Evergreen Marine Corp v Aldgate Warehouse (Wholesale) Ltd.

A concessionary freight agreement which fixes rates for goods carried for an importer’s account does not, without clear contractual language, impose an independent obligation on the importer to pay freight or demurrage. Liability ordinarily arises under the bill of lading contract. The original contract of carriage is generally made with the person named as shipper, unless the evidence shows that the named shipper contracted as agent for another. A buyer purchasing goods on free-on-board terms, with payment against shipping documents, is not thereby made an original party to the carriage contract. The buyer becomes a party when the bill of lading is indorsed and delivered to it. A term requiring the carrier to sell goods within a reasonable time in the buyer’s interests will not be implied merely to prevent continuing demurrage.

Evergreen claimed freight and container demurrage from Aldgate in respect of clothing shipped from Bangladesh and China to Thamesport in 1995. The goods were bought on free-on-board terms, with payment by letter of credit or cash against documents. The bills of lading named the manufacturers as shippers and banks as consignees, while Aldgate was named as notify party. Aldgate rejected the shipping documents because the contractual shipment dates had not been met, and the bills of lading were never transferred to it.

Evergreen relied first on a special freight agreement fixing concessionary rates and alternatively argued that Aldgate was an original party to the carriage contracts. The central issues were whether the special agreement created an independent liability for freight and demurrage, whether Aldgate was an original contracting party, and whether any term should be implied requiring Evergreen to sell the goods within a reasonable time.

1. Claim dismissed. The special freight agreements made in November 1994 and March 1995 established rates for carriage of goods for Aldgate’s account and modified Evergreen’s standard tariff. They did not impose an independent obligation on Aldgate to pay freight or demurrage. The agreements contained no such undertaking and contemplated that bookings would be made by suppliers at the port of loading.
2. The contracts of carriage evidenced by the bills of lading were made between Evergreen and the shippers named in them. The general presumption that the named shipper is the contracting party may be displaced where the evidence shows that the shipper contracted as agent for a third party: Cho Yang Shipping Co. Ltd v Coral (U.K.) Ltd [1997] 2 Lloyd’s Rep. 641; Dickenson v Lano (1860) 2 F. & F. 191.
3. The free-on-board sale contracts, and the arrangements for payment against documents, indicated that the sellers were to retain ownership and control until the bills of lading were indorsed and delivered against payment. The flexible nature of an f.o.b. contract did not establish that the buyer was an original party to the carriage contract: Pyrene Co. Ltd v Scindia Navigation Co. Ltd [1954] 2 Q.B. 402. The manufacturers arranged shipment by tendering the goods and obtaining bills of lading in their own names. Aldgate’s status as notify party, its instructions concerning the goods, and its practical control over their disposal did not make it an original contracting party.
4. Aldgate would ordinarily have become party to the carriage contracts when the bills of lading were indorsed and delivered to it. Since that never occurred, Evergreen’s claim for freight and demurrage failed.
5. For completeness, freight was governed by the March 1995 agreement and demurrage initially by the April 1994 agreement. The later reduction in demurrage rates was treated by both parties as applying from June 1996. No term requiring Evergreen to sell the goods within a reasonable time was necessary for business efficacy. Any liability under the special agreement would have been secondary to the primary liability of the bill of lading holder, who might have legitimate reasons for retaining the goods.