Chapter 5: Contract of Carriage

April 22, 2022April 22, 2022 Study Notes NepalPosted in 3rd YearTagged bbs 3rd year, bbs solutions, Contract of carriage, study notes nepal

Table of Contents

Very Short Question Answer

1. What is meant by carriage of goods?

Carriage of goods refers to the act of transporting or carrying goods, roughly speaking, the people from one place to another by the different means of within the country or beyond the country. In fact, it is the act of transportation of goods as a business from one place to another by the different mean of carriage.

2. When can a common carrier refuse to carry goods?

A common carrier can refuse to carry the goods in the following conditions:

If there is no place in the vehicle, i.e., if the vehicle is fully loaded.
If the goods are those which are not authorized to carry by the carrier or he generally does not carry.
If the lawful charge or fee is not paid unless there is a contract that the charge of carriage shall be paid after the delivery of goods.
If the goods are not properly packed.
If the owner or consignor of goods refused to disclose the nature of goods when it was asked for.
If the goods are prohibited from carrying them.
If the goods are to be carried through such a route which he is not authorized or usually carries.

3. Define the term charter party.

Charter party is a contract in writing between the owner or master of ship or the shipping company and the owner or consignor of goods or any other person whereby some or substantial or major part of the ship or the whole ship is hired and the owner or master of ship or the shipping company promises to carry the goods of owner or consignor or any other person by keeping them in the hired placed in the ship from one port to another port within a country or beyond the country for a fixed price.

4. What is an Air Way Bill?

It is a document issued and approved by the airway service to carry goods by the airway service for price. This is in fact, a contract between the owner or consignor of goods and the airways carrier for the transportation of goods through a cargo plane from one airport to another airport for price. When the goods arrive at the airport, or cargo office of the said airway service the consignor or his agent makes a list of such goods and submits three copies of it to the airway service with formal request to carry goods by plane such a document is called ‘Air Consignment Note’ or ‘Airway Bill’.

5. State incoterms applying only to sea and inland waterway transport.

Incoterms applying only to see and inland water way transport are:

FAS – Free Alongside Ship (named port of shipment)
FOB – Free on Board (named port of shipment)
CFR-Cost and Freight (named port of destination)
CIF – Cost, Insurance & Freight (named port of destination)

The other 7 sets of incoters are applied to any types of transport.

Short Question Answer

1. Why is it important to study the law relating to carriage? What are the rights commonly possessed by a common carrier?

IMPORTANCE OF LAW OF CARRIAGE

The importance of carriage are as follows:

The law of carriage gives us the kno edge about contract carriage.
It tells us the validity I Love You out business.
It provides provisions for the rights and liabilities of carrier and the owner of goods.
It makes provisions what will happen if things go wrong.
It tells the liabilities of carrier if the goods are destroyed in transit.
It lays down the various duties of a carrier.
It provides remedies available to owner of goods as well as the carrier if one of the parties fail to perform their duties.

LIABILITIES OF COMMON CARRIER

A common carrier has the following liabilities:

Liability to carry the goods at the fixed or reasonable place: Under section 66(1) of the contract Act 2056, the common carrier is under obligation to carry the goods received from owner or consignor of the goods at the fixed place. Where the place is not fixed, he is bound to carry the goods at a reasonable place.
Liability for the loss or destruction of the goods: If there is any loss of destruction of the goods during his possession by reason of his negligence or not taking proper care he is liable for such loss or destruction.
Llability to carry the goods with proper care skill and diligence: While carrying the goods the common carrier is bound to take care of the goods and the goods are to be carried at the fixed place with due care, skill and diligence. If there is any loss in the goods for that loss he is liable.
Llability to carry the goods within the fixed or reasonable period of time: where the time for the carriage of goods has fixed, he is bound to carry the goods within such fixed period of time and where the time is not fixed even he is bound to carry the goods within a reasonable period of time.
First carrier is liable: Where the goods are to be carried by more than one carrier, unless otherwise stated in the agreement the first carrier to whom the goods are delivered by the owner of goods is liable for loss or destruction of the goods.
Liability to pay compensation: While carrying the goods if there is any loss or destruction in the goods or by reason of delay or negligence of the common carrier there is loss to the owner of goods he is liable for such amount, which the owner of goods actually been suffered.
Liability to insure the goods:Unless otherwise stated in the agreement the common carrier is bound to insure the goods which he is supposed to carry.

