TT Talk - Legal eagle: Contracts are all about details
- Date: 14/05/2019
- Source: TT Talk 250
DHL arranged carriage of plant material from China to a refinery near Atyrau, Kazakhstan. The cargo was shipped to Novorossiysk, Russia. There DHL contracted with Globalink for it to be towed up the Ural-Caspian Canal on barges to Atyrau and to be taken on to the refinery by road. Globalink was characterised in the contract as forwarding agent arranging the carriage.
One of the two barges employed arrived at Kuryk, at the mouth of the canal, around a fortnight outside the permitted period under the contract, apparently because it was underpowered. It could not continue up the canal because the water level was now too low for its draught. A week later the canal closed for the winter. Three units of cargo were stored at Kuryk under a supplemental agreement between Globalink and DHL, pending re-opening of the canal the following spring.
Globalink claimed US$1.65 million from DHL for the costs of storage and transport and applied for summary judgement. DHL counterclaimed against Globalink for US$2.37 million, representing the additional storage and transportation costs incurred because the barge did not enter the canal as envisaged in the contract.
Globalink contended that the low water level was a force majeure event, and the supplemental agreement superseded the delivery obligations in the original contract. DHL contended that the low water level was entirely predictable and that the supplemental agreement was not a contractual document (it was headed “Agenda”). Further, the slow progress of the barge to the canal was in breach of contract and Globalink had failed to exercise reasonable skill and care in arranging the transportation.
DHL contended that its larger counterclaim entirely extinguished Globalink’s claim for freight. Globalink sought to rely on the common law rule approved in the Aries1 that a carrier’s claim for freight must be paid without set off. In other words, a party in these circumstances must pay the freight which is due and then argue its counterclaim.
The judge held that DHL’s counterclaim had a reasonable prospect of success, thereby making it eligible for summary judgment under the Civil Procedure Rules, and went on to consider set off.
English law generally allows claims and counterclaims to be heard simultaneously. The rule in the Aries is a, possibly arbitrary, exception which, although very well established, has sometimes been followed with reluctance by judges.
The Aries itself turned on short delivery of oil carried by sea. The rule has been held not to apply to hire payable under a time charter, because “freight” and “hire” are different concepts. However most other relevant cases have tended to extend the reach of the rule. It has been applied, for example, to failure to prosecute a voyage charter with utmost dispatch and to carriage of goods by road and by air. Most significantly for this case, it was held in the Britannia2 that, where a freight forwarder acting as agent entered into a contract of carriage with a carrier for which the carrier had charged freight, the forwarder was entitled to claim the freight from its principal without set off.
The judge held that this was a freight forwarding contract, and not a contract of carriage because the primary obligation was not to carry the goods, but to procure carriage by others. He saw no justification to extend the rule in the Aries to this type of contract and therefore refused summary judgment. But, in a concession to the Britannia, and in spite of DHL’s objection that Globalink had not identified any sum as freight, the judge identified US$113,000 of Globalink’s claim as potentially freight payable to the barge operator as carrier. The judge ordered DHL to pay this sum into the court, pending final decision at trial. Finally, the judge noted that it would have been open to the parties to contract on the express basis that there would be no set off, but this will not necessarily be imposed by law.
The designation of Globalink in the contract as “forwarding agent arranging the carriage”, rather than as principal carrier, is arguable on the actual facts of the case. This introduces some uncertainty to the distinction by the judge of the contract from the contract which was considered in the Britannia, and his consequent refusal entirely to follow the Britannia. Above all, this case illustrates the importance of selecting the terms by which parties to a contract are defined.
GLOBALINK TRANSPORTATION & LOGISTICS WORLDWIDE LLP v DHL PROJECT & CHARTERING LTD
 EWHC 225 (Comm)
1 1 WLR 185 (House of Lords)
2 2 Lloyds Rep 420
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Risk Management Director, TT Club