Bills of lading generally contain a provision that limits carriers' liability to a certain extent if goods are lost or damaged or other claims arise. Such limitation provisions can be used when a merchant fails to declare the cargo's value (which is often the case).
A Brazilian court recently upheld the validity of such clauses.
The case involved a redress claim filed by a cargo insurer against a maritime carrier for cargo damages which occurred during an international ocean carriage destined for a Brazilian port.
When the container arrived in the port of discharge, the port operator remarked that there were damages to the unit (eg, scratches, rust and weight discrepancies).
A custom inspection was conducted and the consignee fully rejected the goods for improper use once it had verified that the cargo contained an excess of humidity and moisture inside.
The consignee notified the insurer, which indemnified the cargo loss and subsequently filed a redress suit against the carrier, seeking compensation for the losses.
The first-instance court granted the claim and held the carrier liable for the damages that had occurred during carriage. The judge did not apply the limitation provision invoked by the carrier.
The carrier appealed to the Sao Paulo Court of Appeals.
The Sao Paulo Court of Appeals partially granted the carrier's appeal and overruled the first-instance decision. It unanimously recognised the applicability of the bill of lading's limitation provision. According to the court, the contracting party had had an opportunity to declare the cargo's value but had decided not to, possibly in order to obtain a lower freight cost. Therefore, in the absence of a declaration of the cargo's value, the limitation clause was valid, as it had been voluntarily and consciously adhered to by the merchant.
This decision confirms that if a contracting party can declare its cargo's value in its bill of lading but chooses not to, the limitation of liability clause provided therein can be applied in Brazil.
This decision follows several other precedent decisions from the Brazilian courts, including a number of judgments from the superior courts accepting the "validity of a clause limiting the indemnity amount due by virtue of damage to the cargo object of international ocean carriage".(1)
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.