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25 Nov

INTERNATIONAL TRADE LAW PART 1

FOR THE LOVE OF CHRIST JESUS; THE BEGINNING AND THE END.

INTERNATIONAL TRADE LAW PART I ONLY

TABLE OF CONTENTS.

THE BILL OF LADING. 1

DUTIES AND EXCLUSIONS: 1

INTERNATIONAL EXPORT CONTRACT. 3

COST INSURANCE FREIGHT CONTRACTS (CIF). 3

WHAT IS THE NATURE OF A CIF CONTRACT?. 3

DOCUMENTS IN A CIF CONTRACT. 4

PASSING OF PROPERTY. 4

PASSING OF RISK. 5

DUTIES, REMEDIES AND BENEFITS. 5

FREE ON BOARD CONTRACTS. (FOB) 7

ISSUES THAT ARISE IN FOB CONTRACTS. 8

DUTIES AND REMEDIES. 8

CARRIAGE OF GOODS BY AIR. 10

CHARTER PARTY. 12

TYPES OF CHARTER PARTY. 13

MARINE INSURANCE. 15

TYPES OF POLICIES. 15

PRINCIPLES OF MARINE INSURANCE. 16

SUBROGATION.. 17

DOUBLE INSURANCE. 18

CONTRIBUTION.. 18

ASSIGNMENT. 18

Implied Warranties. 18. 

THE BILL OF LADING.

1.     The Bill confers certain rights and Liability: like the right to sue.

2.     The Carrier is only under an obligation to deliver goods against the presentation of the BOL. Where he delivers to a person who doesn’t present the BOL, he would be liable except liability is excluded by agreement or the receiver is entitled to possession of the goods.

Frauds and BOL: Since the bills are issued in duplicates what happens when a fraudster obtains a copy of the bill and presents it to receive the goods? In Glyn Mills V East West India Dock Co, the court held that there was no liability for mis-delivery once the BOL was presented. In this case, the warehouseman was not liable since he delivered upon the presentation of the BOL.

DUTIES AND EXCLUSIONS[1]:

For the Shipowner:

:: To provide a seaworthy ship: which is fit for the voyage to be undertaken. In The Amstelslot[2] where the vessel broke down due to gear failure, the court held that the ship owner was negligent. In The Muncaster Castle cases of tinned ox tongues were shipped under bills of lading from Sydney to London. On discharge, the cases were found to be damaged by sea water. It was found that defective storm valve covers had let the sea water enter into the hold. The ship owner argued that he employed reputable ship repairers to inspect and maintain the ship. Therefore the repairers should be held liable since they were independent contractors. Court still held that he did not exercise due diligence. Additionally, the court inThe Thorsa, noted that the vessel must be capable of carrying the particular cargo. Same noted in Reed V Page. In Hamilton V Pandorf[3], the goods are destroyed because of rats on board a ship. Held that the duty to provide a sea worthy ship was breached.

:: To proceed with due dispatch: In Freeman V Taylor, delay of seven weeks was regarded as sufficient to frustrate the commercial purpose of the contract.

:: To transport to agreed destination without deviation. Deviation may be allowed where such is necessary to save life and property[4], to undertake necessary repairs on the ship and other deserving circumstances. In Morrison V Shaw Savill the ship deviated from the contract route.

:: Duty of Care (both in navigation and protection of the goods): to “use due care and skill in navigating the vessel and carrying the goods”Lord Mcnaghten in The Xantho. Willes J in Notara V Henderson said: the shipowner is “to take reasonable care of the goods entrusted to him… to preserve them on board”… and arrest loss in damaging situations. In Lennard’s Carrying V Asiatic Petroleum[5], the court noted that the employer company can be liable for its employee’s (or agent’s) negligence where the agent can be said to be the directing mind or brain of the company. A similar position was followed in The Marion[6]

Exclusions for the Ship Owner.

At common law, Act of God[7], Act of the Queen’s enemies and inherent vice[8], latent defects[9]. The ship-owner may also insert various exclusion clauses[10] in the agreement… to exculpate him from liability in the event of riot, strikes[11], latent defects[12], Fire[13], loading and offloading accidents[14], and so on.

For the Shipper: the person utilising the ship to transport his goods.

Not to ship dangerous goods: he should inform the ship owner where the goods are dangerous. In Brass V Maitland, fumes from the bleaching powder containing chloride of lime escaped and corroded other goods carried along in the ship. The shipper claimed he acquired them from a third party without inspecting them. Lord Campbell and Wightman J were of the opinion that the liability is absolute.

DISADVANTAGES.

         Fraud: Where a third-party knows the real owner’s pin (or other details), transactions of the third-party fraudster can be regarded as transactions of the real owner. Because the law presumes that the owner’s secret details are only known to him. Although there are various criminal and tortious prohibitions against cybercrime.

         Unequal bargaining power: you generally cannot price “wellas”

         Goods may not conform to/with pictorial description.

         Hacking: hackers can invade the website and rewire certain funds and details.

 

INTERNATIONAL EXPORT CONTRACT.

COST INSURANCE FREIGHT CONTRACTS (CIF).

Lord Wright in Ross T Smyth and Co Ltd V TD Bailey Son and co remarked that CIF contracts are very important in international trade… The seller does most of the job (necessary for the goods to get to the buyer (like shipping, insurance, export licenses, and so on)) and the buyer just pays. The nature of CIF contracts was adumbrated by Lord Atkinson in Johnson V Taylor Brothers. He noted that under this contract, the Seller shall:

         Make out an inventory of goods sold.

