Question

S is a chemical producer located in Sydney. B is a manufacturer situated in the United Kingdom which uses the chemicals produced by S. S agrees to sell to B 1,000 drums of a particular chemical called “Z” on the following terms:

1. the price is $40 per drum landed at the Port of London which price includes the cost of freight and insurance;
2. Incoterms 2010 shall apply to this agreement unless expressly or impliedly excluded or modified by the Conditions contained herein;
3. goods to be shipped by the end of May 2015;
4. payment is to be made against production of a clean bill of lading, insurance policy and commercial invoice as per the terms of this agreement;
5. the law of the contract shall be the law applying from time to time in the State of NSW and the Commonwealth of Australia.

S arranged carriage with O.H. Nassis & Co Ltd aboard the ship “Good Luck”. O.H. Nassis & Co did not often send their ships to Australia. S signed the carrier’s standard contract of carriage which contained the following term:

“The carrier will exercise all reasonable care in the handling and carriage of the goods BUT in no circumstances will the carrier or its servants or agents be responsible for any loss, damage or injury caused to the said goods.”

The ship was late arriving in Sydney and the drums were not loaded until 1 June 2013. The goods were shipped under a bill of lading made to “S or order” and which described the goods as “1,000 drums containing the chemical “Z” in apparent good order and condition.” The bill was dated 1 June 2015 and noted that freight and other relevant charges had been pre-paid. On 2 June 2015, S forwarded the shipping documents to its agent in London who arranged settlement with B. On 5 June B received the shipping documents and paid the purchase price.

Sometime after 5 June, while approaching the coast of Africa the good ship “Good Luck” had a spot of bad luck. It struck a particularly brutal storm which experts later described as “unusually violent but not unforeseeable”. Consequently, 100 drums broke loose and the contents were extensively damaged.

When the ship arrived in London, O.H. Nassis engaged Juggle & Dropit, a firm of stevedores, to unload the ship. Whilst unloading, 50 drums crashed onto the port dock and were destroyed.

B is not impressed, and wishes to know:

1. If it can refuse to take delivery of the drums, and demand the return of its money;

2. Alternatively, or in addition, sue S or O.H. Nassis & Co for the loss sustained.

Answer 1

Considering the terms and conditions of Incoterms 2010, following actions should be taken:

a) Ideally B should accept the suitable 850 drums and should pay for that, and alternatively if there is a clause in their contract to refuse the delivery if certain percentage of drums are not delivered in good condition.

This is clearly mentioned in the first term " the price is $40 per drum landed at the Port of London "

So, B is definitely not responsible for the damaged 150 drums as they were damaged before unloading at the port of London.

Also, as per term 2 " goods to be shipped by the end of May 2015 " which was not done, again not a fault of B. So, B should not bear charges only for 850 drums (850*40 = $34000) and should get money back for 150 drums (as they paid earlier), also they can return the complete order (if there is a provision in the contract)

b) Now S hired O.H. Nassis & Co Ltd for carrying from Sydney to London even after knowing that they don;t have much operations in Sydney. Now, the Ship arrived late can't be considered a fault of O.H. Nassis & Co Ltd, and again S has to take the blame of being late.

Now, O.H. Nassis & Co Ltd have clearly mentioned in their terms that “The carrier will exercise all reasonable care in the handling and carriage of the goods BUT in no circumstances will the carrier or its servants or agents be responsible for any loss, damage or injury caused to the said goods.”

So technically whatever happened with ship "Good Luck" in the brutal storm where 100 drums got damaged is not the responsibility of O.H. Nassis & Co Ltd as that storm was out of their control. So, S have to take the loss of these 100 drums costing $4000.

Now, O.H. Nassis & Co Ltd engaged Juggle & Dropit to unload the drums at London Port. Juggle & Dropit damaged 50 drums while unloading so it is clearly not a fault of S, and O.H. Nassis & Co Ltd should bear the loss (although they can get it from Juggle & Dropit based on their contract).

b) B can sue S for the loss of 150 drums, but not O.H. Nassis & Co Ltd as it was not directly connected with B.