In November 1991, Industrial Products International Inc (the plaintiff) began negotiations with a supplier in Middlewich, England, for the purchase of rolls of insulation material for resale to a client in Lumberton, Texas. In January 1992, Emo Trans Inc (the defendant) provided the plaintiff with an 'ocean freight quotation' for shipping the goods in a 20-foot container 'door to door'. The plaintiff agreed to the quotation and both parties agreed that 'door to door' meant that the goods would be placed directly in a dedicated container at the supplier's premises and would remain in that container until they were delivered to the customer's premises. Based on this shipping term, the plaintiff advised its supplier to package the insulation material in plastic rather than cardboard boxes.

The defendant engaged the services of another company (Emo Air Cargo) which engaged yet another company (Ware Transport) to collect the goods from the supplier. An agent for Emo Air Cargo contacted the defendant and advised that it would be cheaper to ship the goods as a less than container load (LCL) ie not in a dedicated container. The defendant, without consulting either the plaintiff or the supplier, advised the agent to ship LCL.

The defendant sent an invoice to the plaintiff which reflected a lump sum freight charge and separate customs charge. On the back of the invoice were terms in very small print which, among other things, limited the defendant’s liability for damage to goods during shipment to USD 50 per package. The plaintiff, unaware that the goods had arrived damaged, paid the invoice.

The plaintiff’s customer advised the plaintiff that the goods had arrived badly damaged, with only three out of 30 rolls being salvageable. The plaintiff brought several claims against the defendant seeking damages for breach of contract, breach of implied warranty, and negligence.

At trial, the Court concluded that the defendant was liable for the full damage to the goods because it did not offer sufficient proof that its deviation did not cause the damage. The Court thus awarded the plaintiff USD 19,840.50 in damages. The defendant appealed on the ground, among others, that the trial Court erred in concluding that the defendant acting as a freight forwarder was a 'carrier' subject to liabilty under the Carriage of Goods by Sea Act, 46 App USC § 1300 ff (COGSA), and that it could rely on its own limitation clause contained in the fine print on the reverse of its invoice.

Held: The case is remanded for further findings as to whether the defendant was a carrier for the purposes of COGSA. If the defendant is found to be such, the judgment shall stand affirmed, subject only to the defendant's right to appeal that ruling. If the defendant is found not to be a carrier, the judgment shall be reversed, and a new trial ordered.

COGSA applies to carriers who enter into contracts for the carriage of goods by sea to or from US ports. A 'carrier' is defined as the 'owner or the charterer who enters into a contract of carriage with a shipper'. Under COGSA, if cargo is damaged, the shipper or owner need only prove that the cargo was damaged while in the possession of the carrier. The burden of proof then shifts to the carrier to show either its due diligence in preventing the loss, or that the loss falls within a statutory exception.

A carrier is a party with whom the shipper has a contractual relationship, evidenced most often, but not exclusively, by the issuance of a bill of lading. For the purposes of COGSA liability, more than one party may be a carrier with respect to a shipment. Traditionally freight forwarders have not been considered carriers.

The trial Court concluded that the defendant was a carrier because it held itself out as a single point contact to ship the goods, it did in fact make all the arrangements for shipping the goods, and it knew that the plaintiff was relying on it in all respects for shipping the goods. As the defendant was a carrier, the provisions of COGSA superseded any terms in the contract and the limitations on damages contained in COGSA applied. COGSA provides as follows:

Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to or in connection with the goods, arising from negligence, fault, or failure in the duties and obligations provided in this section, or lessening such liability otherwise than as provided in this chapter, shall be null and void and of no effect.

While voiding contract provisions limiting liability, COGSA itself limits liability to USD 500 per package, unless the nature and value of the goods are declared and noted in the bill of lading. The application of this limitation on liability has been restricted to instances where the shipper was given a fair opportunity to pay a greater charge for higher liability.

The defendant also argued that the trial Court erred in applying the common law of deviation. The common law of deviation makes a carrier an insurer of the cargo and allows the purchaser to avoid the limitations on liability contained in COGSA. COGSA sets out the impact of deviation on liability as follows:

Any deviation in saving or attempting to save life or property at sea, or any reasonable deviation shall not be deemed to be an infringement or breach of this chapter or of the contract of carriage, and the carrier shall not be liable for any loss or damage resulting therefrom: Provided however, that if the deviation is for the purpose of loading or unloading cargo or passengers it shall, prima facie, be regarded as unreasonable.

Many courts interpreting this provision have held that COGSA does not alter the common law rule of deviation, and that even the COGSA limits will not apply in cases where the carrier’s conduct amounts to an unreasonable deviation from the carriage contract.

Prior to the enactment of COGSA under the doctrine of deviation in maritime law, if the carrier deviated from the express terms of a contract of carriage, the contract was rescinded and the carrier assumed liability as an insurer. An unreasonable deviation is more than mere negligence in the handling or stowage of cargo. It must be a serious departure from the contract that exposes the goods to unanticipated additional risks. Restowage of cargo at an intermediate port or negligence in failing to reload cargo would not be unreasonable.

On the facts of this case, the defendant’s conduct in departing from the specifically agreed term in the contract of carriage that the cargo be shipped in a dedicated container is sufficient to trigger the application of the common law doctrine of deviation. Therefore the trial Court properly applied the common law doctrine of deviation in holding that the COGSA liability of USD 500 per package did not apply, and that the defendant was liable for the full damage to the cargo.

The defendant argued that the damage was caused by insufficient packaging and sought exemption from liability. Neither party provided evidence of how the cargo was damaged. In any event, the doctrine of deviation applied and therefore the defendant was liable, regardless of where or how the goods were damaged.

In light of the Court’s decision it was not necessary to address the plaintiff’s contention on cross-appeal that defendant was liable as a bailee.