international commercial law

¶ … Jurisdiction and Applicable Law

The first issue that Barcelo faces concerns which nation's law governs the contractual rights and duties between himself and George. Because this was an international voyage between England and Spain, and because the contract appears to involve English and Spanish parties, the question is whether the parties' rights and remedies are supplied by English or Spanish law. Although maritime law is primarily governed by international treaties that create uniform rules across national boundaries, there still could be legal differences between England and Spain on crucial issues. Moreover, the correct forum for the dispute could be determined by the answer to the choice-of-law question.

As a general rule, the terms of any charterparty and bill of lading are governed by the law chosen by the parties. This rule emerges from the funamental princple of all contract law that the governing law should be determined by the same considerations that determine the other provisions of the private agreement (Cooke, 1.28, p. 11). If the charter lacks an express choice-of-law clause, their choice can be implied from conduct or other evidence that reveals the parties' intentions about choice of law. . (Cooke, 1.33-1.34, p. 13). If the parties intentions cannot be discerned, he charter will be governed by the system of law "with which the charter has its closest and most real connection." Several factors can determine which law has the closest and most real connection to the charter, including: the transaction which the charter embodies; the circumstances surrounding the contract, as known to both parties at the time of making the contract; the parties' respective places of business; the place of loading and delivery; and the currency in which payment will be made. (Cooke, 1.38, pp. 14-15).

In The Assunzione, [1954] P. 150, the parties, an Italian owner and a French charterer, made a charter on a Gencom form. The charterparty itself was headed "Paris, 7 Oct. 1949." Payment was due in Italy in Italian currency. The bills of lading were issued on a French form. The Court of Appeal concluded that the decisive factors were the currency for payment and the place of payment. Consequently, it ruled that Italian law governed the charterparty.

The Contracts (Applicable Law) Act of 1990 applies to contracts made on or after April 1, 1991. It gives effect to the Rome Convention of 1980. Article 4.4 of the Rome Convention provides that a contract for the carriage of goods is presumptively governed by the law of the place of where the carrier has his principal place of business, if that is also the place of loading or discharge. (Cooke, 1.43, pp. 16-17).

According to these rules, the resolution of the choice-of-law issue in Barcelo's case will be a close one. There is nothing to suggest that either the charterparty or the bill of lading contains a choice-of-law clause. Similarly, there is no information from which to imply an intention by the parties about governing law. Consequently, it seems likely that we will have to identify the country that has the closes and more real connection to the transaction. Given the available information about the transaction between George and Barcelo, many of the relevant factors are in equipoise. The place of loading was England; the place of delivery was Spain. It seems that the parties' respective places of business are England and Spain. The analysis from The Assunzione could supply a tiebreaker, but we do not know the place of payment or the currency in which the payment was to be made. Advice to Barcelo about choice-of-law considerations turns on these two factors.

Deviation and Delay in the Voyage

The next issue concerns whether George breached his contractual duties to Barcelo when he diverted the ship to Baltimore to get rid of the stowaway. This issue includes several sub-issues: whether the terms of the bill of lading permitted George to stop in Baltimore; whether the stop was necessary to the safe conduct of the voyage; and whether the stop in Baltimore actually caused the delay in arrival and delivery.

In general, an owner is permitted to take a reasonable time to complete those formalities that are an ordinary incident of any normal voyage. But the charterer can be liable for delays if the ship is detained by a third party if the detention is the result of some default by the charterer. (Cooke, 9.1, p. 182).

The carrier has a duty to proceed according to an ordinary and customary course and has little discretion to deviate from such a course. (Cooke, 12.1, p. 235; see also Davis v. Garrett, (1830) 6 Bing. 716). The "usual route" will be presumed to be the direct geographical route. (Cooke, 12.2, p. 235; see also Achille Lauro v. Total, [1968] 2 Lloyd's Rep. 247, 251).

Of course, the parties can make an express agreement that gives the carrier the discretion to choose a route. That is what the parties did in this case, agreeing to a clause in terms and conditions to the bill of lading which provided that:

The carrier may at any time and without notice to the merchant...proceed by any route in his discretion (whether or not the nearest or most direct or customary or advertised route) at any speed, and proceed to or stay at any place or port whatsoever, once or more often and in any order...'

In most cases, such a clause would not give the carrier unlimited discretion to take the ship to any port anywhere in the world or to follow any conceivable route. Even broadly framed language such as "any port" or "any route" does not give the carrier unlimited discretion. "Any ports" does not mean any port anywhere in the world. It means any port along the usual route. (Cooke, 12.15, p. 241; see also Leduc v. Ward, [1888] 20 Q.B.D. 475, 482).