         Ship goods conforming to the description to the specified port of shipment.

         Arrange for insurance.

         Tender the invoice (at the place of business or residence of the buyer), BOL, and policy of Insurance to the buyer who pays.

In Law and Bonar Ltd V British American Tobacco, the court noted that the parties can vary their duties by agreement[15].

WHAT IS THE NATURE OF A CIF CONTRACT?

Is it a contract for the Sale of Goods or a contract for the Sale of Documents?

In Arnhold and Karberg V Blythe, Green Jourdain and Co, Scrutton LJ was of the opinion that it was a sale of document relating to the goods because: 1. Upon tendering the CIF document, the buyer has to pay notwithstanding that he may not have seen the goods. 2. Numerous rights and liabilities arise from the document. 3. A buyer can reject a bad tender of the document. However, Bankes LJ noted that the document cannot be separated from the goods. Also, in Hindley and Co Ltd V East Indian Produce Co Ltd, the goods were actually not shipped and the sellers contended that they were not liable to the buyers since it is a CIF contract and the buyer must pay once the documents are tendered. The court (relying on Biddell Brothers V E Clemens Horst Co) found for the buyers. Holding, that the CIF contract is a contract for the sale of goods by the delivery of documents.

DOCUMENTS IN A CIF CONTRACT.

         Invoice: shows the price, including freight, insurance and other additional costs.

         Bill of Lading.

         Policy of Insurance.

         Certificate of quality: stating the quality of the contract goods.

         Certificate of Origin:  Stating where the goods are coming from. E.g. U.S, U.K.

And a host of other documents.

Once these requisite documents are tendered to the buyer is generally under an obligation to pay.

PASSING OF PROPERTY[16]. Under Section 17 our SOGoodsAct premium is placed on the intention of the parties). However, under CIF contract, the position is different. Property may pass in the following situations:

         Transfer of the document from seller to the buyer who is to pay[17].

         Upon shipment.

         Upon the tendering of the BOL.

         Upon ascertainment f the goods.

Although the parties can vary the general application by agreement. Although the courts would look at the substance of the agreement to note whether it is still a CIF contract. E.g. In Comptoir d’Achat et de Vente Boerenbond Belge SA V Luis Ridder Limitada (The Julia), while the cargo was at sea, Belgium was invaded by the Germans and the cargo re-routed to Lisbon, where it was sold. The buyers demanded the return of the money they had paid for the cargo on the basis that there had been a total failure of performance. In the House of Lords, judgment was given for the buyers on the basis that, even though the contract was expressed to be on CIF terms, it could not be construed as a CIF contract on reading all the terms of the contract, since the sellers never intended to part with property to the goods until the moment of delivery.

In Law and Bonar Ltd V British American Tobacco Ltd the sale was on CIF terms, but it also contained a clause stating that the risk was to remain with the sellers until actual delivery to the buyers. The clause was held inapplicable.

PASSING OF RISK. Risk has to do with who bears the burden of loss-Re Wait

Section 20 of our SOGoodsAct 1893 generally provides that risk passes with property. However under CIF contracts, risk passes as soon as the goods are shipped.

In Biddel Bros V E. Clemens Horst Co[18] “shipment” was construed to mean where the seller has done all that is necessary to make the buyer to have access to the goods. In layman terms; when the seller says “goodbye” to the goods. (e.g. when the ship is departing to the agreed destination).

This means that risk can pass before property. E.g. the goods may have been shipped but the documents may not have been tendered to the buyer. If for example, the goods are lost at sea, the buyer would have to bear the loss since the goods have been shipped and the risk has passed to him. He has the duty to pay and then sue the insurance company (to indemnify him). In C Groom Ltd V Barber, the goods were lost before appropriation to the contract due to war. The insurance policy did not cover loss or damage due to war. There was no right of action against the carrier. The buyer, nonetheless, had to pay for the goods against the tender of documents.

DUTIES, REMEDIES AND BENEFITS

BENEFIT TO SELLER:

         He can get paid before the goods actually get to the buyer.

         He is to get paid for additional services.

BENEFIT TO THE BUYER:

Relieved of the burden of getting insurance and freight. Furthermore there may be other subcontracts which the buyer doesn’t have to bother about. This makes it convenient… provided he pays. In lay terms, he is on “a chillin”.

DUTIES OF SELLER

         Duty to procure, prepare and tender[19] the requisite documents (Manbre Saccharine V Corn Products). Like the BOL which must be clean, transferable and should cover the entire voyage-Diamond Alkali V Bourgeois.

         Duty to ship goods corresponding with the description[20] specified in the contract. The goods must correspond with the description in both packaging, makeup and content-Mambre Sacharrine Co. V Corn Products. See Section 13 SOGoodsAct which makes this an implied condition in the sale of goods. In Bowes V Shand the court held that breach depends on the facts of the case and the degree of non-conformity.

         Duty to comply with the date/time of shipment-Bowes V Shands[21].

         Duty to obtain an insurance cover in accordance with the agreement and terms of trade. Else, the goods would be at his risk-Lindon Tricotagefabrik V White and Meacham[22]. The insurance policy must have been obtained for a reasonable price and the policy of insurance must be tendered to the buyer. Not just certificate[23]Diamond Alkali Export Corp V FL Bourgeois. Unless the agreement provides otherwise.

