Commentary: Rule 5 Liabilities in respect of delay

5.1 General

Neither the Hague nor the Hague-Visby Rules contain provisions holding the carrier liable for delay. However the carrier’s liability for delay is mentioned in both the Hamburg Rules and the Rotterdam Rules.

It should be noted that the Hamburg Rules contain a special limitation of liability for delay, namely, 2.5 times the freight paid for the goods delayed.

Additionally, under the Hamburg Rules, goods which have been delayed more than 60 days from the time reasonably required of a diligent carrier to reach destination, will be considered lost. This transforms the claim from one for delay to one for non-delivery/shortage.

Given that the most common convention, the Hague-Visby Rules, does not contain any regulations regarding the carrier’s liability for delay to cargo, clauses excluding such liability are routinely found in bills of lading and are, for the most part, effective.

Liability concerning delay could however be mandatory according to local law or the Hamburg Rules. In jurisdictions where liability concerning delay is mandatory for sea transport, a clause excluding liability for delay in the bill of lading will probably be held invalid and set aside. Instead, the carrier needs protection from such liability by way of insurance. This is provided by this section.

The cover under this section is for “liability pursuant to mandatory law”. An increasing number of transports have to meet a certain delivery date. Shippers may make the booking conditional upon delivery of the cargo at the destination within or before a certain time. By agreeing, the carrier extends his liability by contract beyond what would have followed from applicable law. As a breach of a contract, the carrier might be liable also to compensate the receiver for consequential damages such as loss of production of a factory in the absence of a vital piece of machinery. It is a basic principle for P&I Insurance that extended contractual liabilities are not covered unless approved by the Club in advance.

Under this section the Member is also covered for his legal liabilities for delay in the carriage of passengers and their luggage. For the sake of continuity and completeness, the cover for those liabilities is dealt with under Rule 3 Section 5. See the comments under 3.5.15.

See also the comments under 11.2.2.7 regarding exclusion of cover under Rule 11 Section 2 (h) for delay caused by the late arrival of the ship at the port or place of loading.

5.2 What constitutes a delay?

It is easy to define a delay when the carrier has agreed to deliver the cargo by a certain date. However, the liabilities for such delay are excluded from cover under this section.

Other types of delay have to be judged according to the type of cargo and trade concerned. The margin for time constituting a delay is shorter in North Sea traffic than for trans-ocean voyages, covering greater distances. Liner service of general cargo under a timetable will permit shorter delays than a tramp service with bulk cargoes, although a timetable in itself should not be regarded as a guarantee for delivery within the time published. The absence of clear case law on the point makes it difficult to define by what percentage of the expected transportation time, a delay would be treated as unacceptable and expose the carrier to liability. Some guidance as to what might be considered an unacceptable delay can be found in Article 19 of the Convention on the Contract for the International Carriage of Goods by Road (CMR):

“Delay in delivery shall be said to occur when the goods have not been delivered within the agreed time limit or when, failing an agreed time limit, the actual duration of the carriage having regard to the circumstances of the case ……… exceeds the time it would be reasonable to allow a diligent carrier”.

The question of delay is not exclusively related to the time of the ship’s arrival at the port of destination. The ship may have arrived on time but the discharging or delivery of the goods might have been slow enough to constitute an unreasonable delay.

5.3 For what consequences of delay is the carrier liable?

In cases where liability for delay is mandatory, it follows from the general principles of the burden of proof that it is on the claimant to prove in what respect and to what extent he has suffered a loss as a consequence of the delay. This is an important aspect in the defence of the Member’s interests and one which the Club will follow up thoroughly.

If the claimant can prove that he suffered a loss, he must show, in addition, that it was caused directly by the delay. An example of a consequence may be that he had to buy similar goods elsewhere to fulfil his obligations to effect delivery in a timely fashion to buyers under a sales contract. The delay may also have increased the shipper’s or receiver’s costs for storage and transhipment and for customs’ fees, import duties or insurance premiums.

Claims of this nature often contain items which cannot be regarded as direct consequences of the delay.

For the Club to defend the Member successfully against such claims, it is necessary to receive particulars and information from the ship and full support in carrying out the necessary investigations. How this should be done and what the Member’s obligations are for co-operating with the Club are described in the comments to Rule 4 Section 1 and Rule 10 Section 4.

5.4 Measures to prevent delay

To avoid delay, a carrier may take special precautions to bring the goods to their destination in time. The goods may be on-carried by another ship or by train or truck. It happens that urgently required goods might even be air freighted. The increased costs may be compensated under Rule 8 Section 2. A condition for such compensation is that the costs were incurred to avoid a mandatory liability for delay. In line with this, a Member will not be compensated if the preventive costs were incurred to meet a specific, contractual delivery date. (Such is considered to be an operational matter.)

Cargo is sometimes discharged by mistake in a port other than that mentioned in the bill of lading. To avoid a shortage claim or one for delay, the carrier may forward those goods to their correct destination. The increased costs may be compensated under Rule 8 Section 2. For goods discharged intentionally at a port other than that stipulated in the bill of lading, compensation is excluded under Rule 11 Section 2 (i). Liability arising out of the failure to arrive or the later arrival of the vessel at the port or place of loading, as well as the failure to load a particular cargo are excluded under Rule 11 Section 2 (h).

5.5 Recourse against those who caused the delay

If the carrier is held to be responsible under the bill of lading to a receiver for delay under any applicable mandatory law, he may still have a right of recourse against a third party whose negligence breach or fault caused the delay. The stevedore company at the port of loading may stow a container contrary to instructions. Warehouse operators in the port of discharge may have delayed delivery of goods to the receiver because it was misplaced in the terminal. The Club will assist Members in pursuing any such recovery action. If the Club has agreed to compensate the Member for the loss, upon payment to the Member, the Club is subrogated to the Member’s rights against the third party in accordance with Rule 14. The Member has an obligation to assist the Club in pursuing any such recovery. See the comments under 14.2.