The plaintiff claimed for the loss of a cargo of 475 cartons of perfume stowed in 17 pallets into one container and carried to Panama. The bill of lading provided for the application of the US Carriage of Goods by Sea Act 1936 (the US COGSA). The defendant alleged limitation of liability to USD 500.00 per package according to 46 USC § 1304.5 of the US COGSA, which mirrors art 4.5 of the Hague Rules. The carrier alleged that the 17 pallets constituted the 'packages' according to the applicable provision.

The plaintiff argued that the defendant had committed a deviation, which prevented the carrier from limiting its liability. The Second Maritime Court held that there was a breach of the essential obligation of the contract stated in 46 USC § 1303.2 of COGSA (or art 3.2 of the Hague Rules), as the carrier did not deliver the cargo. Such omission constituted a quasi-deviation that prevented the carrier from relying on limitation of liability. Therefore, the Court ordered the defendant to pay the full loss. The defendant appealed the decision.

Held: The Civil Branch of the Supreme Court of Justice (SCJ), acting as Court of Maritime Appeals, reversed the decision. The SJC stated that, under US law, the concept of deviation is exclusively restricted to geographical deviation, not to the breach of the essential terms of the contract, which is known as quasi-deviation. Therefore, the carrier would be allowed to limit its liability to the amount stated in the US COGSA. The right to limit liability would be denied if the shipper had declared the nature and value of the merchandise before loading and such information was inserted in the bill of lading. In this case, however, the bill of lading did not contain any declaration regarding the value of the cargo.

The plaintiff alleged that, if limitation of liability was granted, the calculation must be based on the 475 cartons and not on the 17 pallets, as the carrier proposed. The SCJ analysed the concept of 'package' under US and Panamanian case law on the US COGSA, concluding that a pallet has been considered to be a package. A package under the US COGSA is the device into which cartons of merchandise are introduced and packed to facilitate their carriage. The concept is not extended to cover its contents. Hence, neither the container nor the 475 boxes can be considered a 'package', but the 17 pallets are packages. The SCJ reduced the compensation granted to the claimant, ordering the carrier to pay USD 500.00 for each of the 17 pallets.