         Duty to obtain the export license-Mitchell Cotts (Middle East) Ltd and Co V Hairco Ltd. Except the agreement provides to the contrary. The court reproached the sellers failure to obtain the export license in KC Sethia Ltd V Patabmull Rameshwar. He should exercise due diligence in obtaining the export license-Ross T. Smyth and Co V WN Lindsay.

         Duty to tender the document.

REMEDIES OF THE SELLER.

         Sue for the price: Section 49 Sale of Goods Act entitles the seller to do so where the property has passed to the buyer who refuses to pay the full price of the goods.

         Stoppage in transit.

         Damages for non-acceptance: Section 50 SOGoodsAct. This Section provides that the measure of damages is the difference between the market price and the contract price at the time the cargo ought to have been accepted. Or a reasonable time or time of refusal where there is no time specified.

         Unpaid Seller’s Lien-Section 38(1), and 39 SOGoods Act    .

         Right of Resale Section 48 (2)

DUTIES OF THE BUYER.

         Timeously pay for the goods (in the agreed currency) upon the tendering of the document. Notwithstanding that the goods have not arrived or they are lost or damaged. Provided it is due to no fault of the seller and it complies with the description and terms of the contract-Mambra Saccharine V Corn Products.

         Nominate the port of disembarkation.

         Take delivery of the goods at the agreed port (of disembarkation).

         Obtain import license. Except contract provides otherwise.

BUYER’S REMEDIES.

         Right to reject non-conforming goods. Rejection must be timeous else he would be entitled to only damages-Section 13-15 SOGAct.

         Damages for failure to tender valid documents or failure to deliver goods-Sharpe and Co V Nosawa and Co.

         Damages for late shipment and late tender of document.

         Damages for defective goods.

         The courts are usually reluctant to grant specific performance except the goods are special and scarce.

CIF CONTRACT UNDER INCOTERMS 2010

Is essentially similar to the traditional position. Just that it accommodates use of electronic documents. Furthermore, under incoterms, it appears that the seller bears all risks of loss or damage until the moment the goods have been delivered-A5 CIF. Except the goods have been specifically appropriated for the contract.

In practice, the parties can enter a “C&F” Contract. Which is just cost and freight. As Brandon J noted in The Pantanassa C&F contracts only differ from CIF contracts in that the sellers are not required to insure the goods for the buyer”

FREE ON BOARD CONTRACTS. (FOB)

In Wimble and sons V Rosenberg and Sons[24], it was defined as a contract for the sale of goods where the seller agrees to deliver the goods over the ship’s rail and the buyer agrees to convey it overseas. Here, the seller/manufacturer has to hand over the goods to the buyer. The buyer would then do all the other things like arranging for insurance, shipment and other subsidiary contracts to effect the ultimate delivery of the goods to the desired destination. The job of the seller is to load the goods to an overseas vessel nominated by the buyer at the nominated port of embarkation. The buyer then takes care of the rest.

ESSENTIAL FEATURES (AND DISTINCTION FROM A CIF CONTRACT).

:: In CIF contracts, the shipping obligation is on the Seller while in FOB it is on the buyer.

:: The price paid to the seller includes all costs up to the loading of the goods onto an overseas vessel nominated or specified by the buyer. While in CIF contract, the price paid includes, all the above plus, insurance, cost of shipment (freight), delivery and so on.

:: All subsequent expenses must be borne by the buyer under FOB.

:: Quite unlike CIF contracts, under FOB contracts, property and risk normally pass to the buyer when the goods cross the ship’s rail.

ISSUES THAT ARISE IN FOB CONTRACTS.

         The nature/description of the goods?: the goods should correspond with description. Non-conformity can vitiate the contract. The buyer should inspect the goods to discover defects. Some defects are latent and may not be discovered by mere inspection. This may be a defence for the carrier.

         Who nominates the port of loading?: The buyer nominates the port of loading-Harlow and Jones Ltd V Panex International Ltd. Where the seller and buyer are usual customers, the seller may choose their usual port where the buyer fails to nominate on time.

         Who nominates the ship?: the buyer can specify a particular ship of his preference. Where buyer is a regular customer, the seller can nominate their usual ship or any other available one where buyer fails to nominate.

         Who delivers the goods?: The seller is to bring the goods to the agreed port… the buyer takes care of the rest (i.e. sending it to the requisite destination).

         Loading of the goods into the ship: the buyer should make arrangements for the loading and shipment to the destination. He may be physically present at the port with the seller or may use an agent.

         Passing of property: FOB contract sees passing of property at the time when the goods are handed over to the buyer. Pyrene Co Ltd V Scindia Navigation Co ltd[25]where the goods cross the ship’s rail. If the goods form part of a bulk, property passes upon ascertainment of the seller’s goods and appropriation to the contract-Carlos V Federspiel And Co SA V Charles Twigg and Co ltd. Meaning that the seller finally sets apart the buyers goods.

         Passing of risk: In FOB Contracts, the risk (liability) passes with property (title) above. Both go hand in hand. See Section 20 SOGoodsAct.

         Time of Payment: depends on the parties’ agreement. There is no strict time of payment. Therefore, goods may have been delivered to the buyer, but payment may not have been made yet.

DUTIES AND REMEDIES.

