China State Construction Engineering Corp (the plaintiff) was a Guam construction and development company. On 5 February 1988, the plaintiff entered into a written agreement with Ambyth Shipping & Trading Inc (the defendant). The agreement indicated that the defendant was to arrange for the shipping of the plaintiff's tower crane from Guam to China, via Hong Kong. The defendant hired Dewitt Transportation Services of Guam Inc (Dewitt) to stuff the crane into containers. The stuffing was completed on 30 March 1990. On 5 April 1990, the defendant issued an invoice to the plaintiff referencing the 5 February 1988 quotation agreement. The bill of lading was issued on the same day.

The plaintiff contended that the defendant and Dewitt had damaged the crane during the stuffing process, causing damage of approximately USD 30,000. Dewitt filed a motion for summary judgment; the defendant joined in Dewitt’s motion. Dewitt argued that it was a sub-agent of Far East Micronesia Line (FML), via FML's agent, the defendant. Dewitt therefore fell within the bill of lading's definition of 'carrier' and was not liable for any damage which occurred 'prior to loading'. Dewitt also contended that the bill of lading contained a one-year limitation period, which expired prior to the filing of the plaintiff's complaint. The defendant incorporated Dewitt's arguments that basic principles of contract interpretation precluded imputation of liability to FML's agents pursuant to the strict provisions of the bill of lading in this case. The defendant argued that it was the Guam agent for FML who was responsible for arranging the shipment of cargo to or from Guam on FML vessels. As an agent, the defendant referred the shipper's cargo to FML's container freight station, Dewitt, for containerisation and packing. All of the defendant's actions before and after the issuance of the bill of lading concerning the plaintiff's crane were undertaken as an agent for FML. Thus, pursuant to the terms of the bill of lading, the defendant could not be held liable for the damage to the crane.

Dewitt and the defendant relied upon 46 USC 1307 (COGSA), which provides:

Nothing contained in this chapter shall prevent a carrier or a shipper from entering into any agreement, stipulation, condition, reservation, or exemption as to their responsibility and liability of the carrier or the ship for the loss or damage to or in connection with the custody and care and handling of goods prior to the loading and subsequent to the discharge from the ship on which the goods are carried by sea.

They also argued that a Himalaya clause, cl 6 of the bill of lading, extended the bill of lading protections, ie the carrier's defences and limitation of liability under COGSA, to agents and independent contractors who assisted the carrier in performing its contract of carriage.

The plaintiff argued that the bill of lading did not control the issue of liability because the damage occurred before its issuance. The plaintiff contended that the 5 February 1988 written agreement was a contract that did not have any of the restrictive or limiting language of the bill of lading. The issuance of a bill of lading did not necessarily supersede or nullify a prior contract, oral or written, which was complete in itself, unless it was the intention of the parties to treat the prior contract as merged into the later written agreement. The plaintiff further contended that even if the bill of lading was held to control the issue, cl 5 of the bill of lading which exonerated FML, the defendant, and Dewitt through the operation of the Himalaya clause in cl 6 from liability for any damage, whether caused by their negligence or not, was ineffective. Finally, the plaintiff argued that, although s 1307 of COGSA provided that the carrier and shipper could agree on liability for damage occurring prior to loading, s 1311 stated that s 1307 could not supersede any part of ss 190 to 196 of 46 USC (which dealt with the limitation of vessel owner's liability) or of any other law which would be applicable in the absence of COGSA, in so far as they related to the duties, responsibilities, and liabilities of the ship or carrier prior to the time when the goods were loaded on, or after the time they were discharged from, the ship.

Held: The defendant's motion was denied.

COGSA was applicable in the instant case. The Hague Rules were ratified in the United States in 1937 and given effect by COGSA. It was well established that Congress passed the Harter Act and COGSA to counteract the persistent efforts of carriers, who were the drafters of ocean bills of lading, to insert all-embracing exceptions to liability. Also, even if the bill of lading was held to control the issue, it was well settled that any contract between a carrier and shipper completely exonerating the carrier from liability for negligent damage to the goods carried is void as being against public policy. Further, mere acceptance and retention of a receipt containing the terms of limitation had been held not to constitute assent to the limitation as a matter of law. Contents of ocean bills of lading were for all practical purposes completely within the carrier’s power, subject to provisions of COGSA, and contracts purporting to limit liability must be strictly construed. Thus, even if the bill of lading was found to control the issue, there was a genuine issue of material fact regarding the validity of the liability provision in cl 5.

Dewitt and the defendant argued that the plaintiff failed to file its claim for relief within one year of the delivery of the goods or the date when the goods should have been delivered pursuant to cl 19(2) of the bill of lading, and that the plaintiff’s claim was time-barred. The plaintiff contended that the bill of lading was issued after the damage to the crane occurred, and its terms were not applicable. However, even if the bill of lading applied, the plaintiff’s claim was not time-barred because the defendant’s conduct resulted in waiving the one-year statute of limitations period. In this case, the plaintiff had immediately notified the defendant upon discovery of the damage to the crane. The plaintiff filed its claim and, when Dewitt failed to respond, the plaintiff wrote two letters in December 1988 to the defendant requesting compensation for the damage to the crane. In February 1989, the defendant sent a certification attached to the plaintiff’s letter to Dewitt stating that '[i]t seems to us their [China State's] claim is valid and sound. Therefore, appreciate your amicable settlement between you and our customer as soon as possible'. The plaintiff argued that, when Dewitt failed to respond, it made repeated attempts to contact the defendant, as evidenced by the plaintiff's letter to it dated 17 April 1989. This letter was written just a few weeks before the one-year limitation period expired. The defendant did not respond to the letter.

Since the plaintiff’s efforts after February 1989 to settle its claim involved direct contact with the defendant only, and since the defendant was not an agent of Dewitt, the defendant’s conduct is not legally attributable to Dewitt. Thus, there is a genuine issue of material fact as to whether the defendant’s conduct alone was such as to waive the one-year limitation period in the bill of lading.