On November 28 2013 the Transport Law Division of the Federal Court of Justice decided on a case (I ZR 144/12) in which a manufacturer of tap chargers contracted a freight forwarder (the defendant) on a fixed-price basis to transport eight boxes of tap chargers from Germany to Canada. During loading two boxes loaded by the truck driver of the freight forwarder’s subcontractor were damaged, resulting in total loss.
According to transport law a freight forwarder is, in principle, strictly liable for damages or loss to carried goods which occur during its custody, with no negligence or intent required. In this case, the decision focused on when the freight forwarder’s custody of the goods was established. The Federal Court of Justice denied the strict liability, but held the defendant liable according to general statutory law.
The manufacturer entered into a contract with the defendant on a fixed-price basis for the transport of eight boxes for delivery in Winnipeg, Canada. The boxes were located in a storage facility rented by the manufacturer. The defendant subcontracted a commercial carrier for transportation, which then sent a truck to the storage facility to collect the boxes. The contract between the manufacturer and the defendant contained no express stipulations of who should be responsible for the loading of the goods.
When the defendant’s subcontractor arrived, the storage facility employees loaded six of the eight boxes onto a trailer. The remaining two boxes were then loaded by the truck driver. Due to faulty operation the two boxes fell off the loading gear, causing damage and the loss of two chargers. During the truck driver’s loading attempt, none of the storage facility’s employees were present. Further, the court found that the truck driver had acted independently and without authorisation from the storage facility’s employees. In addition, the truck driver had never been involved in any loading operations in the past.
Consequently, the manufacturer claimed for the loss of approximately €33,000, arguing that the truck driver’s neglect was attributable to the defendant. The defendant rejected its liability and invoked that the truck driver had merely assisted the storage facility employees, and that it was the employees’ actions which were solely attributable to the manufacturer.
The first-instance court held the defendant liable for the claimed damages and the Court of Appeal upheld the decision. The defendant then filed a review at the Federal Court of Justice, which also upheld the former decisions.
Determining the custody period was the crucial aspect of the case, as at fixed costs a freight forwarder would be strictly liable for any damage or loss of the goods during its custody, even without any neglect.
According to Sections 425(1) and 459 of the Commercial Code, to be liable the freight forwarder had to have custody of the goods. As a prerequisite, damaged or lost goods must be under a freight forwarder’s (or subcontractor’s) responsibility, enabling the freight forwarder to protect the goods from possible damage. In addition, a personal element is required (ie, it was the carrier’s intention to take the goods into its custody for the purpose of transportation). The Federal Court of Justice assessed whether the truck driver’s loading operations met these requirements and concluded that no custody was established.
First, custody could not be established by the driver’s unauthorised loading. The driver acted on his own initiative and without instruction from the storage facility employees when he commenced loading the remaining boxes. It was also found that he had not been involved in loading the first six boxes. As the contract between the manufacturer and defendant did not contain an express obligation of the defendant to load the goods, Section 412 of the Commercial Code applied, which assigns the general loading obligation to the sender of the goods (in this case, the manufacturer). Based on this, responsibility to load the goods lay exclusively with the manufacturer and, according to Section 425(1) of the Commercial Code, the driver’s unauthorised loading could not be regarded as taking over custody.
Second, the court rejected the argument that since the driver’s actions were attributable to the defendant, his intent to take custody (the necessary personal element) should be attributable in favour of the defendant. In principle, custody commences once loading has finished. In this case, loading had not finished when the damage occurred.
Parties are generally free to subsequently agree on a deviation from this principle. However, in this case, such a deviation was not agreed by the parties – the goods remained in the custody of the storage facility, which was attributable to the manufacturer. As a result, the truck driver’s conduct was insufficient for such an agreement because he commenced loading without consent. The court also pointed out that unauthorised loading cannot result in a subsequent agreement, since the freight forwarder could have unilaterally established a limitation of his liability (liability would be limited by statutory transport law according to Section 431 of the Commercial Code).
The court also approved the earlier decision that the defendant was nevertheless liable according to the general statutory provisions for a negligent breach of contract, as well as the non-applicability of Section 433 of the Commercial Code, which is applicable to transportation contracts and contains a statutory limitation of liability. The court pointed out that this provision also requires that damage occurs during the custody period, which applies only to consequential losses not based on damage or loss of goods.
Section 425 of the Commercial Code applies directly to a commercial carrier of goods but, according to Section 459 of the Commercial Code, the provision also applies to a freight forwarder on a fixedprice basis. Therefore, the decision also has practical relevance, not only for the freight forwarder but also for a carriage of goods contract subject to German law.
The key fact of the case was the unauthorised loading by the truck driver, which was attributable to the defendant. This was the main difference from the vast majority of cases where a truck driver may have been asked to help during loading operations. Requested assistance is regarded as a mere courtesy and is insufficient to establish a freight forwarder’s (or carrier’s) liability.
The court clarified that independent and unauthorised actions will not establish the necessary custody for strict liability according to Section 425(1) of the Commercial Code. Additionally, the court pointed out that Section 433 of the Commercial Code is applicable only within the scope of its clear wording.
As a result, any freight forwarder on a fixed-price contract or commercial carrier of goods should pay close attention to briefing its staff and subcontractors regarding their involvement in loading operations. In the absence of any special contractual stipulations, staff should abstain from loading goods, as possible neglect may lead to liability. During contract negotiations, it is advisable to keep in mind that an express allocation of responsibility or a limitation of liability could be agreed should a freight forwarder’s employees assist during loading. Close attention must be paid to sufficient insurance cover for unlimited liabilities outside the custody period.