Seller’s Duties:

         To ship the goods corresponding with the contract description and agreement… at the agreed port.

         To pay all handling and transport charges up to the loading of the goods into the ship.

         He should deliver/transport the goods to the agreed port of shipment within the specified[26] (or a reasonable) time. Then the buyer ships the goods to their destination. Delivery is deemed to have been accomplished when the goods pass the ship’s rail on the day of shipment.

         He should notify the buyer of the transportation/shipment to the nominated port-Section 32(3) SOGoodsAct. Wimble Sons and Co Ltd V Rosenberg and Sons.

Seller’s Remedies:

         Sue for price of the goods. Although in Colley V Overseas Exporters, the court held that title must have passed to the buyer and in this case, since property had not passed, the sellers could not sue for the contract price.

         Sue for non-acceptance: provided the goods correspond with its description and the stipulations of the contract.

         Damages for breach.

         Stoppage in transit: so long as the seller is in a position to control the ship.

         Right of resale.

Buyer’s Duties:

         He should secure a convenient shipping space[27] and quickly notify the seller to that effect. Else he would be liable to pay extra warehousing cost.

         Nominate a vessel of his choice within the contract period-Agricultores Federados Argentinos V Ampro S.A.

         Payment of contract price at the agreed time, mode and currency.

         Apply for and obtain export license. H.O Brandt and Co V Morris and Co ltd[28]. A.V. Pound and Co V Hardy and Co Inc[29].

         Fulfilling other government/legal regulations.

Buyer’s Remedies.

         Reject non-conforming goods.

         Damages for defective goods or where goods were not delivered at the agreed port of embarkation.

CARRIAGE OF GOODS BY AIR.

Moving goods from one territory to another by means of flight. Governed by International Law.

The law relating to the international carriage by air of cargo, passengers and luggage is to be found in two distinct sources: (1) Montreal Convention 1999 and (2) a network of legal instruments commonly known as the Warsaw system[30].

They include:

1. The WARSAW Convention 1929[31]: Sought to avoid conflict of laws through harmonisation. It had various exclusions protecting carriers from damages where carrier has taken due measures to avoid damage. Except he is guilty of wilful misconduct.

2. The WARSAW Convention (as amended by the Hague Protocol) of 1955: Sought to limit liability for death of passenger and interpret the phrase “wilful misconduct” in relation to passenger death in the 1929 convention.

3. The Guadalajara Protocol of 1961: extends the application of the 1929 and 1955 convention to actual carriers and operators of aircraft.

4. The WARSAW convention (as amended by the Guatemala Protocol) of 1971: Introduced provisions relating to carriage of passengers and baggage.

5. Montreal Additional Protocol No 1-3 of 1975: contained measures/formula for calculating the liabilities of the parties as and when due.

6. Montreal Additional Protocol 4 of 1975: Introduced amendments to the scheme of liability and calculations formula contained in the protocols 1,2 and 3.

SCOPE OF THE CONVENTION.

Article 1 and 2 1929 Convention provides that the contract must be international in nature for it to be governed by the convention. Meaning that, cargo must proceed from one sovereign territory to another. The convention applies to all international carriage of persons, luggage or goods by aircraft for profit purposes[32] Article 1(1) 1929 Convention. Excluding carriage of mail and postal packages[33].

The Airway Bill/Consignment Note[34] Is a document used in this regard.

It evidences the conclusion of the contract and receipt of the goods by the carrier from the consignor. Also relates to the conditions of carriage.

It is a document of title which gives the holder the right to claim the goods over and above others. This is just like the BOLading which is in relation to sea transportation.

Note however that unlike the BOL, the Airway Bill is not transferrable/negotiable-Article 15 of the 1929 Convention.

The Airway Bill usually comes in triplicates which are all regarded as original-Article 6.

         The first part is signed by the consignor and marked for the carrier of the goods.

         The second part signed by the consignor and marked for the consignee and the carrier (this part shall accompany the goods in the craft[35]).

         The third part is signed by the carrier who hands it over to the consignor.

The carrier should ensure that the goods stated in the Airway bill is actually what he is given before accepting. The third consignment note is prima facie evidence of the conclusion of the contract between the consignee and carrier and evidences receipt of the goods by the carrier from the consignor-Article 11.

The following details are usually found in an Airway Bill (see Article 8 1929 Convention):

         Date and place of its execution.

         Place of departure and destination.

         Agreed Stop-over locations.

         Names and Address of the Consignor, Consignee, First Carrier.

         Nature of the goods.

Where the agreement is oral it would generally not be governed by the convention. Oral claims would have to be substantiated by evidence. Oral contracts are usually enforced to the detriment of the carrier.

Consignor’s Responsibility.

Article 10 and 16 of the 1929 convention.

         Represent the true condition of the goods or be liable for misrepresentation. The carrier can recover damages. Provided he is also innocent in the dealing.

Consignee’s Responsibility:

         Demand delivery upon payment of charge and compliance with terms-Art 13(1).

Carrier Responsibility:

         Bear liability for loss or damage to the cargo-Article 18.

         Damages for loss occasioned by delay-Article 19.

         The Carrier may be exempted from liability in the following instances:

o   Where he took all reasonable measures to avoid damage.

o   Where it was an act of God-Article 20 Swiss Bank Corp V Brink’s Mat.

o   Contributory negligence-Article 21.

o   Defective packaging and latent defect.

o   Act of war.