2. What is a charter party? What matters are dealt with by the clauses of a charter party?

MEANING OF CHARTER PARTY/AFFFREIGHTMENT

If a carrier carries goods of other by ship or through sea is called as sea/water ways carrier. For the carriage of goods through sea or by ship there is a contract between the owner of goods and the owner of ship or master of ship or shipping company by receiving charge or fee from one port to another port is known as the affreightment. The contract of affreightment is of two kinds:

Charter Party, and
Bill of lading

Charter party is an agreement in writing between the owner or consignor of goods and the owner of ship, master of ship or shipping company for hiring an entire ship or substantial or major part there of or some part for the purpose of carrying goods through sea routes within that hired place for money or fee. It may be either time charter or voyage charter with demise or without demise..

MATTERS DEALT WITH BY THE CHARTER PARTY

There are two terms or clauses and warranties dealt with by the charter party.

Express clauses or terms.
Implied warranties or terms.

Express Terms or Clauses

These terms or clauses are mentioned in an every charter party at the time of agreement express words either written or spoken. For example:

The name and nationality of the ship.
The name and address of owner or consignor of goods and ship owner or shipping company.
The class of the ship
Weight, quantities and particulars of goods.
Types of charter party.
Place and manner of loading and unloading.
Amount and way of payment of freight.
Remedies of the parties in case of breach of contract.
Liabilities of the parties in case of loss of goods. etc.

Implied Terms or Clauses

There are some clauses or terms which are secondary and implied by law in each contract of charter party. They are:

The ship is in a good condition at the time of carriage of goods.
It should be reads to commence the voyage.
It shall carry out a reasonable care and diligence of goods. 4. It shall not carry illegal or dangerous goods.
IT shall follow the fixed route or customary route while carrying the goods.

These are the matters which are dealt with by the clauses of the Charter Party.

3. What is bill of lading? What are its characteristics?

MEANING OF BILL OF LANDING

Where the goods are carrying through sea or by ship, the consignor or the owner to the goods enters into an agreement with the ship owner. This contract is known as contract of affreightment. The contract of affreightment may be of two kinds.

Charter party: It is an agreement, in writing, for hiring an entire ship or a substantial part there of ,or some for the purpose of carrying goods through sea routes. It may be either time charter or voyage charter with demise or without demise.
Bill of landing: In this type the consigner or owner of the goods does not hire the entire part of ship or substantial part or some part thereof but he pays the money and the ship owner agrees to carry the goods along long with other’s goods. In a bill of lading, there is a direct contract between the consigner or owner of goods and the owner of the ship. It is a receipt given by the ship owner to the consignor about the list of goods loaded and amount of price.

CHARACTERISTICS OF BILL OF LANDING

It is a contract between ship owner or shipping company and owner of the goods for the carriage of goods through sea routes.
It is a document of title any body having this bill will enjoy a right to take delivery of goods from company.
It is a receipt of carriage of good.
There is signature of the captain of the ship on behalf of the shipping company. e. It is semi-negotiable instrument.
It is contained the list of goods, name of consignor and consignee; the place where it is to deliver etc.

4. What is contract of affreightment? Explain the implied conditions in a contract for the carriage of goods by sea.

MEANING OF CHARTER PARTY/AFFFREIGHTMENT

Charter Party, and
Bill of lading

MATTERS DEALT WITH BY THE CHARTER PARTY

There are two terms or clauses and warranties dealt with by the charter party.

Express clauses or terms.
Implied warranties or terms.

