Oral Charter Party SOMETIME in June 1978, Marvel Development
Co. (MDC) entered into a written barging and towage contract with Mr. Gabby Yu
(GY) for the shipment of the former's cargo from Iligan City to Kalibo, Aklan.
Under the said contract, MDC was allowed four lay days and it agreed to
pay demurrage at the rate of P5,000 for every day of delay. After the MV
"Tanda" had passed the Mactan-Mandaue Bridge, fire ensued in her engine
room, destroying the vessel and her cargoes.
Subsequently, GY sent
a barge and a tugboat to Iligan City and the loading of cargoes began immediately.
But upon completion of the loading, the parties agreed to divert the barge to
Roxas City for a cargo consigned to Modern Hardware in that city. This new agreement
was not reduced to writing.
The cargo for Modern Hardware was eventually
unloaded and received by the consignee in Roxas City.
Six months later,
GY demanded payment of demurrage charges in the amount of P40,000 for an alleged
delay of eight days and four hours. MDC ignored the demand of GY. And the latter
filed a suit.
After trial on the merits, the trial court ordered MDC
to pay GY the demurrage charges with interest, attorney's fees and cost.
The Court of Appeals held that since the diversion of the cargo to Roxas
City was not covered by a new written agreement, the original agreement must prevail.
In the Supreme Court, MDC contended that the first written contract was
replaced by a new verbal agreement that did not contain any stipulation for demurrage.
But the Supreme Court ruled as follows:
"In ruling that in the
absence of a new written agreement, the old agreement must prevail, the courts
a quo were saying that the first agreement continued to be valid because the second
was void. That is hardly a logical conclusion.
x x x
The contract executed by MDC and GY was a contract of affreightment. As defined,
a contract of affreightment is a contract with the shipowner to hire his ship
or part of it, for the carriage of goods, and generally takes the form either
of a charter party or a bill of lading.
Article 652
of the Code of Commerce provides that "a charter party must be drawn in duplicate
and signed by the contracting parties" and enumerates the conditions and information
to be embodied in the contract, including "the lay days and extra lay days to
be allowed and the demurrage to be paid for each of them".
But while
the rule clearly shows that this kind of contract must be in writing, the succeeding
Article 653 just as clearly provides:
"If the cargo should be received
without a charter party having been signed, the contract shall be understood as
executed in accordance with what appears in the bill of lading, the sole evidence
of title with regard to the cargo for determining the rights and obligations of
the ship agent, of the captain and of the charterer.
We read this last
provision as meaning that the charter party may be oral, in which case the terms
thereof, not having been reduced to writing, shall be embodied in the bill of
lading.
Let us bear in mind that a charter party may be oral and the
rights and obligations of the parties shall be governed by provisions of the bill
of lading.
x x x
As the year
2004 is about to end, let us thank the Almighty for all the blessings we have
received. And pray that the ensuing year be more blessed. Happy holidays to everyone!
For questions or comments, contact the writer at jtb@pac-atlantic.com. back
to top Is the Bank Liable for
Signing Shipper's Letter of Indemnity? Sometime in December 1991, Mr.
Nestor Anel delivered to Long Shipping Lines a cargo to be transported on board
the MV "Tanda" on her voyage from Cebu City for Surigao del Sur. The
shipping company issued bill of lading no. 10 where Mr. Anel was both the shipper
and consignee of the cargo valued, on the face thereof, in the amount of P6,500.00.
Mr. Anel subsequently insured the cargo covered by bill of lading no. 10
with CB Insurance Co., Inc. for the amount of P100,000.00 "against all risks"
under an open policy.
After the MV "Tanda" had passed the
Mactan-Mandaue Bridge, fire ensued in her engine room, destroying the vessel and
her cargoes.
Shortly thereafter, Mr. Anel filed a claim with CB Insurance
Co., Inc. The latter approved his claim and he signed a Subrogation Receipt after
receiving the amount of P100,000.00.
Three months later, he also filed
a claim with the shipping company. The shipping company paid Mr. Anel the amount
of P6,500.00 in full payment of his claim without knowing that the same cargo
was insured with CB Insurance Co., Inc.
Then, as subrogee of Mr. Anel,
CB Insurance Co., Inc. filed a complaint against Long Shipping Lines with the
Regional Trial Court of Makati for the recovery of the amount of P100,000.00 which
it paid to Mr. Arnel.
But the trial court dismissed the case for lack
of merit.
However, the Court of Appeals reversed the decision of the
trial court and ordered Long Shipping Lines to pay the amount of P100,000.00 to
CB Insurance Co., Inc.
In the Supreme Court, CB Insurance Co., Inc.
contested that the liability of the common carrier should be based on the actual
insured value of the goods, subject of the case. On the other hand, Long Shipping
Lines claimed its liability should be limited to the value declared by the shipper/consignee
in the bill of lading.
The Supreme Court ruled as follows:
"The
records show that the bill of lading covering the lost goods contain the stipulation
that in case of claim for loss or for damage to the shipped merchandise or property,
the liability of the common carrier x x x shall not exceed the value of the goods
as appearing in the bill of lading.
x x x
In the present case, the stipulation limiting petitioner's (Long Shipping Lines)
is not contrary to public policy. In fact, its just and reasonable character is
evident. The shipper/consignee may recover the full value of the goods by the
simple expedient of declaring the true value of the shipment in the bill of lading.
Other than the payment of a higher freight, there was nothing to stop the shipper
from placing the actual value of the goods therein.
