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18 July 2007
In a case recently decided by the Hamburg Court of Appeals, the plaintiff cargo insurers sought recourse against the insured's freight forwarder for damage incurred while the cargo was shipped from Bremen, Germany to Bandar Abbas, Iran. The plaintiff's insured and the defendant had agreed to hire the latter's services at a fixed price. Furthermore, as specified in the contract, the defendant had the option to subcontract the ocean leg of the transportation to either of two different carriers explicitly mentioned in the contract. The ocean carriage was performed by a carrier that limited its liability for loss of and damage to the cargo to £100 per package in its bill of lading terms and conditions. The claim far exceeded the liability amount. The defendant argued that it could rely on the subcontractor's terms, especially its limitation of liability, because the subcontractor was already specified by the plaintiffs' insured in the contract of carriage.
The Hamburg Court of Appeals ruled that, as a fixed-cost freight forwarder, the defendant was liable to the same extent as an ocean carrier under German law. Thus, it was liable up to 2 Special Drawing Rights (SDR) per kilogram (or alternatively 666.67 SDR per package) as set forth in Paragraph 660 of the Commercial Code. The court ruled that the defendant could not rely on the limitation of liability that the ocean carrier's bill of lading conditions provided because those terms and conditions were not incorporated into the contract between the plaintiff's insured and the defendant. The ocean carrier was a subcontractor of the freight forwarder. The court found that it was not possible to override the carrier's terms in favour of the plaintiff's insured, and that the principle of good faith does not justify a different conclusion, even though the ocean carrier was given by the plaintiff's insured in the contract of affreightment.
It was known to the defendant when it concluded the contract of affreightment with the plaintiff's insured that potential recourse actions against the actual carrier would be rather limited. Thus, the defendant could have included the ocean carrier's terms and conditions in the contractual agreement with the plaintiff's insured and refrained from accepting the transport order. Furthermore, it could have chosen the other carrier nominated by the plaintiff's insured, which may have had a different liability.
The court prohibited revision of the judgment at the German Federal Supreme Court. However, the defendant is appealing this decision. It remains to be seen whether the Federal Supreme Court will accept a revision or reject the defendant's further action by making the Hamburg Court of Appeals decision legally binding.
The Hamburg Court of Appeals judgment is correct and in line with established principles of German law. Generally, each party can rely on the terms and conditions it agreed upon when concluding the contract. The fact that the ocean carrier was nominated by the plaintiff's insured could not lead to a different conclusion. Freight forwarders are well aware that ocean carriers limit their liability in many ways and, thus, their own liability might be much wider by law if they do not ensure a back-to-back liability with their contractual partner. One can only recommend that equal, bilateral agreements concerning liability are made. If such measures are not taken or shall not be taken in general, one has only two options: either to accept the offer and hope for the best or to reject the offer, which may be a prudent decision from an economic point of view.
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