The carrier’s true load

As freight forwarding has moved into the 21st century, there has been much confusion about its legal roles and responsibilities. The sector offers a vast range of value-added services to customers who could hold the service provider accountable as the carrier. The typical role of a freight forwarder is that of an

agent, arranging shipments of goods belonging to the shipper and coordinating its transit safely to the receiver. Now, in the light of consolidation, a forwarder’s liability extends beyond that of an agent when it undertakes the carriage in its own name as principal contractor.

It is common practice in shipping to consolidate cargo belonging to different shippers in one container, a concept adopted to utilise cargo capacity, cater to small(er) consignments and maximise profits. Yet, while adopting this approach, the freight forwarder remains responsible to the shipper(s) as contractual carrier once it assumes the carriage of the goods. Although this principle is cost-effective for the forwarder, it bears huge legal implications should any loss or damage occur to the goods during transit. However, responsibility shifts at various stages of the journey, depending on the nature and agreement of carriage.

A freight forwarder’s main concern is how it can protect itself against potential cargo claims. From a legal standpoint, agents try to limit their liability via the ‘small print’ contained under their trading terms and conditions and this is where confusion starts to emerge. It is important that they minimise, or even avoid, liability as principals by ensuring that the wording contained in the house bill is consistent with what was initially agreed in keeping with the nature of the business undertaken.

In a practical sense, once damage/ loss is apparent, a forwarder will have to put in a claim (within one week) towards its own carrier under the master bill, and towards any other contractors engaged in transport and handling. This is important in order to avoid possible time bars which would otherwise reimburse any losses arising out of a cargo claim.

In ‘The Hyundai Federal’ case, goods were misdelivered without the production of a bill of lading and the agents tried to evade liability by relying on certain terms on the reverse side of the bill. They assumed the carriage of the goods and issued clean bills of lading that goods were received in apparent good order and condition, signed by Birkart Globistics without qualification under Birkart’s name, clearly indicating it as principal. Birkart’s defence was rejected and that the use of the term ‘forwarder/agent’ offered no legal protection. It is of no particular aid to the forwarder to presenting itself as a straightforward agent while also affording the role of carrier. ‘The Starsin’ decided that the contractual carrier is evidenced by the named signatory on the front of the bill, notwithstanding any exclusion clauses on the reverse side of the document.

In this case, the forwarders were solely liable as the actual carrier delivered in accordance with its carriage contract, assigning control to the agents, notwithstanding presentation, of the waybill. Nonetheless, the freight forwarder breached the contract of carriage with the shipper by releasing the goods without production of the bill.

However, freight forwarders can guard against such menacing ordeals and various defences are available. They can limit their liability by simply inserting a condition stating that they are acting as ‘agents only’, but this clearly depends on the facets of the bill. In the event where the bill has been issued by a freight forwarding agent and signed under its own name without qualification, the freight forwarder will be presumed to have signed as the principal, thus extending its liability to an entirely different plane. In addition, a condition excluding liability for loss, damage or misdelivery can be inserted but has to be very clearly drafted to be accepted by the courts.

By Jasamin Fichte,
Managing Partner, Fichte & Co.
Legal Consultancy