International Commercial Law - the Basics of Carrier Liability

Olga Khabaeva (2014722023)

International Commercial Law, Stephen Frye

May 19, 2015

Final Exam

PROBLEM 4.2

PART B. THE BASICS OF CARRIER LIABILITY

1) Should the goods be insured against loss or damage in transit-or will the liability of the carrier fully protect parties such as Sam, Bill and Howard?

I think that the goods should be insured against loss or damages, because under the COSGA carrier is liable only for 500 dollars damages, and it’s not protecting all the parties in the full way.

 In Sam-Bill case we can see an INCOTERM FOB, under the UCC [2-319] “when the term is FOB the place of shipment, the seller must at that place ship the goods *** and bear the expenses and risk of putting them into the possession of the carrier;” also it is stated in the INCOTERM that the seller is exempted from buying insurance, in case if buyer wants an insurance the buyer is responsible for buying an insurance, because according to the B5 of the FOB “the buyer bears all risks of loss and damage from the time they have been delivered as envisaged in A4”.

In case of Sam-Howard contract, there is another INCOTERM- CIF where the seller is required to buy cargo insurance (A3(b) of CIF).

 2) a. If Sam misdescribes the goods, does such a clause relieve the carrier of all obligations regarding the nature of the goods received from the Sam?

No, because the carrier must always inspect the goods and make a description of the goods.

b. Would you answer change if the carrier could have discovered the discrepancy only by opening sealed cartoons?

Pomerene act- the carrier isn’t liable for misdescription if it’s the shipper who sealed the box. Also we can find some provisions in the Hague Rules, there is the principle of estoppel, which preventing carrier from proving that the goods were other than as described against t third party holder of the bill of lading for value who is acting in good faith. To prevent himself carrier can seal the box with the notification “shipper load and count”.

c. Or of the discrepancy instead was apparent from the markings on the outside of the cartons?

The carrier would be liable, because the carrier can make “reasonable” inspection.  

3) Limitation liability according to COGSA is a 500 dollars per package or, for goods not carried in packages, per customary freight unit. Usually look at number of packages stated in bill of lading. “Freight unit” can be an entire container, a vehicle such as a yacht or locomotive, or large assembled machinery. Under the Rotterdam Rules, the limitation would be the greater of 875 “units of account” per package or “shipping unit” or 3 units of account per kilogram, unless the shipper declares a higher value and the carrier agrees to a higher limitation [article 59 of Rotterdam Rules]. We can see that Rotterdam Rules limitation amount is higher than COGSA’s, but it’s more difficult to break, Article 61 provides that the carrier shall be precluded from relying on the package limitation only where a loss resulted from “a personal act or omission . . . done with the intent to cause such loss or recklessly and with knowledge that such loss would probably result.” [Article 61 of Rotterdam Rules]