The limits on the carrier's discretion are defined by a reading the clause that gives discretion about routes or port of call together with other clauses defining the carrier's general duties. A carrier has the liberty to deviate from customary routes or to call at intermediate ports when it is necessary to accomplish the purpose of the voyage. That liberty does not extend to pursue objectives that are inconsistent with the main object of the voyage. Thus, there is an implied limitation on the liberty to choose routes and ports of call, even when such liberty is relatively unlimited according to the terms of the charterparty or bill of lading. (Cooke, 12.22, p. 244).

In this case, there seems to be little question that it was permissible for the La Tremontaine to deviate from the route to stop in Baltimore. Baltimore is not far from the usual commercial route that the La Tremontaine would have taken directly to Cadiz. Regardless of any limitations that might exist on the La Tremontaine's discretion to deviate from the route to put in at Baltimore.

The next question is whether the stop in Baltimore was necessary. Deviation from the usual route is permissible when necessary to protect the safety of the cargo or crew. Such deviations must be no more than reasonably necessary. Necessity includes the making of repairs to the ship, the avoidance of capture or confiscation, to save a life, or similar reasons. (Cooke, 12.8-12.13, pp. 239-41). Reasonable deviations are those that are consistent with the purpose of the voyage. (Cooke, 12.23, p. 244).

Based on the available information, it is difficult to determine whether the stop to discharge a stowaway really was necessary to maintain the safety of the crew or to preserve the ship's ability to achieve the objective of the voyage. There is no information to suggest that the stowaway was a dangerous person who would necessarily have threatened the safety of the crew if he had remained on board while the voyage was completed. Similarly, there is no information to suggest that the La Tremontaine was under a legal obligation to discharge a stowaway at the first opportunity. If the ship was subject to detention or capture by authorities by having a stowaway on board, then the stop in Baltimore could be characterized as necessary to the voyage's objective.

Finally, there is the question whether the stop in Baltimore was the sole cause of the La Tremontaine's delay in arriving at Cadiz. Courts have ruled that a brief, unscheduled stop is not the sole cause of losses when there is no evidence to suggest that the time spent in making the stop was the decisive factor in the loss. For example, in Connolly Shaw v. Nordenfjeldske, (1934), 49 Ll. L. Rep. 183, there was a contract to ship lemons from Palermo to London. The carrier had the liberty "to proceed to any ports whatsoever although in a contrary direction or out of or beyond the route." The carrier called at Hull for three days before discharging the lemons at London, by which time they were spoiled. The court concluded that the main object of the contract was not frustrated by the three-day delay in Hull. The court pointed out that "[t]he result would have been different if the call at Hull had caused any appreciable harm to the cargo."

Here, we lack information about the nature and extent of the stay in Baltimore and how it contributed to the week-long delay in reaching Cadiz. It is hard to imagine how discharging a stowaway takes a week. Given the proximity of Baltimore to the direct route from Liverpool to Cadiz, and given the simplicity of placing a stowaway in the custody of authorities, it seems likely that the stop in Baltimore caused a delay of no more than a day. There could be other factors contributing to the delay in reaching Cadiz, but we would need more information about them. Of course, in the event that the La Tremontaine really did spend a week in Baltimore, Barcelo would have a strong argument that the trip to discharge the stowaway was the cause of his losses and that the captain of the La Tremontaine was negligent in exercising his discretion to make stops necessary to preserve the integrity and safety of the voyage.

Duties Regarding Conditions of Cargo

There are also issues regarding the conditions under which the party poppers were kept. Apparently, storage conditions on the ship were too dry, causing chemical changes in the small explosive charges, which prevented the party poppers from working. Thus, the question arises whether the owner of the La Tremontaine can be liable for the damages to the party poppers because he should have assured better storage conditions on board.

In general, stowage is not negligent when it is undertaken in conformity with a sound system and when it is properly executed. Soundness is evaluated in terms of the owner's knowledge of the idiosyncrasies of the cargo as well as knowledge of qualities required for the sound storage of cargo generally. (Cooke, 11.11, pp. 196-197).

Holds must be properly cleaned of rust, residues of previous cargoes, insects and the like, which might contaminate cargo. The owners also have the obligation to cure any other condition on the ship that might render the stowage dangerous. In Mediterranean Freight Servs. v. B.P. Oil Internat'l (The Fiona), [1994] 2 Lloyd's Rep. 506, affirming [1993] 1 Lloyd's Rep. 257. The owners failed to remove condensate from the ship's lines, which led to an explosion during the shipment of a cargo of fuel oil. The owners were liable, even though the fuel oil contained an unusual amount of explosive gas, a fact of which the owners were not aware. (Cooke, 11.31, p. 202).

