Since the dawn of shipping, cargo owners have been concerned with having their goods transported in a timely fashion. Commercial markets fluctuate and delays may equate to financial losses even if goods arrive in sound condition.
Under the principle of deviation, if goods are unreasonably delayed in ocean transit, cargo interests may sue for losses causally connected to the delay. If goods are shipped for the purpose of sale, the cargo owner may recover actual damages for decrease in the market value of the goods which may have occurred between the time the shipment should have arrived and did arrive. Recovery is based upon the theory that the aggrieved party should be placed in the same position as if the breach had not occurred.
Consequential damages in excess of market value will only be awarded if such damages were foreseeable by the parties as a probable consequence of breaching the contract. This is based upon the 1854 English case of Hadley v. Baxendale.
Eighty two years after Hadley, Congress enacted the Carriage of Goods by Sea Act (COGSA). The Act provides that every bill of lading evidencing a contract of carriage of goods by sea to or from the United States, in foreign trade, shall be subject to the Act’s provisions.
Under COGSA, ocean carriers must properly load, stow, care for, and discharge goods carried. There are also 17 exceptions which relieve carriers from liability.
COGSA does not specifically impose a duty on the part of carriers to deliver goods in a timely fashion. Indeed, there is case law supporting the position that COGSA is not violated by exculpatory provisions in bills of lading for reasonable delay. For example, COGSA permits voyage deviations for the purpose of saving life or property at sea. However, unreasonable deviations invalidate bill of lading contracts and strip carriers of statutory and contract defenses.
The recent QUESORO case (1995 A.M.C. 2054), in the federal court for the Southern District of New York, focuses on how courts determine who bears the financial risks associated with cargo delays in falling markets.
In the QUESORO case, a cargo consignee sued a shipowner for $205,000 after a shipment of Chilean onions was delayed in arriving in the United States. The consignee alleged it informed the shipowner the onions had to arrive by mid-April at the latest, prior to the availability of U.S. onion crops. The consignee further claimed the ship’s agent said the shipment would sail April 1 on the two week trip. It appears the vessel sailed on April 6 and the cargo arrived on April 27, two days after the U.S. onions arrived on the market.
Cargo interests argued that the bill-of-lading provisions were not affected by the arbitration agreement. Furthermore, the Hague-Visby Rules applied under the terms of the bill, since Mexico had enacted these rules domestically.
The shipowner moved to dismiss the complaint based on the bill of lading term which expressly guaranteed the transportation with reasonable dispatch, but not in time to meet any particular market. The bill also prohibited oral modifications of the contract.
The Court upheld the bill of lading provisions and dismissed the claim. “[A] delay of one week in the shipment from Chile to the U.S. does not constitute a breach of contract for failure to provide `reasonable dispatch’ as required by … the Bill of Lading.”
The Court relied on two prior decisions that held both a two-week and an 18 day delay on international voyages were not unreasonable.
The QUESORO case suggests that courts will resolve cargo delay claims by utilizing a case by case analysis of the bill of lading terms and also evaluating the reasonableness of the delay.
QUERY: Would the result of the QUESORO case have been different if the vessel sailed from Chile on December 5 and arrived on December 26 with a shipment of Christmas trees?