A
shipper/consignee that undervalues the real worth of the goods it seeks to transport
does not only violate a valid contractual stipulation but commits a fraudulent
act when it seeks to make the common carrier liable for more than the amount it
declared in the bill of lading.
x x x
It
is well to point out that, for assuming a higher risk (the alleged actual value
of the goods), the insurance company was paid the correct higher premium by the
shipper/consignee; while petitioner was paid a fee lower than what it was entitled
to for transporting the goods that had been deliberately undervalued by the shipper
in the bill of lading. Between the two of them, the insurer should bear the loss
in excess of the value declared in the bill of lading. This is the just and equitable
solution. "
Let us bear in mind that the liability
of a common carrier is the "actual valuation declared by the shipper/consignee
in the bill of lading" and not the "actual insured value" of the
goods.
For questions or comments, contact the writer at
jtb@pac-atlantic.com. back
to top Is the Bank Liable for
Signing Shipper's Letter of Indemnity? YES. And this story happened in
Australia. Sometime in June 2000, Aus-tralian grain trader New Agricultural
Traders Pty Ltd (NAT) sold to Manila-based Royal Trading Company (ROYAL) a cargo
of soya bean meal in bags. The said cargo was transported to Manila by
MV "BELSON", which was time-chartered by Atlantic Carriers Ltd (ATLANTIC).
As the original bills of lading could not be presented by the consignee ROYAL,
NAT and its Sydney-based banker - BNB Parico (BNB) issued letters of indemnity
to the carrier to release the cargo. The letters of indemnity were signed by NAT
and BNB. And these were delivered to ATLANTIC in order to indemnify ATLANTIC for
any loss arising out of its delivery of the cargo without the original bills of
lading. ATLANTIC settled substantial claims against it by cargo interests.
As NAT became insolvent, ATLANTIC claimed from BNB under the letters of indemnity
to recover its losses. BNB disputed ATLANTIC's claim. It alleged that it
signed the letters only to authenticate NAT's execution of the letters. It also
argued that the letters were signed without its authority and were, therefore,
not binding. The trial judge ruled that by signing the letters of indemnity,
all BNB did was to represent to ATLANTIC that NAT had the financial capacity to
honor its obligations. However, the trial judge declared that under Australia's
Trade Practices Act, BNB had negligently misrepresented to ATLANTIC that NAT was
financially capable of providing the indemnity and it awarded damages to ATLANTIC.
But the NSW Court of Appeal held that the bank officer who signed the letters
had neither actual nor ostensible authority to bind the bank. It also found no
negligence was committed by BNB.
ATLANTIC appealed to the High Court of Australia.
It held that BNB was contractually liable under the letters of undertaking to
indemnify ATLANTIC for its losses. The High Court rejected BNB's claim
that its officer was merely authenticating NAT's letters because there was no
way for ATLANTIC to know what was going on the mind of a bank officer.
It
likewise pointed out there was nothing in the letters to indicate that BNB was
merely authenticating the execution by NAT. Lastly, the High Court pointed
out ATLANTIC's reasonable assumption that BNB was indemnifying it to deliver the
goods without the bills of lading was, in fact, "induced and assisted"
by BNB's conduct.
Thus, let us remember that the bank may be held liable for
signing on the shipper's letter of indemnity. For questions or comments,
email the author at jtb@pac-atlantic.com.ph. back
to top Can the Carrier Be Exempt from
Liability Due to Fire? No. And this is the story.
Sometime in 1993, Beauty Plants, Inc. delivered some artificial trees to Share
Company , the General Ship Agent of Dutch Lines, a foreign shipping corporation,
for transportation and delivery at the port of Riyadh, Saudi Arabia.
Poly Assurance Company insured the cargo against all risks.
While the carrying vessel was in transit, she and her cargo caught fire. The vessel
eventually sank. Share Company informed Beauty Plants, Inc.
about the tragedy. Consequently, Poly Assurance Company paid Beauty Plants, Inc.
corresponding to the amount of the insurance for the cargo. Then,
Poly Assurance Company sent a demand letter to Share Company demanding the reimbursement
of what it paid to Beauty Plants, Inc. on the basis of the Subrogation Receipt.
But Share Company denied any liability on the ground that such liability was extinguished
when the vessel was gutted by fire. Thus, Poly Assurance Company
filed with the Regional Trial Court a complaint for damages against Share Company
and Dutch Lines. After trial on the merits, trial court rendered a Decision in
favor of Poly Assurance Company. On appeal, the Court of Appeals
affirmed the trial court's decision. The Court of Appeals denied the motion for
reconsideration of Share Company and Dutch Lines. And they elevated the case to
the Supreme Court. The Supreme Court ruled in the following
manner:
"Fire is not one of those enumerated under the above provision
(Art. 1734, Civil Code) which exempts a carrier from liability for loss or destruction
of the cargo. In Eastern Shipping Lines, Inc. vs. Intermediate
Appellate Court, we ruled that since the peril of fire is not comprehended within
the exceptions in Article 1734, then the common carrier shall be presumed to have
been at fault or to have acted negligently, unless it proves that it has observed
the extraordinary diligence required by law. Even if fire
were to be considered a natural disaster within the purview of Article 1734, it
is required under Article 1739 of the same Code that the natural disaster must
have been the proximate and only cause of the loss, and that the carrier has exercised
due diligence to prevent or minimize the loss before, during or after the occurrence
of the disaster." Let us always remember that fire will
not exempt the carrier from liability for loss or destruction of cargo. And in
those cases where the presumption of fault or negligence is applied, the common
carrier must prove that it exercised extraordinary diligence in order to overcome
the presumption.
For comments or inquiries, email the writer at jtb@pac-atlantic.com.ph. 2005
Q4 | 2005 Q3 | 2005 Q2 | 2005 Q1
2004
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Q2 | 2004 Q1
2003
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