS AND LIABILITIES OF PARTIES

1. Estoppel

A non-owner can pass a good title if the true owner is by his conduct precluded from denying the seller’s authority to sell. This is the equitable doctrine of estoppel. If the true owner of goods makes it appear that some other person is the owner, the true owner is estopped from denying the apparent ownership of the other.

2. Sale by Mercantile Agent or Factor A factor is a mercantile agent who is entrusted with possession of goods and who sells in his own name. A factor passes a good title, even if he has no authority to sell provided he sells the goods:

• In his capacity as mercantile agent
• In the ordinary course of business
• To a bona fide purchase for value without notice
• Of which he has possession of with the owner’s consent.

3. Resale by Seller in Possession If the seller who has already sold goods but retains their possession or documents of title, sells them to a 3rd party who takes in good faith for value without notice of the previous sale, the seller passes a good title.
4. Sale by buyer in Possession Where seller who has bought or agreed to buy goods, obtains their possession or documents of title with the seller’s consent before title passes to him and as a consequence he transfers them to a bona fide purchaser who takes them in good faith and with notice of the original seller’s lien on the goods, he passes a good title.
5. Sale Under Statutory Power. A sale made in exercise of a power conferred by an Act of parliament passes a good title

 

REMEDIES AVAILABLE TO PARTIES IN THE BREACH OF A CONTRACT OF CARRIAGE OF GOODS

Remedies for Breach of Contract Whenever there is a breach of contract, the injured party becomes entitled for some remedies. These remedies are:-

1. Damages
2. Quantums Meruit
3. Specific Performance
4. Injunction
5. Rescission

These are explained below

Damages

Damages are a monetary compensation allowed to the injured party of the loss or injury suffered by him as a result of the breach of contract. The fundamental principle underlying damages is not punishment but compensation. By awarding damages the court aims to put the injured party into the position in which he would have been, had there been performance and not breach, and not to punish the defaulter party. As a general rule, “Compensation must be commensurate with the injury or loss sustained, arising naturally from the breach”. “If actual loss is not proved, no damages will be awarded”. The damages recoverable for breach of contract are governed by the rule in Hadley V. Baxendale (1894) which is as follows:- “Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be, either such as may fairly and reasonably be considered arising naturally, i.e. according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the possible result of the reach of it”. This is the general rule. The plaintiff can only recover for loss arising naturally from the defendant’s breach or for such loss as was in the contemplation of both parties at the time when the contract was made. In this way, it is sought to do justice to both parties. In fact the above case goes on to explain that where a contract is made under special circumstances it is the duty of the party seeking to rely on those special circumstances to communicate them to the other party; and in the absence of such communication any loss arising from the special circumstances is not recoverable: Hadley V. Baxendale (1854) A miller sent a broken crankshaft by a carrier to deliver to an engineer for copying and to make a new one. The miller informed the carrier that the matter was urgent and that there should be no delay. The carrier accepted the consignment on those terms. The miller did not inform the carrier that the mill would be idle and unable to work. The carrier had no reason to believe that the delayed delivery of the crankshaft was an essential mechanism of the mill. The carrier delayed delivery of the crankshaft to the engineer; and as a consequence, the mill was idle for longer than it need have been. Held: that the carrier was not liable for the loss of profits during the period of the delay. 132 The Heron II (1969) The defendant’s ship, the Heron II, was chartered by the plaintiff to carry sugar from Constanza to Basrah, and the ship was to take an agreed route. But the defendant deviated and took a longer route and as a result delivery of the sugar was delayed by 9 days. In the meantime the market price of sugar had fallen and the plaintiff lost a profit of # 4,000. Held: The loss of profits was recoverable by the plaintiff, because fluctuations in market prices are in the normal course of things and the loss suffered by the plaintiff must have been in the contemplation of both parties as a probable result of a breach of the contract.

