Compañía Sudamerica de Seguros SA, acting under an assignment of rights, claimed damage to machinery carried from Houston, USA, to Cartagena, Colombia, on the MV Thorndale. On discharge, the machinery was reported damaged, and was sent back to the manufacturer for repairs. The plaintiff paid for those expenses, and claimed them against the carrier. The contract of carriage provided for the application of the US Carriage of Goods Act 1936 (COGSA), which contains provisions similar to the Hague Rules.

The first instance Court admitted the claim, ordering the defendants to compensate the plaintiff. Both parties appealed, and the Court of Appeal (CA) modified the decision, reducing the compensation amount. The CA applied the Code of Commerce (CCom) instead of COGSA. According to arts 1643 and 1644 of the CCom, the carrier is allowed to limit its liability if the shipper does not declare the cargo's value. These provisions do not establish a minimum limit. The CA stated that the first instance Court did not consider the clauses in the bill of lading that establish a limitation of liability of USD 500 per package unless the shipper had declared a higher value. The value of the cargo was not expressly declared in the bill of lading. The plaintiff recurred in cassation before the Supreme Court of Justice (SCJ). The plaintiff alleged an infraction of art 1031 of the CCom, which establishes a minimum limitation of liability between 75% and 80% of the cargo's value, and that the value was made known to the carrier through the invoices referred to in the bill of lading.

Held: The SCJ admitted the recourse, and reversed the decision.

The SCJ observed that art 1031 of the CCom governs contracts of carriage generally, while art 1644 of the CCom specifically governs carriage by sea under bills of lading. Although art 1644 allows the carrier to limit its liability, this provision is not a complete or exhaustive rule. Other mechanisms must complement the legal regime before invoking abstract parameters such as 'the spirit of the law' or the 'intention of the legislature'. A systematic analysis of the local legal order confirms that it never concedes absolute freedom to any contractual party to establish a maximum limit to its contractual liability. The case law has been consistent that the parties may agree to a degree of liability that differs from the norm. However, it does not allow a total exclusion of liability. A clause like this implies the tolerance of negligence in the performance of obligations. Likewise, general contract and obligation principles establish a limitation on parties' freedom. Synallagmatic contracts, which generate cumulative or correlative obligations, by their functional structure, must secure a minimum of proportionality between the obligations assumed by the parties. Allowing one of the parties to fix a very low amount of liability amounts to authorising it to exclude its responsibility beforehand. That is unacceptable because, apart from contradicting the idea of an obligation, it may also endorse future wilful misconduct (dolus), which is forbidden by law.

In the law merchant and comparative law, foreign laws and international treaties reveal an increasing interest in limitation clauses guaranteeing a minimum compensation to the parties affected, in order to prevent abuses. Regarding carriage of goods by sea, the Hamburg Rules (art 6) and the Rotterdam Rules (arts 59-61) contain provisions on limitation of liability. Both instruments determine the carrier's limitation of liability according to the number of units of cargo or weight, but differ on the ability of the parties to modify such rules. The Hamburg Rules allow the parties to limit liability to a lower amount. The Rotterdam Rules are more severe towards the carrier, and only allow the parties to agree to higher amounts of limitation to those established. This Convention also excludes the limitation for breaches caused by dolus or fault of the carrier or its servants.

Therefore, art 1644 of the CCom cannot be applied, as it endorses the absolute ability of the carrier to limit its liability in a broad and unlimited manner. Such an ability must be subject to limits imposed by the contract itself, or by mandatory legal norms where it infringes public order or good customs, or exonerates the carrier of the whole duty to perform the obligation, or leaves it in such laughable or unbalanced terms that imply the acceptance of dolus or wilful misconduct, or the abuse of a dominant position. However, the maritime carrier's liability for damage or loss in contracts under bills of lading is governed by a specific regime established in arts 1643 and 1644 of the CCom. Article 1031 of the CCom cannot apply directly, indirectly, or by analogy, as there is no remission to this rule.

The cargo value is not declared in the bill of lading, but in box 6, entitled 'export references', it indicates the relevant invoice numbers, where the value appears in USD. A declaration of value facilitates calculation of the quantum of compensation, as well as the identification, assessment of the extent, and distribution of risks. As far as the carrier is concerned, this allows it to assess its exposure, the terms of the contract, and the costs of transport, freight, and insurance. Its expression in the bill of lading offers certainty, warrants good faith, trust, loyalty, and allows the parties to establish limits to compensation, which commonly is the declared value, except if it is higher than the actual value. The burden to insert the value, or to make it known to the carrier, falls on the shipper. In international practice, it is commonly omitted. Freight is commonly calculated and collected according to the cargo's quantity and weight, rather than its value. If the value is omitted, it does not affect the character of the bill of lading as a document of title, but the value is essential for quantification of compensation and the possibility to establish limitation of liability. When it is declared or appears in the document of title, the amount of the compensation for the damage or loss equals the total amount declared, unless the carrier or its agent expresses any reservation, or proves a lower value.

Article 1644 of the CCom applies where there is an omission of the value of the goods in the declaration inserted in the bill of lading. The word 'declaration', according to the Dictionary of the Spanish Language, means an 'action and effect of declaring, to manifest, make public, declare or make known, discover, to make evident'. It entails the expression of information to the knowledge of the carrier by any direct, indirect, express or tacit means, whether oral or written. The word 'insert' means to include, contain, introduce, to put something inside, which supposes, to place, express, or to make known the value of the goods in the bill of lading. This requirement is based on the essential consideration that the value must be made known to the carrier. The insertion in the bill of lading is performed by the literal expression of the value, or by the indication of a document expressing that value. For logical reasons, those documents are also integrated into the content of the bill of lading. On the facts of this case, the Court is obliged to conclude that the value of cargo appears in the declaration inserted in the bill of lading. Otherwise, the reference to the invoices has no other explanation.

This interpretation is also supported in the guiding principles of dispositive acts, ie good faith, certainty, security, and regularity of juridical acts. Following the parameters established in the provision of the Civil Code and the CCom, art 1644 of the CCom must be construed according to the general principle of good faith. The case law has stated that the concept of 'good faith' indicates that individuals must in the operation of their businesses, compliance with their obligations, and generally, display loyal conduct towards others. This supposes that every person must act with loyalty in their relationships with others and that everyone has the right to expect loyal behaviour from others. This obligation also supposes a duty of acting with diligence. The duties of diligence are stricter for those who professionally undertake commercial activity, as is the case of the shipowner in contracts of carriage of goods by sea. The local regime is particularly severe in regard to loss, damage, or delay in delivery of cargo. Considering their experience and expertise, good faith demands that carriers display special care in the formation and execution of their professional business activities. Where a carrier issues a signed bill of lading that refers to documents that indicate the value of the cargo, and those documents, applying basic parameters of logic and common sense, are an integral part of its contents, the carrier cannot ignore a declaration of value expressed in that manner. There is no doubt that the carrier was aware of this declaration of value according to these documents referred to in the bill of lading, and signed it. Its liability must then be assessed according to these circumstances, and the duty of diligence and good faith. Therefore, the CA erred in assessing the evidence, and the decision must be reversed.