(Judgments No. 94A / 2008 / KT-PT dated 29/04/2008 on compensation for goods to be lost during transportation by sea)
Nguyen Nhu Hai – Lawyer
The important contents of this judgment include what the shippers should pay attention to avoid the risk of compensation for damages and what the court has made precedents on the application of the principle of good faith and explain the contract in the commercial dispute.
A. CONTENT OF CASE
1. On March 25, 2005, Vietnam Northern Food Corporation (called as Vinafood) has signed a charter party with Vietnam Shipbuilding Industry Corporation (called as Vinashin) to transport shipment of rice from Vietnam to Cuba. The transporting ship have name as Vinashin Sun that is under the management of Sea Transportation Company (now known as Vinashinelines).
2. On April 22, 2005, the shipper issued the bill of lading No. 08 / ALP / 05 for the shipment of rice with a total weight of 9,000 tons bound into 180,000 bags, the journey from Saigon to Havana and Nuevitas harbors in Cuba. The notified consignee is Alimport, Havana – Cuba. The same day, Vinafood also signed an insurance contract No. 05 / HNO / HHA / 1120/0083 with Petrolimex Insurance Corporation (called as Pjico) hedging the shipment against risk.
3. On June 11 and 23, 2005, Vinashin Sun sequentially arrived at Havana and Nuevitas harbors to unload the whole shipment. After completion of the unloading, it is detected the shipment losses.
4. According to the assessment report No. M05 / 138 / 08.17.2005 of the Marinter SA Assessment Company, Cuba instructed by Pjico, the shipment lose by 131,528 tons, of which lack of 2,395 sacks of rice equivalent to 119,750 tones
5. On September 12, 2005, based on the insurance endorsed Vinafood, Alimport requested Pjico to pay $ 60,732.86 for the loss of rice shipments. Pjico undertook, as the insurer, to compensate Alimport for $ 60,732.86 USD, including the following: – Value of loss: $ 59,331.62; – Cost of handling damage: $ 1,373.46; – Confirmation letter fee: US $ 27.78.
6. On February 9, 2006, Alimport sent a confirmation of full receipt of the compensation. Also, they entitled Pjico to claim compensation for losses of the shipment. On February 15, 2006, Pjico has sent Vinashinelines a letter No. 214 / GD-BT / 2006 to claim amount of $ 60,732.86.
7. Trial and appeal courts decided for Pjico win.
B. WHAT TO DO AVOID RISK OF DAMAGE
The shipper should inventory the shipment and clearly indicate in the bill of lading before issuing it. Failure to this, it will make them bear the risk of compensation for lost goods during transport.
1. To inventory the shipment before issuing bill of landing
• Article 148 of 2015 Maritime Code stipulated that (Articles 81, 86 Maritime Code 1990 regulated): A bill of lading is the shipping documents as proof that the shipper has received the goods with the number, type, status as stated in the bill of lading for transportation to the place of delivery.
• According to the details in the judgment “On 22/4/2005 the loading up board was completed. The same day, Vinashin has supervised the loading but not tally. Total quantity, weight indicated on the bill of lading is subject to declarations by Vinafood “.
With issuing bill of lading No. 08 / ALP / 05 but not inventory, Vinashin was held by court that “must take responsibility for the losses incurred due to damage or loss of items” during transport, and Vinashin “have the obligation to compensate for the loss of goods, if can not prove that he is not at fault for causing such damage.”
2. Clearly indicate your comments in the bill of lading if having doubts about the goods
• According to details in the judgment: ” On 22/4/2005 the loading up board was completed. The same day, Vinashin has supervised the loading but not tally. Total quantity, weight indicated on the bill of lading is subject to declarations by Vinafood “. Also, at the front of the bill of lading stating that: “Details of the quantity and quality of goods declared by the consignor“; The weight, quantity, condition, content, value as mentioned in the Bill we do not know unless there is contrary evidence or agreement. The issuing this Bill not be regarded as a contrary agreement“.
• According to provisions of Article 16.1 of the 2015 Maritime Code, the shipper have right to indicate their comments or refuse to describe goods in the bill of lading if there is doubt about the status of goods.
With stating only on the bill of lading ” Total quantity, weight indicated on the bill of lading is subject to declarations by Vinafood “, without clearly indicate about the status of goods, the plaintiff argued that “the shipper have no comments on the shipment.” The court accepted this argument.
C. NEW PRECEDENT ON PRINCIPLES OF GOOD FAITH AND INTERPRETATION OF CONTRACT IN THE CONTEXT OF ENTIRE CONTRACT
1. To extend the standard of good faith principle in commercial transactions. not only within “establishment, execution and termination of civil rights and obligations” as Article 3 of the Civil Code, but also the Court has applied this principle to “settlement of civil obligations“. In analysis: “In opinion that The Trial Court did not allow the defendant to copy the documents. Considering that: the case has been accepted by the Trial Court on 25/7/2007, instance trial on 06/11/2007. During the investigation and conciliation phase, the defendant has enough time to know about the bill No. 08 / ALP / 05, but the defendant did not copy the bill of lading. Thus, there are proofs to confirm that the defendant has a full charter party and bill of lading No. 08 / ALP / 05, but because of unwillingness to resolve the obligation, the defendant has made non-objective claims. “
Point of view of the court is also consistent with the provision in Principle of International Commercial Contracts (PICC). Accordingly, Article 1.7: “1. The contracting parties shall act in conformity with the spirit of goodwill and good faith in international commercial transaction. 2. The contracting parties not be entitled to limit and remove this obligation “. The PICC’s editorial approach can be interpreted that the parties must act in accordance with not only the establishment, implementation and termination, but also in the whole stage of commercial transaction, including settlement of civil obligations.
2. Exceptions in interpretation of contract in the context of entire contract. Under Article 404 of the Civil Code 4: “The terms of the contract must be interpreted in relation to each other, provided that the meaning of the terms that fit the entire contents of the contract”. However, in this case, the Court has created an exception of Article 404.4, which acknowledged, the parties can set the order between the different terms or parts of the contract. Specifically: “Whereas: the defendant request to consider Article 25 of the charter party that specified :” The other terms are not stipulated in the charter party will be determined according to the charter party Gencon 1994 “. This is only a treaty agreement with the indicated manner, but in Article 9 of this contract specified responsibilities as follows: the shippers try to keep the goods in the good condition during the journey and is responsible for the loss of goods caused by ship to the port of destination”. There was a agreement on compensation for loss of the goods in the Contract, so no need to reference Gencon 1994 at request of the defendant “.
Point of view of the court is also consistent with the provision in Principle of International Commercial Contracts (PICC). Accordingly, although the article 4.4 stipulated “The contents of the contract must be interpreted in the context of entire contract or of all terms in the contract “. On principle that there is no priority order between the terms of the contract, meaning that the terms are equally important in explaining the remaining of the contract. There is, however, some exceptions to this rule.
– Firstly, the will statement stated in the title of the contract may or may not be taken into account in explaining the terms of the contract.
– Secondly, even in the event of a dispute, specific terms (direct application) are usually preferred to general terms (morally or purposely).
– Finally, the parties can set their own order between the different terms or parts of the contract. It is often the case that complex contracts have different legal documents relating to economic and technical aspects of the contract.
The application of the court for the principle of good faith to settlement of civil obligations and the recognition that parties may set priority order of terms or parts of the contract, the Court has created precedents on those issues in commercial disputes..