Quantum Meruit

The third remedy for a breach of contract available to an injured party against the guilty party is to file a suit upon quantum meruit. The phrase quantum meruit literally means “as much as is earned” or “in proportion to the work done”. This remedy may be availed of either without claiming damages (i.e. claiming reasonable compensation only for the work done) or in addition to claiming damages for breach (i.e. claiming reasonable compensation for part performance and damages for the remaining unperformed part). The aggrieved party may file a suit upon quantum meruit and may claim payment in proportion to work done or goods supplied. The court must then determine a reasonable sum to be paid for those goods or services; and the plaintiffs is said to have brought his suit on a quantum meruit. In the case of contracts for the sale of goods, this remedy has been codified by the Sale of Goods Act. It provides; “where the price is not determined, the buyer must pay a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case”. The plaintiff may also sue on a quantum meruit where the original contract has been replaced by a new one and work has been done by him under the new one. As Lord Atkin has said: “If I order from a wine merchant twelve bottles of whisky and two of brandy, and i accept them i must pay a reasonable price for the brandy”: Steven V. Bromley & Son (1919). 133 A claim under quantum meruit sum does not apply, however, where the contract requires complete performance as a condition of payment e.g. a contract to do one piece of work in its entirety in consideration for lump-sum payment. Sumpter V. Hedges (1898) S agreed to build a house for a certain sum on H’s land. When the house was half finished S ran out of money and could not complete. H refused payment, and S brought an action on a quantum meruit for the value of materials used and the labour he had expended. Held: that the claim must fail. The contract was to do certain work for a lump sum which was not payable until completion. H had no choice but to accept the work.

Specific Performance

This is an equitable remedy. Specific performance means the actual carrying out of the contract as agreed. Under certain circumstances an aggrieved party may file a suit for specific performance, i.e. for a decree by the court directing the defendant to actually perform the promise that he has made. A decree for specific performance is not granted for contracts of all types. It is only where it is just and equitable so to do i.e. where the legal remedy is inadequate or defective, that the courts issue a decree for specific performance. Specific performance is not granted as a rule, in the following cases:-

1. Where monetary compensation is an adequate relief. Thus the courts refuse specific performance of a contract to lend or to borrow money or where the contract is for the sale of goods easily procurable elsewhere.
2. Where the court cannot supervise the actual execution of the contract, e.g. a building construction contract. Moreover, in most cases damages afford an adequate remedy.
3. Where the contract is for personal services, e.g. a contract to marry or to paint a picture. In such contracts “injunction” (i.e. an order which forbids the defendant to perform a like personal service for other persons) is granted in place of specific performance.
4. Where one of the parties to the agreement does not possess competency to contract and hence cannot be sued for breach of contract. Thus a minor cannot succeed in an action for specific performance.

Injunction

“Injunction” is an order of a court restraining a person from doing a particular act. It is a mode of securing the specific performance of the negative terms of the contract. To put it differently, where a party is in breach of negative term of the contract (i.e. where he is doing something which he promised not to do), the court may, by issuing an injunction, restrains him from doing, what he promised not to do. Thus “injunction” is a preventive relief. It is particularly appropriate in cases of “anticipatory breach of contract” where damages would not be an adequate relief. Illustration: A agreed to sing at B’s theatre for three months from 1st April and to sing for no one else during that period. Subsequently, she contracted to sing at C’s theatre and refused to sing at B’s theatre. On a suit by B, the court refused to order specific performance of her positive engagement to sing at the plaintiff’s theatre, but granted an injunction restraining A from singing elsewhere and awarded damages to B to compensate him for the loss caused by A’s refusal (Lumley vs. Wagner).

 

Rescission

When there is a breach of contract by one party, the other party may rescind the contract and need not perform his part of obligations under the contract and may sit quietly at home if he decides not to take any legal action against the guilty party. But in case the aggrieved party intends to sue the guilty party for damages for breach of contract, he has to file a suit for decision of the contract. When the court grants rescission, the aggrieved party is freed from all his obligations under the contract; and becomes entitled to compensation for any damage which he has sustained through the non-fulfillment of the contract.

Illustration: A contracts to supply 100 kg of tea leaves for sh. 1,500 to B on 15th April. If A does not supply the tea leaves on the appointed day, B need not pay the price. B may treat the contract as rescinded and may sit quietly at home. B may also file a “suit for rescission” and claim damages. Thus, applying to the court for “rescission of the contract” is necessary for claiming damages for breach or for availing any other remedy. In practice a “suit for rescission” is accompanied by a “suit for damages”