Passing the parcel with logistics liabilities

Mike Burns
31 March 2014

Mike Burns, Weightmans1 April 2014 | Mike Burns

Traders entrust the movement and care of their goods to a number of parties: forwarding agents, shipping lines, port terminal operators, hauliers and warehousers. Little surprise then, from a liability perspective, that the logistics chain has been likened to commercial pass the parcel, crossed with elements of Jenga, in terms of operators and their liability insurers seeking to avoid liability incidents on their watch.

The reality of multimodal carriage is that accidents can happen anywhere, from the poorly stowed container on the ocean ship, to the unseaworthy feeder vessel, to the wind-blown box on the quayside, the haulage theft, or warehouse fire. The best an operator in the chain can do is to ensure that if a cargo owner brings a direct claim, or if an indemnity claim is brought by a main contractor, that its terms and conditions are effective opposite co–contracting parties.

There are three elements for it to be effective:

• The conditions must be binding. Best practice dictates having a signed contract with the customer, or other evidence of written agreement such as email exchange, but at the very least having terms (e.g. RHA or BIFA) referred to on pre-contract paperwork exchanges, quotations and website. In the case of Matrix v Uniserve [2008], a warehouser was subject to a £500,000 liability following a theft of mobile phones since it could not demonstrate that UKWA conditions (incorporating a £100 per tonne limit) were properly incorporated.

The conditions must contain the right ingredients as standard terms like RHA, CMR (road carriage) or Hague Visby (sea carriage) do. This includes: A warranty of the customer’s authority to agree the terms as the customer may not be the cargo owner; Defining the start and end of the operator’s responsibility for example no liability before loading of after discharging; Setting the standard of care to avoid suggestion of strict liability and to adjust the common law bailment burden of proof; appropriate exclusions for certain no fault or force majeure type events, and consequential losses; Standard carriage limitation of liability with reference to cargo weight or packages; claim notice and time bar; "Himalaya" protection for sub-contractors, employees and agents who are not party to the contract.

The conditions should be at least “back to back” with any sub contractors’ conditions or else an indemnity claim could be prevented or restricted. For instance, if opposite the customer the operator has a 12-month time bar and £2,000 per tonne limitation, but the sub-contactor operates on a nine-month limitation and £1,300 per tonne.  

By ensuring appropriate contractual terms are effective – wherever the operator may stand in the logistics chain – will give comfort that whenever the Jenga blocks tumble, that financial exposure will be limited.

☛ Mike Burns is a partner in the marine and transit team at Weightmans

Darmstadt-Dieburg, Hessen (DE)
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