Express Terms or Clauses

These terms or clauses are mentioned in an every charter party at the time of agreement express words either written or spoken. For example:

The name and nationality of the ship.
The name and address of owner or consignor of goods and ship owner or shipping company.
The class of the ship
Weight, quantities and particulars of goods.
Types of charter party.
Place and manner of loading and unloading.
Amount and way of payment of freight.
Remedies of the parties in case of breach of contract.
Liabilities of the parties in case of loss of goods. etc.

Implied Terms or Clauses

There are some clauses or terms which are secondary and implied by law in each contract of charter party. They are:

The ship is in a good condition at the time of carriage of goods.
It should be reads to commence the voyage.
It shall carry out a reasonable care and diligence of goods.
It shall not carry illegal or dangerous goods.
IT shall follow the fixed route or customary route while carrying the goods.

These are the matters which are dealt with by the clauses of the Charter Party.

5. Define the term common carrier. How do you distinguish between common carriers and private carriers?

MEANING OF COMMON CARRIER

Generally carrier means the person who carry the goods of other whether the owner’s goods or consignor’s goods, from one place to another place for money or on payment. The person may be natural or legal, whether private or government. Common carrier means and includes any individual, firm or company who transport goods, as a business for money without discrimination form one place is called common carrier.

MEANING OF PRIVATE CARRIER

A private carrier is one who does not do regular business as a carrier but occasionally carries goods for money.

The differences between common carrier and private carrier are as follows:

Basis	Common Carrier	Private carrier
Nature of business	To carry the goods is a regular business of common carrier.	Private carrier carries the goods occasionally.
Discrimination	Common carrier must carry the goods without discrimination.	Private carrier may discriminate to carry the goods.
Equal treatment	Common carrier must treat equally while conducting its business.	Private carrier may treat the parties differently.
Route	Common carrier carries the goods through the customary route.	There is no fixed route for private carrier.
Goods belonged to	Common carrier carries only goods of owners or consigner.	It may carry the goods as well as the passengers.
Reward	It is non-gratuitous carrier.	It may carry the goods gratuitously.
Governing law	The rights and duties are governed by the Carriage of Goods Act.	It is governed by the Contract Act.

6. Who is a common carrier? Describe the rights and duties of a common carrier.

Generally carrier means the person who carry the goods of other whether the owner’s goods or consignor’s goods, form one place to another place for money or on payment. The person may be natural or legal, whether private or government. Common carrier means and includes any individual, firm or company who transport goods, as a business for money without discrimination from one place to another place is called common carrier.

RIGHTS OF COMMON CARRIER

Right to reject the goods: Though the common carrier can not refuse the goods from carrying them but in certain grounds he can reject the goods from carrying them:
If there is no place in the vehicle.
If the goods are those which is not authorized to carry by the carrier.
If the goods are not property packed.
If lawful charges and fees are not paid to carrier.
If the goods are to be carried except through other routes which he is not authorized or usually carries.
Right to receive remuneration: Common carrier always carries the goods for payment which is mentioned in every contract. If it is mentioned, he is entitle to receive such price. Where price is not mentioned, he has right to receive reasonable remuneration of his services.
Right to receive extra ordinary expenses: If common carrier has incurred extra ordinary expenses to care and preserve the goods, he is entitle to receive such charges or expenses as an extra ordinary expenses.
Right to compensation: IF the dangerous nature of goods not discloses to the carrier and if he sustain any loss because of such defective goods, he can claim for compensation from the owner of the goods.
Right to lien: If the goods are under control of carrier and lawful charges are not paid, he can retain the goods until such charges are paid to him. If the goods are of perishable in nature he can sell the goods.

DUTIES OF COMMON CARRIER

A common carrier has following duties:

Duty to carry goods without discrimination: It is the first and foremost duty of common carrier that he must carry he goods of owner without any discrimination. Without any reasonable ground if he discriminates he will be liable for punishment.
Duty to take proper care of the goods carried: It is another important duty of the common carrier to take reasonable and proper care of the goods delivered to him. The carrier is responsible for loss, damage or destruction of goods because of his negligence to care. Except the goods were destroy by the act of god or because of inherent defects of the goods, the common carrier is responsible in all cases.
Duty to deliver the goods to receiver or consignee or fixed place: He is not only bound to carry the goods but he must deliver the goods to concerned person or place.
Duty to carry goods within a specified time: He must carry the goods within specified time. If time is not fixed, he must carry them within reasonable time otherwise he will be responsible for loss.