On the contrary, the Montreal 4 provides that the carrier is strictly liable for loss or damage and cannot escape liability. Therefore, it all depends on the facts of the case and the interpretation of the courts.

Furthermore, the damage must have occurred during the carriage by air-Article 18(1). Except the contract provides otherwise. Montreal 4 provides that liability shall be limited to carriage of passenger and baggage.

Choice of forum

Both versions of the Warsaw Convention contain a provision specifying the places where a plaintiff may bring an action for damages against the carrier[36]. Article 28(1) states that the plaintiff has the option of bringing an action for damages in the territory[37] of one of the Contracting Parties, in a court having jurisdiction at one of the following places:

• Where the carrier is ordinarily resident;

• Where the carrier has his principal place of business;

• Where the carrier has an establishment by which the contract has been made; or

• At the place of destination.

The parties should pick the most convenient forum. Else one party may plea forum non-conveniens[38]

CHARTER PARTY.

A Charter Party is an agreement between a ship owner and a charterer. The Charterer wants to use the ship to transport his goods. It is usually in writing. Where the cargo can occupy the ship’s full capacity, the charterer would usually hire the ship… where less, he can just hire a space in the ship.

The agreement usually contains certain disclosures or clauses:

         The sea worthiness of the vessel.

         Particulars of the Ship.

         The introductory clause (having to do with the vessel’s identity).

         The Vessel’s Capacity (if 20,000 tonnes is alleged and it is found that it is just 2,000 tonnes, then there has been a breach).

         When loading would occur and when the journey is expected to commence.

         Contain a cancellation clause (on whether the contract can be cancelled).

         Quantity of goods to be loaded.

         Demurrage clause: Note the Cement Armada case which encapsulated in the Trendtex V CBN case. In this case, Nigeria paid demurrage dearly for their negligence in catering for where the goods of cement would be offloaded at the Nigerian port.

         Exemption clause(s).

         Jurisdiction clause: Shipping is in the exclusive legislative list (FHC). However, parties can negotiate out of this.

         Arbitration clause.

         Choice of law: select the law they wish to apply to their transaction.

Other clauses can be added by the parties-Overseas Transport Co V Mineral ImportExport (The Sinoe)

TYPES OF CHARTER PARTY.

         Voyage charter party.

         Time Charter party.

         Trip Charter party.

         Demise charter party.

:: Voyage Charter Party: The ship is hired for one or more specified voyage(s). E.g. Lagos-Johannesburg. Here, the ship-owner controls and maintains the ship and crew. GENCON is an example of a standard form voyage charter party.

Common law implied obligations for a VCParty[39] (kindly refer to our discussion above (page 4) on Implied obligations in a BOL they are also applicable here. Also read the footnotes for applicable cases).

         The Ship must be ready and available for dispatch.

         The Ship/vessel must be sea worthy.

         There must be no deviation from the agreed route. Else the charterer can sue. Except such deviation is necessary (like the ship needs to berth for repairs, the route is precarious or prone to danger and so on).

         That a skilled crew would navigate the ship effectively and with due skill till it safely berths at the agreed destination.

Obligations at Common law for the Charterer.

         Duty to nominate a safe[40] port of loading and notify the shipowner.

         Not to ship dangerous and prohibited goods[41]. He should notify the charterer[42] if he wants to do otherwise. (Note that a carrier is a person who enters into the contract of carriage with the shipper)

:: Time Charter Party: where the charterer hires the ship for a specified period of time. The ship-owner still has control of the ship. However, unlike under the voyage charter party, the ship-owner does not agree to transport the goods to a particular port… just any port during that period. The most popular standard forms here are;-BALTIME (Baltic and International Maritime Conference Uniform Time Charter) and NYPE (New York Produce Exchange Time Charter).

:: Trip Charter Party: A hybrid of voyage and time charter party. The ship is hired for a particular voyage which is to last for a specified period.

:: Demise Charter Party: Also know as the “Bareboat Charter party”. Here, the ship-owner hires the ship out to the charterer who would control both the ship and crew for the stipulated period of time[43]. It is a total handover of possession. The charterer should return the ship in good condition. Most times, after the demise, the charterer usually makes and offer to purchase the ship. Mackinnon LJ in Sea and Land Securities V Dickinson and Co notes that the distinction between the demise and other forms of charter contract is like “a man who hires a boat to row himself and the contract he makes to take him for a row

 

MARINE INSURANCE.

Covers risk associated with transportation of goods by water. Covers perils inherent in the high seas.

Defined under Section 3 MIA of Nigeria as a contract whereby the insurer undertakes to indemnify the assured, in manner and to the extent thereby agreed, against marine losses, that is to say, the losses incident to marine adventure[44].

Section 23 provides that the contract of marine insurance shall be deemed to be concluded when the proposal of the insured has been accepted by the insurer… notwithstanding that the policy has not been issued. In practice, while considering the offer of the prospective insure, the insurer usually issues a cover note till the policy-proper is issued.

Section 53 provides; unless otherwise agreed, the duty of the assured or his agent to pay the premium, and the duty of the insurer to issue the policy to the assured or his agent, are concurrent conditions; and the insurer shall not be bound to issue the policy until payment or tender of the premium.

If the risk occurs before the premium is paid, it appears that from Section 53 above, the insurer may not be bound… except, he accepted the payment of the premium after the incident (this can be by collusion between the agent of the company and the insured).

