This claim arise from the international carriage of 602,560 kg from Vestmannaeyjar, Iceland, to the port of Gunness, UK, on the MS Saar Genoa. On departure, the cargo was weighed by a certified weigher, and the weight was found to be 602,560 kg. The master confirmed the weight of the cargo by his signature on the weighing certificate.

A bill of lading was issued on 18 March 1997 and signed by Þorvaldur Jónsson, shipbroker, on behalf of Kvist hf, the ship's time charterer, and on behalf of the master of the ship in question. The bill of lading stated under the heading 'Shipper's description of goods' that it was Icelandic fishmeal, weighing 602,560 kg. The terms and conditions also stated: 'Weight, measure, quality, quantity, condition, contents and value unknown'. When unloading took place at Gunness on 27 March, the cargo was 20,360 kg short.

The plaintiff paid insurance compensation and then claimed ISK 690,202 from the defendant. The defendant rejected that recourse claim with a general reference to the terms of carriage on the relevant bill of lading.

The plaintiff argued that the defendant was liable for the damage as the carrier of the cargo and the time charterer of the ship. According to article 73 of of the Shipping Act/Siglingalög No 34/1985 (the Act) [which gives domestic effect in Iceland to the Hague-Visby Rules, with modifications], the defendant carrier is liable for the damage to the cargo even if someone else is actually responsible for the transport of the goods in part or in full.

The defendant relied on the general disclaimer on the front of the bill of lading. The goods were sold 'fio', ie 'free in and out'. The loading and unloading of the goods was therefore not carried out by the carrier but by the consignor and its consignee. The same applies to the weighing of the goods. This was also not carried out by the defendant, neither in Iceland nor in the UK. According to arts 102 and 103 of the Act [equivalent to arts 3.3 and 3.5 of the Hague-Visby Rules], the consignor is responsible to the carrier for the correctness of the description of the goods recorded in the bill of lading according to its wishes and information. The defendant argued that art 111 of the Act [equivalent to art 3.4 of the Hague-Visby Rules] could not be relied upon because that art only applies when the master can see that the information about the cargo is clearly incorrect but fails to record a comment. The situation is different in the case of loose fishmeal, where the master is not in a position to verify its weight.

The Reykjanes District Court held that in this case, the cargo was in bulk. It could not be assumed that the master was in a position to verify or ascertain that the quantity taken on board was correctly weighed. He had no choice but to accept the quantity provided by a certified weigher. The same applied to the quantity taken off the ship at the port of discharge. The terms of the bill of lading must also be considered. They state that the weight of the cargo is unknown. Therefore, judgment should be given in favour of the defendant.

The plaintiff appealed to the Supreme Court.

Held: Appeal upheld.

The Supreme Court has been presented with evidence as to how the cargo was weighed. The meal was placed into sacks, which were then unloaded into the ship's hold. The meal was weighed both at the factory and again when it was unloaded from the cargo hold. This method was considered accurate and reliable.

The parties do not dispute that the defendant was a carrier within the meaning of the Act, nor that the resolution of their dispute should be governed by Icelandic law. The calculation of the amount of the claim is also undisputed. The dispute solely concerns whether the defendant's reservation in the bill of lading, which was upheld in the District Court, relieves it of liability.

The plaintiff bases its appeal primarily on art 110 of the Act that the bill of lading is the basis for the legal status of the carrier and the consignee of the cargo, but that the plaintiff, by paying insurance compensation for damages, has acquired the rights of the consignee of the cargo against the defendant. The bill of lading is evidence that the defendant carrier has accepted the goods as stated in the bill of lading, unless otherwise proven: art 111 of the Act. A general disclaimer on limitation of liability, such as the one printed on this standard form bill of lading, does not change the defendant's liability for damages if it does not return the cargo in the same condition in which it was received. According to art 118 of the Act [equivalent to art 3.8 of the Hague-Visby Rules], this obligation shall not be derogated from by agreement.

In support of its claim, the defendant refers in particular to arts 102, 103, and 111 of the Act. It also bases his claim on the fact that it has long been customary to include in printed bill of lading forms a disclaimer of this kind regarding the carrier's liability. This is therefore part of generally accepted terms of carriage and the consignor was fully aware of this.

The Act places restrictions on a carrier limiting its liability for cargo that it accepts for carriage. These are to be found in the Act, especially in art 68 [equivalent to art 4 of the Hague-Visby Rules]. The disclaimer in the bill of lading is general, and its literal application would almost completely exclude the carrier's liability for the description of the goods towards the holder of the bill of lading. The limitation of liability here is so general and extensive that it cannot be upheld in the light of arts 102.2 and 111.2 of the Act. The defendant therefore cannot rely on the provisions of the bill of lading in question to avoid liability for the plaintiff's loss.