Under section 66 to 70 of the Nepalese Contract Act, Common carrier is liable to carry goods to a particular place, within specified time and if he fails to perform the duties he is liable to pay compensation the owner of goods.

7. Define contract of affreightment and provide a classification of carriers.

MEANING

Where the goods are to be transported from one port to another port by ship or sea or water ways, there must be an agreement between the owner or consignor of goods and the owner or master of ship or shipping company -sea ways carrier in which the sea ways carrier agrees to carry the goods of owner or consignor by ship for price. It is called the contract of affreightment. In other words, it is a contract between the owner or consignor of goods or any other persons and the owner or master of ship or shipping company to carry the goods from one port to another port by ship for price. The contract of affreightment can be classified in to two divisions

Charter party: it is a contract in writing between the owner or consignor of goods or any other persons and the owner or master of ship or shipping company where the whole ship or major or some part of the ship is hired for the purpose of carrying the goods from one place to another by keeping the goods in that hired place for price. It may be either time charter or voyage charter, and it can be made with or without demise.
Bill of lading: firstly, it is a contract of affreightment between the owner or consignor of goods and the owner or master of ship or shipping company for. the purpose of carrying of goods by ship without hiring any place in the ship but the carrier promises to carry the goods keeping them along with the goods of others for price. Secondly, it refers a receipt of the goods issued by the sea way carrier which acknowledges that the goods mentioned in the list are delivered to the carrier to carry them from one port to another port.

TYPES OF CARRIERS

Carrier is a person an individual or a company or a firm who carries the passengers or goods of other from one place to another by different means of carriage within or beyond the country. The carriers can be classified into different divisions under the different basis. Some of the important classifications are given as under:

On the basis of nature of carrier

Common carrier: It is the carrier either an individual or a company or a firm other than the government carrier who carries the goods of other as a regular business of carrier through the fixed or customary route without discrimination while carrying goods and for price. It finds an important place in the business field because most of the goods are carried from one place to another place through the common carrier.
Private carrier: It is the carrier who carries the goods of other not as a regular business of carrier but occasionally without following the fixed or customary route with discrimination and with or without price.

On the basis of reward received by the carrier

Gratuitous carrier: A carrier who carries the goods of other from one place of another without receiving the charge or reward or remuneration of his service is called as a gratuitous carrier. In general, the private carrier is an example of gratuitous carrier.
Non-gratuitous carrier: A carrier who always carries the goods of other for price remuneration is known as the non-gratuitous carrier. Common carrier is a non-gratuitous carrier.

On the basis of things they carry

Passenger carrier: The carrier who carries only the passengers and not the goods by different means of carriage from one place to another is a passenger carrier. Therefore, it cannot carry the goods.
Goods carrier: The carrier who carries only the goods from one place to another is a goods carrier. In general, common carrier is the goods carrier. Therefore, it cannot carry the passenger from one place to another.

On the basis of means by which they carry

Land/Road ways carrier: The carrier who carries the goods by different means of carriage from one place to another through land or roads is called land/road ways carrier. It is an important means of carrier which can provide door to door service; and goods are frequently moved from one place to another by this type of carrier.
Water/Sea ways carrier: The carrier who carries the goods or passenger by different means of carriage or by ship from one port to another port through water or sea is called water/sea ways carrier. The goods which are to be carried in a large quantity and heavy in weight are generally carried by ships or sea ways-carrier.
Air ways carrier: The carrier who carries the goods or passenger by aeroplanes or different means of carriage from one airport to another airport through air or space is called air ways carrier. The goods which are light in weight and expensive in price and which needs fastest delivery are generally carried by aeroplanes or air ways carrier.