TYPES OF POLICIES.

         Voyage policy: Section 27[45]. For a particular voyage.

         Time policy: Section 27 too. The policy is for a particular period.

         Valued policy: A cover for an agreed value-Section 29[46].

         Unvalued policy: The value is generally left to be determined by market forces. Section 30[47] MIA.

         Floating Policy: Section 31: A floating policy is a policy which describes the insurance in general terms, and leaves the name of the ship or ships and other particulars to be defined by subsequent declaration.

PRINCIPLES OF MARINE INSURANCE.

:: Uberrimae Fidei: This is the requirement of utmost good faith. Both parties to the contract (particularly the insured) should disclose facts which are likely to affect the judgment of the other[48]. The insurer has to disclose material facts within his knowledge to the insurer. Insurance contracts require material disclosures[49] to be made to the insurer-Section 20 MIA. “material” has been defined as a fact which would influence the insurer in deciding whether he wants to cover the risk or not-Section 20(2) MIA. Section 22 of the MIA also prohibits misrepresentation on the part of the insured. In Greenhill V Federal Insurance Company, Scrutton LJ noted; “it is the duty of the underwriter to disclose to the insurer, every material particular that is known to the insured…” same noted in Carter V Boehm[50], Pan-Atlantic V Pinetop[51] and a host of other cases. Except:

         The insurer already has knowledge.

         It is a matter within common knowledge.

         If it is a fact known in the ordinary course of business.

         The insurer waives this breach.

The party alleging lack of utmost good faith should prove same-Cleland V London General Insurance Co[52]. Liberian Insurance Agency Inc V Mosse[53].

 

:: Insurable Interest: Who can insure? Who has the locus to insure? Section 6 MIA provides that (1) Every contract of marine insurance by way of gaming or wagering is void. (2) A contract of marine insurance shall be deemed to be a gaming or wagering contract- (a) where the assured has not an insurable interest as defined by this Act, and the contract is entered into with no expectation of acquiring such an interest; or (b) where the policy is made “interest or no interest,” or “without further proof of interest than the policy itself,” or “without benefit of salvage to the insurer,” or subject to any other like term. According to Section 7 (1) MIA: every person has an insurable interest who is interested in a marine adventure. By Section 7(2) a person is interested in marine adventure where he stands in any legal or equitable relation to the adventure or to any insurable property at risk in consequence of which he may benefit by the safety or due arrival of insurable property or may be prejudiced by its loss or damage thereto or by the detention thereof or may incur liability in respect thereof.

In other words, if a person is going to gain or lose from the safety or loss of the property, he has insurable interest[54].

It is possible that at the point of contracting, there is no insurable interest but at the time of loss, there is insurable interest. It is the time of loss that determines-Section 6 of the Act. Where you do not have insurable interest, then the contract is regarded as that of gambling/wagering-Cheshire and co V Vulram Brothers[55].

 

SUBROGATION. According to the Black’s Law Dictionary[56], subrogation is the substitution of one person in the place of another with reference to a lawful claim, demand or right, so that he who is substituted succeeds to the rights of the other in relation to the debt or claim, and its rights, remedies or securities. Where the insurer wishes to recover the amount they paid to the insured from the actual wrongdoer. Section 80 (1) provides; Where the insurer pays for a total loss, either of the whole, or in the case of goods of any apportionable part, of the subject-matter insured, he shall thereupon become entitled to take over the interest of the assured in whatever may remain of the subject-matter so paid for, and shall thereby be subrogated to all the rights and remedies of the assured in and in respect of that subject-matter as from the time of the casualty causing the loss. In essence, once the insurer has paid the insured’s claim, the insurer steps into the shoes of the insured[57]. E.g. you insure your car and the car is lost. You receive compensation for the car. Later, you hear that the car has been found. In such a situation, it is the insurance company that should claim the car not you… because you have already received compensation from the insurance company. Yorkshire Insurance V Nisbet Shipping[58] explains this well. In this case, a ship insured by the plaintiffs sank as a result of a collision. The insurers paid out the insured sum of £72,000 to the assured. The assured were successful in their proceedings against the tortfeasors in Canada and received damages that produced a sum of £127,000 (as a result of devaluation). Court noted that £72,000 should be returned to the insurers.

This ensures that the insured is not overcompensated and does not make a profit out of his loss.

 

DOUBLE INSURANCE: Prevents the insured from gaining more than the value of the goods insured. Section 33 (1) provides: Where two or more policies are effected by or on behalf of the assured on the same adventure and interest or any part thereof, and the sums insured exceed the indemnity allowed by this Act, the assured is said to be over-insured by double insurance. If A insures his goods with insurer B and insures the same goods with insurer C. When the loss occurs, he is to take compensation from EITHER insurance B or C. He cannot take from both.

 

CONTRIBUTION: Where double insurance occurs, (see the scenario directly above) Insurer B can ask Insurer C to contribute to the money of compensation[59].

 

ASSIGNMENT: Section 51 (1) A marine policy shall be assignable unless it contains terms expressly prohibiting assignment, and a marine policy may be assigned either before or after loss. (2) Where a marine policy has been assigned so as to pass the beneficial interest in such policy, the assignee of the policy shall be entitled to sue thereon in his own name; and the defendant shall be entitled to make any defence arising out of the contract which he would have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected.

