By Vanshika
The Hague and the Hague Visby rules were envisioned to be such guiding principles which acts as a fair balance between the rights and liabilities of the ocean carrier and the cargo owner. Even before the adoption of these rules, the bill of lading had various clauses and provisions which would allow the carrier to absolve himself from liability and exclude his responsibility. Such provisions which attempt to reduce to exempt the carrier from any liability are generally referred as an exclusion or a limitation clause.[1]
Article III (8) of the Hague and Hague Visby allows from such exclusion however limits the carrier’s liability to a certain scope. Wherein Article III (8) of the Hague-Visby rules states that any clause, covenant, or agreement which absolves the carrier’s liability for any damage other than provided in the rules shall be considered null and void.[2] The provision is designed keeping in consideration the jurisprudence behind enactment of the rules itself, i.e., prescribing carrier with the minimum responsibility. [3]
The jurisprudence behind inclusion of 3(8) in the Hague or the Hague Visby rules is that since bill of lading is a standard form of contract which is subject to negotiations. Since the bargaining power of the carrier is more the shipper, this aims to restrict the nature of the exclusions by the carrier and prevent any excessive reduction in responsibility.
One such limitation clause is a rust clause or popularly known as the RETLA clause. The “rust clause” in a bill of lading is a provision that exempts the carrier from liability for damage caused by rust or corrosion to the cargo during transit.[4] It is common in bills of lading for cargoes that are prone to rust or corrosion, such as metal goods, agricultural products, or chemicals. The purpose of the rust clause is to protect the carrier from liability for damage that is outside of their control including humidity, temperature, and exposure to saltwater[5].
In a recent English law judgement popularly known as the “Saga Explorer Case”, the court had held that RETLA is a misrepresentation of the apparent order and condition of the goods. This essay is a critical analysis on the validity of the rust clause with the lens of apparent order and condition in the English or the common law jurisprudence.
One of the first cases wherein the court decided the legal enforceability of a rust clause was an American jurisprudence case popularly known as the Tokio Marine case [6]wherein the court held the RETLA clause to be valid on the grounds that the such exclusions are valid and that a substitute bill can be asked which shall include the notations or rust which depicts the actual picture.
However, the clause the American erred in the decision in a number of ways.
However, the most indispensable flaw in the judgement is that they failed to apply the meaning of Apparent good order and condition and its relevance in the Bill of Lading. Secondly, demanding a substitute bill cannot be used as a justification for the purpose of a inserting Retla.
A bill of lading is prima facie evidence for details of the goods including the apparent condition of the goods[7] and acts as conclusive evidence in the hands of a third-party.[8] In practise, the documents against the goods are received before the actual goods reach the port of destination. The payment for such goods has to be made before the goods arrive, based on particulars of such document as he has no opportunity to inspect the actual goods. In such a scenario, anybody who circulates a bill of lading should ensure that the document should be a true representation of the facts they believe to be true.[9] The reliance on such details provides the purchaser, a security in transaction with a foreign seller.[10] If a shipper is expected to verify the accuracy details of the bill of lading each time he takes a bill of lading, then it shall be the most serious impediment to international trade[11] which shall lead him at the disposal of any possible remedy available against an unknown person in a distant land [12] destroying the objective of issuing a bill of lading in the first place.[13]
Article III (3)[14] of the Hague-Visby rules provide that that a bill of lading should contain the quantity and weight, leading marks and the “apparent order and condition” of the goods. The term apparent means “so far as meets the eye” and condition refers to the external[15] and apparent condition of the goods.[16] However, the provisio to same provides for carrier to omit inserting information only regarding leading marks and quantity and weight of goods in certain cases. Thereby, such provisio does not absolve the carrier from recording the apparent order and condition of the goods. Additionally, the Hague-Visby rules binds the carrier by the statements in the bill of lading through the rule of estoppel.
