Contracts of carriage typically contain “maximum liability” provisions, limiting a carrier’s liability for loss or damage in the course of carriage of cargo. One such provision has historically been the “weight limit defence”, which limits the liability of a carrier to a maximum amount per kilogram. The scope and limitations of this defence, however, are often misunderstood by carriers, placing those carriers open to unforeseen monetary risk. This article aims to clarify some of the misconceptions that carriers typically have respecting the weight limit defence so that they may be better able to protect and insure themselves adequately.
Clauses 9 and 10 of the standard Specified Conditions deal with the valuation of cargo, and read as follows:
9: Subject to Article 10, the amount of any loss or damage for which the carrier is liable, whether or not such loss or damage results from negligence, is to be computed on the basis of the value of the goods at the place and time of the shipment (including the freight and other charges if paid and the duty if paid or payable and not refundable) unless a lower value has been represented in writing by the consignor or has been agreed on between the parties to this bill of lading, or is determined by the classification or tariff on which the rate is based, in any of which events such lower value is the amount that governs the computation of the maximum liability of the carrier.
10: The amount of any loss or damage computed under Article 9 must not exceed $2 per pound ($4.41 per kilogram), computed on the total weight of the shipment, unless a higher value is declared on the face of the bill of lading by the consignor.
Thus, a carrier’s liability is limited as follows:
a)If the shipper has declared the value, no more than that declared value;
b)If the shipper has not declared the value, no more than $4.41 per kilogram ($2.00 per pound); and
c) In any event, no more than the actual value at the time and place of shipment.
These clauses are broad, and with the exception of willful misfeasance, protect a carrier from liability for all loss or damage to the cargo it is carrying, even in the event of negligence on the part of the carrier or theft by the carrier’s employees or by strangers.
However, the weight limit defence is not without its own limits. Some points to remember include:
- The defence does not cover lost profits due to non-delivery of cargo. For example, in the Ontario Court of Appeal case of Cathcart Inspection Services Ltd. v. Purolator Courier Ltd. (1982), it was held that the maximum liability provisions of the contract for carriage did not protect the carrier from the shipper’s lost profits due to non-delivery of what would have been a successful tender. It is important to note that this limitation of the defence applies to consequential profits lost rather than to the value of the cargo itself.
- The weight limit defence does not cover damages due to delay in the delivery of cargo. The Ontario Supreme Court case of Cornwall Gravel Co. v. Purolator Courier Ltd. (1978), also a tender case, held that a carrier could not avail itself of the weight limit provision when it delivered a tender past the delivery deadline, causing business losses for the shipper. The decision was ultimately affirmed by the Supreme Court of Canada.
- The defence does not cover consequential business loss due to cargo damage, unless that limitation is specified. See, for example, the Ontario Court of Appeal case of Monta Arbre Farms Inc. v. Inter-Traffic (1983) Ltd. (1990), in which damages were awarded for lost profits due to destruction of cargo intended for resale.
- In contracts of combined carriage and storage, a carrier may be denied the benefit of a weight limit defence unless it can show that the loss or damage occurred during the carriage portion of the contract.
- Where a carrier offers to carry cargo at a valuation higher than the maximum allowed by the weight limitation for an additional freight cost, declining to pay this additional cost will likely preclude a shipper’s cargo insurer from collecting more than the weight limit amount on a subrogated action. There is little Canadian case law on this point. However, American authorities indicate that it is incumbent on the carrier to notify the shipper of the availability of additional freight cost and the shipper has had a reasonable opportunity to pay the higher rate.
Bearing the above in mind, there are a number of steps cargo carriers should take to ensure they are not exposed to unforeseen risk:
- Clarify with shippers whether business loss damages may result if particular cargo is delayed or lost.
- Obtain a valuation of the cargo from the shipper in order to limit damages to this amount.
- Update standard form contracts and bills of lading to make explicit provision that consequential losses due to delay or damage will not be covered, or will be limited to a set amount.
- In contracts of combined carriage and storage, either clearly delineate between the carriage and storage portions of the contract or also put in place provisions to limit liability for storage of cargo.
- If additional freight costs are available for higher valued items, ensure that the shipper has been notified of the availability of these additional freight costs and has been given the opportunity to select whether it wishes to pay this extra amount. It may also be worthwhile to ask the shipper about what insurance they carry on the cargo.
- Discuss the issue with the carrier’s insurance broker to ensure that any claims not subject to the weight limit are also covered.
- When in doubt, contact a transportation lawyer for advice.
In sum, the weight limit defence typical in cargo transport contracts offers valuable protection for carriers to limit their risk for lost or damaged cargo, but is often misconceived as being broader than its actual scope. This can lead to risks that may not become apparent until the carrier is faced with an unexpected loss. It is hoped that the information above will serve to make the industry better aware of the risks faced in a contract of carriage, and will provide some means of mitigating those risks.
