Test your transportation law knowledge

by Canadian Shipper

Sometimes transportation law is not what you think it is. Test your legal knowledge as legal expert Francois Rouette, navigates through the legal twists and turns of two perplexing case studies. Rouette, from the Cain Lamarre Casgrain Wells legal firm, was a guest speaker at the recent CITT Reposition Conference.

THE CASE: Hotstyle Inc. has its domicile and place of business in Repentigny, Que. It operates a business in the fashionable women’s garment industry. Needing to deliver to a retail store in Vancouver, Hotstyle retained the services of Choose For U, a transportation service intermediary. Choose For U was to organize and take care of the required transportation services. Choose for U, in turn, retained the services of Star Transport Inc., to handle the carriage of the merchandise.

A few days later, a driver from Star Transport went to Hotstyle’s warehouse and loaded the merchandise onboard a trailer. The standard Bill of Lading mentioned, among other things, the quantity, the weight (1,000 lbs) and the merchandise’s description. But no declaration of the merchandise’s value was entered into the Bill of Lading.

A week after pick-up Star Transport, Hotstyle Inc. found out that the merchandise had not yet been delivered to the retail store in Vancouver. Hotstyle’s management later learned that the merchandise had been stolen by an employee of Star Transport.  The total value of the merchandise was $75,000 and Hotstyle wished to be compensated for the value of the lost merchandise.

Who could be found liable for this loss?

Although their obligations are different, both Choose for U and Star Transport could be found liable: Start Transport as the carrier and Choose For U as the transportation service intermediary.

Can Choose for U escape its liability only by stating that it is not part of the transportation contract?

No. Although Choose for U, as a transportation service intermediary, is not party to the transportation contract and is not liable for the transportation of the merchandise, it has the responsibility to choose a reliable and competent carrier. It may be responsible for the loss if it fails to perform its duty as a transportation service intermediary, since it has an obligation of means, which implies that it must be diligent in the selection of the actual carrier.

What does Choose for U have to prove to demonstrate that it chose a reliable and competent carrier?

All steps in the choice of this carrier: does the carrier hold all the required licenses, sufficient insurance, the number of business relationship years with this carrier, the carrier’s reputation, etc. If it cannot prove this, Choose for U could be held jointly liable with the carrier for the value of the stolen merchandise.

How could Star Transport not be held liable for the loss?

Star Transport as the actual carrier of the merchandise at the time of the loss, is liable. It will remain liable unless it is able to prove 1)superior force, 2)inherent defect or 3)natural shrinkage. However, according to the 2nd paragraph of section 2050 of the Quebec Civil Code, no action would be admissible if proper notice has not been given within 9 months of the date on which the merchandise was sent.

If Start Transport is found liable, to what kind of compensation could Hotstyle Inc. be entitled to?

Since there was no declared value of the merchandise on the Bill of Lading, Star Transport’s liability should be limited to $2/pound, for a total of $2,000 (1,000 pounds). The loss over that limited liability should then be supported by Choose for U (if it is found liable) or, ultimately Hotstyle Inc.

CASE: Extra Food, a German company, specializing in the production and distribution of organic sunflower oil, sold 30,000 pounds of sunflower oil to its client, Morena U.S.A. on a “DDP” basis On December 14, 2009. Extra Food retained the services of Logistiques s.a. (a freight forwarder) to organize the carriage of its goods t to the US. On February 2, 2010, the merchandise was received by boat container (under a sea waybill), acting as  a maritime carrier.

A week later, the ship arrived at the port of Montreal where the merchandise was picked up (under a Standard Bill of Lading) by a driver of Intermodal Truck, a land carrier. On its way to Windsor, Ont., Intermodal Truck’s driver lost control of his truck, tipped the tractor and the container on the side. Sunflower oil leaked from the container and diesel fuel leaked from the tractor’s fuel tanks. The truck and the merchandise were complete losses.

On May 12, 2010, Great Insurance, Extra Food’s cargo insurer, paid $29,700 to Extra Food in accordance with its obligations as an insurer. Extra Food had a $300 insurance policy deductible. Extra Food and Great Insurance wished to be indemnified for the loss.

Could Extra Food and Great Insurance successfully file a suit against Boat Container and/or Intermodal Truck?

The merchandise was destroyed while it was under the care and control of Boat Container and Intermodal Truck, therefore both are liable for the loss suffered. However,  Intermodal Truck could ultimately be held liable as the de facto carrier at the time of the loss.

Great Insurance is justified and has the right to claim the amount of $29,700 from Boat Container and Intermodal Truck. Boat Container could have a warranty claim against Intermodal Truck (as long as the terms of the Seaway bill do not prevent it.)

Accordingly, Extra Food is justified and has the right to claim the amount of the deductible under its insurance policy of $300 from Boat Container and Intermodal Truck.

Could Extra Food and Great Insurance successfully sue Logistiques s.a.?

As a freight forwarder, Logistics Inc., is not liable for the actual carriage of the goods, but it could be liable for the loss if it committed a fault in the execution of its contract.

Could Extra Food and Great Insurance successfully file a suit against Morena for the amount for which it sold the sunflower oil?

No, because of the “DDP” modalities, the sale was not complete and that means that Extra Food was assuming the risk of loss until the deliver in the US.

Have your say

We won't publish or share your data