By harmonious construction of the above provisions, it can be interpreted that the requirement to specify accurate apparent condition of the cargo is the strongest obligation under Hague-Visby Rules
The term “apparent good order and condition” mentioned in the face of bill of lading are construed as statements of fact and not contractual representations of fact[17]. It denotes that a that a bill of lading contract constitutes a promise by the carrier to deliver the goods received than a promise to deliver to specific goods identified in the bill. Therefore, they do not come within the scope of Article III (8)[18] as they do not classify as contractual clauses, covenants or agreements.[19]
Due to the above reasoning, it is a carrier who is responsible to declare the condition of the goods.[20] By inserting a RETLA clause, the carrier attempts to relieve himself or lessens his liability from such an obligation of providing the accurate description of apparent order and condition.[21] Such immunity undertaken by the carrier upon himself is contrary to the carrier’s the responsibility of providing the accurate description of the “apparent order and condition of goods”.[22] Therefore, this representation in the bill of i.e., RETLA clause is outside the scope of immunities and rights under Article III (8), making it null and void. In the landmark case of Saga Explorer , the court held that the third party relies solely on the bill of lading for the payment of goods or for any other purpose. Furthermore, such a party is unaware of the contents of the mate’s receipt, which can assist him to reject the goods while making the payment against the goods. Due to above reasons, it was held that RETLA clauses in agreements are an attempt to give new meaning to the apparent good order and condition and can mislead the third party relying on the bills of lading.
The court held that such clauses do not intend to cover all types of rust, regardless of it severity as such interpretation would severely affect the value of “apparent good order and condition”[23]. Due to which a RETLA clause was held to be a false misrepresentation. In the present factual matrix, the buyer has to pay against the documents received before receiving the actual goods relying on the bill of lading.
In conclusion, the Rust clause has been critically evaluated in relation to its impact on apparent order and condition in bills of lading. While the clause is designed to protect the interests of both the shipper and the receiver of goods by ensuring that the cargo is delivered in good condition, it can be subject to various interpretations and disputes.
[1] Todd, P. (2016). Principles of the Carriage of Goods by Sea. Routledge.
[2] Sturley, M. F. (2000). Carriage of goods by sea. Journal of Maritime Law and Commerce, 31(2), 241-250
[3] Tetley, W. (1986). Limitation, non-responsibility and disclaimer clauses. Maritime Lawyer, 11(2), 203-236.
[4] Todd, P. (2016). Principles of the Carriage of Goods by Sea. Routledge.
[5] Selvig, E. (1961). The Paramount Clause. The American Journal of Comparative Law, 10(3), 205-226. American Society of Comparative Law. http://www.jstor.org/stable/838944
[6] Tokio Marine & Fire Insurance v. Western Pacific Roofing Corp., 75 1(999) Cal.App.4th 110, 89 Cal. Rptr. 2d 1 (Cal. Ct. App.
[7] Hague-Visby Rules. (n.d.). Article 3(4). Retrieved April 16, 2023, from http://www.jus.uio.no/lm/sea.carriage.hague.visby.rules.1968/doc.html
[8] Hague-Visby Rules. (n.d.). Article 4 Retrieved April 16, 2023, from http://www.jus.uio.no/lm/sea.carriage.hague.visby.rules.1968/doc.html
[9] Tetley, W. (1964). Loss and damage under marine claims. McGill Law Journal, 10(2), 105-125
[10] E. Clemens Horst Co v Biddell Bros [1912] AC 18
[11] Standard Chartered Bank v Pakistan National Shipping Corporation [1995] 2
[12] Thomas Roberts Co. v. Calmar S.S. Corporation, 59 F. Supp. 203 (E.D. Pa. 1945)
[13] Hindley & Co Ltd v East Indian Produce Co Ltd [1973] 2
[14] Hague-Visby Rules. (n.d.). Article 3(3). Retrieved April 16, 2023, from http://www.jus.uio.no/lm/sea.carriage.hague.visby.rules.1968/doc.html
[15] Compania Naviera Vascongada v Churchill (1906) 1 KB 237
[16] Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2000] 1 Lloyd’s Rep 85, 97
[17] Paul Todd (2016) Principles of Carriage of Goods by Sea , Roultedge
[18] Hague-Visby Rules. (n.d.). Article 3(8). Retrieved April 16, 2023, from http://www.jus.uio.no/lm/sea.carriage.hague.visby.rules.1968/doc.html
[19] Cunard Steamship Co Ltd v Buerger [1927] AC 1, HL
[20] The Saudi Crown [1986] 1 Lloyd’s Rep 261, 265
[21] Connolly Shaw Ltd v A/S Det Nordenfjelske D/S, (1934) 49 Lloyd‟s Rep 183.; Raiffeisen Zentralbank Osterreich AG v Royal Bank of Scotland Plc [2010] EWHC 1392 (Comm); [2011] 1 Lloyd’s Rep 123, [81].
[22] Simon Baughen (2015) Shipping Law, 6th Ed. Routledge
[23] Breffke & Hehnke GmbH & Co KG and Ors v Navire Shipping Co Ltd and Ors. (2012). The “Saga Explorer” – QBD (Com Ct)(Simon J) – 7 November 2012. (2012) 861 LMLN 1.
Centre for Maritime Law 