Cargo Disputes: Lesson 1 - Overview
When a party ships goods by sea, there are two main contracts that will be involved: (1) the underlying sale contract between buyer and seller; and (2) the contract of carriage with a carrier to transport the goods from A to B. Either the buyer or the seller will organise the contract of carriage, but the carrier might end up in a dispute with either of those parties. In that case, the parties involved in the dispute normally want to have or obtain privity of contract, so they can take the benefit of any contractual obligations or exclusions, depending on which side they are on. The following diagram shows how that happens.
Normally, it is the seller who arranges the contract of carriage and the buyer obtains privity of contract by virtue of the operation of s.2(1) of the Carriage of Goods by Sea Act 1992 (COGSA 1992), which provides for a kind of pseudo-assignment by operation of law.
By contrast, if the buyer has arranged the contract of carriage but the seller has a dispute with the carrier, the seller can gain privity by virtue of a sui generis exception to the normal contractual rules on privity developed in the case Pyrene v Scindia to take the benefit of that contract.
The diagram on this slide also shows what happens at the financial level. A buyer thousands of miles away from a seller doesn't want to run the risk of loss or damage to the goods (or documents representing title to the goods), so they frequently use banks as intermediaries who give cross-undertakings to each other, which makes the process more secure (although not always!).
Because this diagram has lots of moving parts, we recommend you download the dynamic PowerPoint presentation below, as well as look at this static diagram. It talks you through each stage.
NB: On this website the terms "seller" and "shipper" are often used interchangeably, as are "buyer" and "consignee". Although these can be different, they are often the same.
overview powerpoint (dynamic)
NB: Please view the dynamic PowerPoint in "Presentation View" mode.