TT Talk - Court rules on contractual exclusion for high-value shipments
A recent decision of the English commercial court in Datec Electronic Holdings Ltd v United Parcels Services Ltd raises some important issues for freight forwarders and carriers dealing with high-value consignments.
Datec regularly used UPS to move consignments of electronic parts to customers all over the world and, as part of this agreement, gave UPS a consignment of three parcels of computer processors valued at UKP 240,000 for transport from the UK to Holland.
UPS's conditions of business stated that it would not accept shipments whose value exceeded USD 50,000; that if it inadvertently did so, it reserved the right to stop those goods in transit; and that in any event it excluded all liability for loss or damage of any such parcel. UPS relied on these conditions and rejected Datec's claim.
There was considerable discussion as to whether Datec knew of this restriction and whether UPS knew that some of Datec's parcels exceeded this value. There was conflicting evidence about the discussions that had taken place between Datec, its freight forwarders and UPS about this point. The evidence was based on meetings and discussions between the parties, but there was nothing in writing to show that Datec had been aware of the restriction, or that UPS knew that its limit was being breached. The judge held that, even though UPS had accepted parcels with a higher value, it had not done so knowingly and therefore had not waived its right to rely on the contractual restriction.
The restriction was valid as an express provision in the contract and would normally have been binding on the parties. However, the consignment in question had been moved by road from UPS's hub in Cologne, Germany to its destination in Holland and therefore the provisions of the CMR convention came into play. While it was perfectly legitimate under the convention for UPS to refuse to accept consignments that did not meet its own criteria, if it nevertheless carried them (with or without its knowledge) it could not, unless permitted by CMR, limit or exclude its liability: that was in direct contravention of Article 41. The claimants had alleged that the parcels in question had been stolen by the driver employed by UPS but the judge held that their evidence had not met the required standard of proof. There were no grounds to say that the loss had been caused by gross negligence on the part of UPS (which would have exposed it to unlimited liability). UPS was however liable under the ordinary provisions of CMR and was ordered to pay compensation of UKP 657.73 (about USD 1200).
There was considerable discussion in this case as to whether UPS knew (or should have known, from accompanying documents, invoices etc) that Datec's consignments were in breach of its limits. Had the evidence shown that it was aware of the values yet done nothing about it, the judge might well have held that UPS had waived its rights to rely on that particular limitation.
The lessons for forwarders and carriers are clear:
If your terms and conditions state that you will not carry certain items, you must make sure that you abide by those conditions. You should draw the attention of senior management to the issue and must also tell the client in writing that its shipments do not meet your criteria. You must not simply carry on regardless, ignoring the issue and hope that nothing will happen. This applies not only to valuable packages, but also to other items, such as dangerous cargoes, that you have specifically excluded in your trading conditions.
Apart from anything else, you should think about your liability insurance. The Club has agreed to insure your liabilities on the basis of your standard trading conditions and you may jeopardise your cover if you agree to carry something which you have said you will not normally move. If you want to handle or carry such shipments (or if you suddenly discover that you are handling them) you must alert your brokers and get them to check with the Club. The Club recognises the commercial pressures in circumstances like this (Datec was giving UPS up to 100 shipments a week and was therefore clearly a most valuable customer) and will always try to help find a financially acceptable solution but it must be consulted about your plans and agree extensions of cover before you start operations.
You should also be aware that, if any part of the movement is by sea or air (or by international road transport within Europe) the provisions of the relevant international convention will generally override any contractual restrictions you have on liability for loss or damage.
Thirdly, and almost as important: if you have a meeting with a customer write to them afterwards confirming the items discussed and the agreements made. You never know when you will be glad you did so.
For those interested in reading the full text of the judgment, it is available at http://www.bailii.org/ew/cases/EWHC/Comm/2005/221.html