Implied Warranties

That the ship is seaworthy[60]: Section 40. (1) In a voyage policy there is an implied warranty that at the commencement of the voyage the ship shall be seaworthy for the purpose of the particular adventure insured[61]. (2) Where the policy attaches while the ship is in port, there is also an implied warranty that she shall, at the commencement of the risk, be reasonably fit to encounter the ordinary perils of the port. (3) Where the policy relates to a voyage which is performed in different stages, during which the ship requires different kinds of or further preparation or equipment, there is an implied warranty that at the commencement of each stage the ship is seaworthy in respect of such preparation or equipment for the purposes of that stage. (4) A ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured.

That the goods are not dangerous-Section 39 MIA

That the goods are not illegal-Section 42.

Where these implied warranties don’t exist, the insured is to disclose such to the insurer.

 

 



[1] Most of these conditions are also applicable for sea charter parties.

[2] [1963] 1 Lloyd’s Rep 223.

[3] (1887) 12 App Cas 518.

[4] In The Olympias, the deviation was to save another ship (The Arion) which was in distress.

[5] [1915] AC 705.

[6] [1984] 2 All ER 243.

[7] Which was not foreseen and could not be prevented.

[8] Where the goods by their nature have an inherent defect. Where the goods are unfit to withstand normal and ordinary occurrences. Provided the carrier exercised due care. Under Article IV of the VISBY rules, he is generally not liable for damages caused by inherent vice in the goods. The position has been affirmed in Albacora SRL v Westcott Laurance Line [1966].

[9] In Silver v Ocean Steamship Co, a cargo of Chinese eggs packed in tins were not covered with cloth or any other form of packing. No mention of the defective packing was made on the bills. On arrival, the goods were found to be damaged. It was also found that the tins had pinhole perforations. The carrier was estopped from denying the insuffi cient packing of the tins but could not be estopped from alleging the presence of the pinhole perforations since these would not have been apparent on a reasonable inspection. This suggests that the standard of care required of a carrier is no more than that of reasonable diligence.

[10] Black v Rose (1864) 2 Moore PC (NS) 277.

[11] The New Horizon

[12] in Cargo ex Lacoles , 78

use of the phrase ‘latent defect existing even at the time of shipment’ was deemed suffi cient to

qualify the seaworthiness undertaking. Under Article IV of the HAGUE-VISBY rules, he is generlally exculpated from liability for latent defects not discoverable by due diligence.

[13] 80 Virginia Carolina Chemical v Norfolk and North American Steam Shipping [1912] 1 KB 229

[14] In New Zealand Shipping Co Ltd v AM Satterthwaite and Co Ltd (The Eurymedon) , 129 the bill of lading excluded the carrier from all liability whatsoever from unlading. Held valid.

[15] Note however In The Julia (Comptior DÁchat et deVente Boerenbond Belge SA v Lois Ridder Limited). That where the clauses in the contract evidence another contract which in nature is not a CIF contract, the court would construe it according to its natures notwithstanding its labelling as a CIF Contract.

[16] Property here means title to the goods… Who is the owner

[17] This is the most usual.

[18] (1911) 1 KB 9 34 at 937.

[19] Brett MR stated in Sanders v Maclean I quite agree that he has no right to keep the bill of lading in his pocket. Was held in The Albazero [1976] 2 Lloyd’s Rep 467 that the tender should be at the buyer’s place of residence or business.

[20] In Manbre Saccharine Co v Corn Products , 30 the contract was for the sale of starch in 280 lb bags. The cargo was shipped partly in 280 lb bags, and partly in 140 lb bags. The sellers argued that the packing of the goods was not a material part of the bargain. However, the court held that the packaging was a part of the description of the goods, and the sellers were in breach of shipping goods that did not correspond to the contract description.

[21] In this case, the contract was for a shipment of rice from Madras, shipment to take place during March and/or April 1874. Part of the cargo was shipped in February and the rest in March. The court held that the parties had contracted to buy rice shipped during March and/or April and the buyers were not bound to take rice shipped during February since it was not the same article for which they had bargained.

[22] The seller who did not obtain insurance cover for the entire transit was unsuccessful in obtaining the price of the goods when they were stolen while awaiting delivery to the buyer’s correct address.

[23] Because the certificate of insurance is not freely transferrable and is subject to terms.

[24] 1913 3 KB 743.

[25] 1954 2 All ER 158.

[26] Frebold Sturznickel (Trading as Panda OHG) v Circle Products Ltd [1970] 1 Lloyd’s Rep 499 (CA) 39

[27] In Cunningham v Munro, a convenient space was regarded as that which would ensure smooth loading of the goods corresponding with the contract of sale.

[28] 1917 2 KB 784.

[29] 1956 AC 588.

[30] Indira Carr, International Trade Law 7th Edition at page 355.

[31] Convention for the Unification of Certain Rules Relating to International Carriage by Air) 1929

[32] The consideration must be denominated in monetary terms. This means that it does not apply to aircrafts fying for non-economic/profit purposes. See also Article 34 of the Convention.

[33] Mails and postal packages are subject to international Postal Conventions-Article 2(2).

[34] Note that the 1929 act referred to it as the consignment note.

[35] If the carrier fails to receive the airway bill/If it doesn’t accompany the goods, the carrier would not be entitled to rely on any clause in the airway bill/consignment note if the clause would be detrimental to the consignee/another party. Article 5(2) of the Convention.

[36] Indira Carr Supra.