8. What is air way bill? Explain other major documents relating to carriage by air.

MEANING OF AIR BILL

In other words it is called as Air Consignment Note. In one hand, it is a document issued by the airways service to the owner while carriage of goods by airways carrier. Therefore, it is a note which confirms that the airways carrier has agreed to carry the goods of owner or consignor from one place to another by receiving certain charge or remuneration. In other hand, it is described as an agreement in is made and writing between the airways carrier and owner or consignor of goods where the airways carrier agrees to carry the goods by air for remuneration. issued in three copies. The airways carrier delivers two copies to the owner or consignor keeping one and out of these two; one is delivered to the consignee or receiver of the goods. In an air bill, the following matters are generally mentioned:

Name and nationality of the airways.
Name of the country of registration of airways.
The place and date of issue of the bill.
The name of place of departure and arrival.
Name and address of the owner or consignor.
Nature of goods, weight, quantity of goods.
Condition and packaging method of goods.
Price of goods.
Carrying route, period and the place of stoppage
The nature and conditions of liability of the consignor and airways carrier etc.

DOCUMENTS RELATING TO AIRWAYS CARRIER

Passenger ticket: It is a document which can be described as an agreement between the Airways Company and passenger to carry the passenger from one place to another place by airplane. For the purpose of carriage of passenger only this document is issued and given to the passenger with necessary signature and stamp. It generally contains the name and address of the Airways Company and passenger, date of issue of ticket, date and time of arrival and departure of airplane and the liability of the airways company towards the passenger for their loss by reason of injury or destruction or damage of goods.
Luggage ticket: As like passenger ticket, the luggage ticket is issued by the airways company for the purpose of carriage of luggage of the passenger by airplane. When the luggage ticket is issued, the luggage is delivered to the airways company which contains the same number of the passenger ticket. One of the luggage tickets is affixed to the luggage ant its receipt is given to the passenger. At the time of receiving the good, the airlines handover the goods by matching the ticket number of passenger ticket and luggage ticket. It generally contains the number of baggage, their weight, the place and time of departure and arrival, the date and time of luggage received the price of luggage and the conditions of liability of the Airways Company for loss or destruction of the luggage etc.

Long Question Answer

1.Give the concept of incoterms 2010 and discuss the universal incoterms and the incoterms applying only to sea and inland water way transport.

INCOTERMS 2010: A BRIEF INTRODUCTION

The Incoterms or International Commercial Terms are the trade terms published by the International Chamber of Commerce (ICC) which is commonly used in both international and domestic trade contracts. The Incoterms rules are intended primarily to clearly communicate the tasks, costs, and risks associated with the transportation and delivery of goods. The trade terms used in different countries may appear identical on the surface, but actually have different meanings as they are used domestically. Incoterms, however, are internationally recognized rules that help prevent confusion in terms of foreign trade agreements. Incoterms help buyers and sellers understand their obligations in international trade agreements. They are accepted by worldwide governments and are incorporated into legal trade contracts.