Because the party poppers were explosives, albeit very small ones, it may be that the principles governing the storage of dangerous items applies to determine the owner's duties. It is well-established that, where the cargo may be dangerous, the charterer has the duty to notify the owner of the nature of the cargo so that he can take suitable precautions. (Cooke, 6.49, p. 149). Courts have determined that this is an absolute duty -- that is, the shipper has the duty to notify the owner of all of the dangerous characteristics, not just the dangerous characteristics of which the shipper is actually aware. (Cooke, 6.49, p. 149; see also Effort Shipping v Linden Mg't (The Giannis, NK), [1998] 1 Lloyd's Rep. 337)

Goods are considered dangerous when they have inflammable, explosive, corrosive, noxious or other properties such that they are likely to cause personal injury or physical damage to the ship. Dangerous goods can also include those that may subject the ship to legal or political risks, such as the ship being seized. (Cooke, 6.52, p. 150 (citing Art. IV (6) of the Hague Rules)).

When the carrier is given some information about the nature of the goods to be shipped, there can be a question whether that information was sufficient to permit the carrier to make adequate provisions for its safe storage. In this situation, the carrier has a duty to conduct an investigation consistent with the "usual course of commercial business," but he does not have a duty to develop any special expertise about the cargo. (Cooke, 6.53, p. 151).

In The Athanasia Comninos [1990] 1 Lloyd's Rep. 277, there was a contract for the carriage of "coal." The particular coal in this case was unusually hazardous because it emitted large quantities of methane gas. The charterer argued that the carrier had consented to the risk associated with carrying this form of coal because the propensity of coal to emit methane gas is a well-know risk in the trade. The court pointed out that the risks associated with this kind of coal were different in kind from the risks associated with ordinary coal and, therefore, that the owner was not sufficiently apprised of the risk when he was simply informed that he would be carrying coal. Nevertheless, the charterer was not liable for the damages resulting from an explosion because the owner did not undertake the kinds of precautions that would be necessary even for a load of ordinary coal.

A charterer was found liable for damages because it did not adequately inform the owner of the dangerous properties of the cargo in The Fiona. There, the cargo was accurately described as "fuel oil," but, at that time, carriers did not generally know the dangerous properties of certain kinds of fuel oil, and the charterer's duty to give notice to the carrier was defined in terms of the then existing general knowledge of carriers about that particular kind of cargo.

The condition of cargo can change during a voyage so that otherwise safe cargo becomes dangerous or so that cargo that is ordinarily dangerous to some degree loses its dangerous (and possibly valuable) qualities. In these situations, a court will consider the condition of the goods at the time of shipping, as well as whether the carrier took adequate precautions to assure that the goods' inherent qualities did not change during shipping. (Cooke, 6.57, p. 153). In Acatos v. Burns, [1878] 3 Ex. D. 282, the charterer contracted with the owner to ship a load of maize. The maize sprouted during the voyage and, as a result, endangered the other cargo. The ship was detained by authorities because of this danger. The carrier claimed damages for the costs associated with the detention, asserting that the maize was not in a fit condition for shipping when it was brought onboard. In essence, the carrier claimed that the shipper provided an implied warranty about the condition of the cargo at the time of shipping. The Court of Appeal denied that claim, rejecting the argument that such a warranty should be implied. The rationale for this decision seems to be that the owner should know that maize has a propensity to sprout during shipping and that both the charterer and the owner were equally well positioned to know about the risk associated with shipping maize. Thus, there should be no implied warranty.

This approach has been criticized, however. In a situation like the one in Acatos, the charterer is in a better position to know how the maize was previously stored and whether the conditions of such storage would have made it more likely that the maize would sprout during the voyage. (Cooke, 6.57, p. 153).

Given these legal principles, the question here is whether the owner and captain of the La Tremontaine had sufficient information about the nature of the party poppers and the proper conditions for their storage. To determine whether the owner breached a duty in stowing the party poppers, it must be determined whether it is general knowledge in the shipping trade about the proper conditions for storing party poppers. Similarly, it must be determined whether Barcelo should have reasonably expected dry storage conditions on the ship. If so, the he may have had a duty to inform the owner of the La Tremontaine about the need for less dry storage conditions. Here again, the extent of Barcelo's rights against the owner depend upon factual information not currently available.