[37] Eck v United Arab Airlines Inc [1966] 2 Lloyd’s Rep 485 De Beers Consolidated Mines Ltd v Howe [1906] AC 455, at p 458.

[38] Spiliada Maritime Corp v Consulex Ltd [1987] AC 460. This would be an appeal to the court to deny jurisdiction on the basis that there is a better forum where the action can be instituted and the rights of the parties better determined.

[39] These obligations can be negated by the law or agreement between the parties.

[40] Leido Shipping v Societe Francian Bunge (Eastern City) the court interpreted safe to mean when a ship can reach the place and return without an abnormal occurrence or being exposed to danger. In Marincich (The Dagmar) it was held that an area with unpredictable weather may render the port unsafe. So would a politically unsafe environment. For example, in Ogden v Graham, The port was closed by government order, and the vessel was likely to be confiscated on entry. The ship waited for the port to open and discharged the goods. Shipowners claimed damages for the delay. The issue was whether political safety came within the safe port obligation. Blackburn J had no hesitation in finding that it did. Note however that obstacles of a temporary nature would not render the place unsafe. The master may have to wait until it is cleared-Independent Petroleum Group v Sea Carriers. Grace v General Steam Navigation Co Ltd. The master may refuse to enter the port if he feels a danger exists-The Kan Chen Junga.  The responsibility of the Charterer does not extend to abnormal or unexpected events. Kodros Shipping Corp v Empresa Cubana de Fletes (The Evia) (No 2) Shatt al Arab ceased because of war between Iran and Iraq. The arbitration tribunal held the charterparty was frustrated, and the shipowner appealed on the grounds that the frustration was self-induced because of the breach of the safe port undertaking embodied in cl 2 of the charterparty. After careful examination of existing case law on the safe port undertaking, the House of Lords concluded that the undertaking was not a continuing contractual promise, but referred only to the prospective safety of the port. In The Lucille [1983] 1 Lloyd’s Rep 387 the vessel was unable to enter Basrah until 20 September. Likelihood of war was imminent, but the charterer did not order the ship to leave, which she could have done. The court found that the charterer was in breach of the safe port obligation.

[41] In England, for example, The Hague-Visby Rule under Article IV(6) provides that, where goods of an infl ammable, explosive, or dangerous nature are shipped without the consent of the carrier, the master or the agent of the carrier, the carrier is at liberty any time before discharge to land them at any place or destroy or render the goods innocuous. In Effort Shipping Co Ltd v Linden Management SA and Another , a cargo of processed nuts infested with a beetle of voracious appetite (Khapra beetle) was held to be dangerous

[42] This is mandated under the Hamburg Rules else he would be liable. Similar provided in the The Rotterdam Rules (The UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea).

[43] The charterer would have to man it, fuel it, insure the ship against perils and so on-Land Securities v Dickinson and Co.

[44] 5. (1) Subject to the provisions of this Act, every lawful marine adventure may be the subject of a contract of marine insurance. (2) In particular there is a marine adventure where- (a) any ship goods or other moveables are exposed to maritime perils, such property being referred to in this Act as insurable property; by for

(b) the earning or acquisition of any freight, passage money, commission, profit, or other pecuniary benefit, or the security for any advances, loan, or disbursements, is endangered by the exposure of insurable property to maritime perils; (c) any liability to a third party may be incurred by the owner of, or other person interested in or responsible for, insurable property, by reason of maritime perils.

[45] Where the contract is to insure the subject-matter “at and from,” or from one place to another or others, the policy is called a voyage policy; and where the contract is to insure the subject-matter for a definite period of time the policy is called a time policy. A contract for both voyage and time may be included in the same policy.

[46] Section 29 provides: … A valued policy is a policy which specifies the agreed value of the subject-matter insured.

[47] Which provides: An unvalued policy is a policy which does not specify the value of the subject-matter insured, but, subject to the limit of the sum insured, leaves the insurable value to be subsequently ascertained in the manner specified in Section 18 of this Act

[48] Diamond Alkali Export Corp v Fl Bourgeois [1921] 3 KB.

[49] Like details of the cargo, name of the vessel, amount and type of cover, and so on.

[50] 1766 3 BURR 10 95.

[51] 1994 3 All ER 581.

[52] (1935) 51 LILR 156.

[53] [1977] 2 Lloyd’s Rep 560.

[54] Lucena v Craufurd (1806) 2 B&PNR 269… Tomlinson v Hepburn [1966] AC 451.

[55] 1940 3 KB 240.

[56] See also Robert E.Keeton & Alan, Insurance Law.

[57] Simpson v Thomson (1877) 3 App Cas 279

[58] [1962] 2 QB 330.

[59] Section  81 (1) Where the assured is over-insured by double insurance, each insurer shall be bound, as between himself and the other insurers, to contribute rateably to the loss in proportion to the amount for which he is liable under his contract.

[60] This warranty does not extend to the seaworthiness of the goods-Section 41 MIA

[61] Bank of Nova Scotia v Hellenic Mutual War Risks Association (The Good Luck) [1992] 1 AC 233, at pp 262.

Isochukwu

Quite eccentric really

Comment (1)
Munachim George
07/12/2022

Please, I a trying to get PDF version of the international trade law 1 material, but it keeps saying to search the footer. I didn’t see anything in the footer. Please how do I get it? Also, is there a material for shipping and admiralty law?

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