UNIVERSAL INCOTERMS

EXW – Ex Works (named place of loading): EXW means that a buyer incurs the risks for bringing the goods to their final destination. Either the seller does not load the goods on collecting vehicles and does not clear them for export, or if the seller does load the goods, he does so at buyer’s risk and cost. If parties wish seller to be responsible for the loading of the goods on departure and to bear the risk and all costs of such loading, this must be made clear by adding explicit wording to this effect in the contract of sale. Similarly, the buyer arranges the pickup of the freight from the supplier’s designated ship site, owns the in-transit freight, and is responsible for clearing the goods through Customs. The buyer is also responsible for completing all the export documentation.
FCA Free Carrier (named place of delivery): The seller delivers the goods, cleared for export, at a named place. This can be to a carrier nominated by the buyer, or to another party nominated by the buyer.It should be noted that the chosen place of delivery has an impact on the obligations of loading and unloading the goods at that place. If delivery occurs at the seller’s premises, the seller is responsible for loading the goods on to the buyer’s carrier. However, if delivery occurs at any other place, the seller is deemed to have delivered the goods once their transport has arrived at the named place; the buyer is responsible for both unloading the goods and loading them onto their own carrier.
CPT Carriage Paid To (named place of destination): The seller pays for the carriage of the goods up to the named place of destination. Risk transfers to buyer upon handing goods over to the first carrier at the place of shipment in the country of Export. The Shipper is responsible for origin costs including export clearance and freight costs for carriage to named place (usually a destination port or airport). If the buyer does require the seller to obtain insurance, the Incoterm CIP should be considered.
CIP – Carriage and Insurance Paid to (named Ito (named place of destination): This term is broadly similar to the above CPT term, with the exception that the seller is required to obtain insurance for the goods while in transit. CIP requires the seller to insure the goods for 110% of their value under at least the minimum cover of Institute Cargo Clauses of the Institute of London Underwriters (which would be Institute Cargo Clauses (C)), or any similar set of clauses. CIP can be used for all modes of transport, whereas the equivalent term CIF can only be used for non containerised sea freight.
DAT Delivered at Terminal (named terminal at port or place of destination): This term means that the seller covers all the costs of transport (export fees, carriage, unloading from main carrier at destination port and destination port charges) and assumes all risk until destination port or terminal. The terminal can be a Port, Airport, or inland freight interchange. Import duty/taxes/customs costs are to be borne by Buyer.
DAP Delivered at Place (named place of destination): The term can be used for any transport mode, or where there is more than one transport mode. The seller is responsible for arranging carriage and for delivering the goods, ready for unloading from the arriving conveyance, at the named place. The seller bears all risks involved in bringing the goods to the named place.
DDP Delivered Duty Paid (named place of destination): Seller is responsible for delivering the goods to the named place in the country of the buyer, and pays all costs in bringing the goods to the destination including import duties and taxes. This term is often used in place of the non-Incoterm “Free In Store (FIS)”. This term places the maximum obligations on the seller and minimum obligations on the buyer. With the delivery at the named place of destination all the risks and responsibilities are transferred to the buyer and it is considered that the seller has completed his obligations

INCOTERMS APPLYING ONLY TO SEA AND INLAND WATERWAY TRANSPORT

FAS – Free Alongside Ship (named port of shipment): The seller delivers when the goods are placed alongside the buyer’s vessel at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that moment. However, if the parties ‘wish the buyer to clear the goods for export, this should be made clear by adding explicit wording to this effect in the contract of sale. This term can be used only for sea or inland waterway transport
FOB – Free on Board (named port of shipment): FOB means that the seller pays for delivery of goods to the vessel including loading. The seller must also arrange for export clearance. The buyer pays cost of marine freight transportation, bill of lading fees, insurance, unloading and transportation cost from the arrival port to destination. The buyer arranges for the vessel, and the shipper must load the goods onto the named vessel at the named port of shipment according to the dates stipulated in the contract of sale as informed by the buyer. Risk passes from the seller to the buyer when the goods are loaded aboard the vessel.
CFR Cost and Freight (named port of destination): The seller pays for the carriage of the goods up to the named port of destination. Risk transfers to buyer when the goods have been loaded on board the ship in the country of Export. The Shipper is responsible for origin costs including export clearance and freight costs for carriage to named port. The shipper is not responsible for delivery to the final destination from the port (generally the buyer’s facilities), or for buying insurance. CFR should only be used for non-containerized seafreight; for all other modes of transport it should be replaced with CPT.
CIF Cost, Insurance & Freight (named port of destination): This term is broadly similar to the above CFR term, with the exception that the seller is required to obtain insurance for the goods while in transit to the named port of destination. CIF requires the seller to insure the goods for 110% of their value under at least the minimum cover of the Institute Cargo Clauses of the Institute of London Underwriters, or any similar set of clauses. CIF should only be used for non containerized sea freight; for all other modes of transport it should be replaced with CIP.