Paul Bugden, Bugden + Co., London

A notable feature in the international movement of good is the widespread adoption in various guises of ‘agent to arrange’ roles by the contractor for fulfilment for at least some part of the physical ‘bailment’ services contemplated by his contract with the merchant. This article examines some of the typical contractual terms encountered in this respect in contracts governed by English law and considers the position where, as is not infrequently the case, the parties are found to have reached no express agreement as to whether the contractor agrees to perform any relevant aspect of his work as agent or rather assume responsibility as principal.

Categories of forwarding contracts

A forwarding agency contract may be described as a contract whereby a contractor (whether described as forwarding agent, freight forwarder, delivery agent or carrier) agrees to act as agent for a principal (whether consignor or consignee or some other carrier) in procuring a contract of carriage between that person and a carrier. This role is typically to be contrasted with that of a party who contracts to carry, in which case (absent clear express provision to the contrary) he may delegate the work required in the performance of the duty but not the duty itself. In loose commercial terms, the contractor (whatever else he may be or hold himself out to be) is a booking agent for the customer, thereby fulfilling the counterpart role to that which a liner or booking agent customarily performs for a carrier.[N1]

Determining whether a contractor has agreed to fulfil such an agency role in respect of the whole or at least some part of his work is often not an easy task. Contractors commonly perform the functions of both carrier and forwarding agent in the same transaction and, perhaps, sometimes even for the same customer. Matters may also be made difficult by the considerable degree of informality encountered in the contracting arrangements of the parties where the contractor is not an actual carrier, and also by the fact that standard terms in common use typically provide for the contractor to have the option to make performance in either a principal contractor or agency role. Indeed, in those infrequent cases, where nothing at all may have been expressly agreed in this respect (as where the point is not addressed by the parties and no standard terms are incorporated into their contract) it will fall to the law to infer what was intended and the most obvious inference in such case may be that the contractor had the option to perform in either capacity.

A contractor may be agent to arrange but at the same time warrant certain features of the contract he is to arrange[N2] or some aspect of the third party’s performance of that contract.[N3] An intermediate, if somewhat remote possibility, is that the contractor agrees to undertake an intermediate role between that of a carrier and an agent limited to procuring carriage by another person, but without doing so as agent for his customer, although it has been said that such a role is neither likely nor to be inferred lightly.[N4]

Of course the contractual position is almost always only one part of the overall legal position subsisting between contractor and customer, as most obviously where the contractor also assumes the duties of a bailee by taking possession of his customer’s goods or otherwise becomes liable to his customer, qua owner or possessor of the goods, in the chattel torts of trespass, conversion and negligent damage.

Whether the contract is one whereby the contractor agrees by its terms merely to act as agent for his customer to arrange for services to be provided by others, or one where he agrees to supply the services himself or through subcontractors, is a matter of ascertainment and the construction of the particular terms of the contract, in accordance with the usual principles applicable to commercial contracts.[N5]

Where the contract is one that the parties have reduced entirely into writing or agreed an entire agreement clause, the question of whether the contractor has made an agreement to arrange or to carry as principal will fall to be determined by the construction of the defined contract, including any terms effectively incorporated therein, taking into account the surrounding factual matrix extant at the time the contract was made. The task of construction may require resolution of inconsistent provisions in various documents or even internally within one document, so as to determine which of them prevails. For example, whether the booking note or the terms of, and manner of signature,[N6] on the obverse face of the bill of lading or other receipt, trumps the small print on the reverse face, as being inapposite, or simply repugnant, to the rest of the terms.

Otherwise, where the contract is not intended by the parties to be comprised of one or more written documents, the court will be required to identify, in the first place, the terms of the contract from an evaluation of the oral and documentary evidence before it.[N7] In seeking to ascertain the terms of the contract the court may have regard to corroborating facts and matters occurring after the contract was made.[N8] But in interpreting these terms the court is nevertheless restricted to an examination of the factual matrix extant when the contract was made. It appears that an examination of the parties’ relationship in such cases may include an examination of whether the contractor dealt with third parties as principal or agent for his customer.

Ancillary work performed by forwarder for merchants

As agent a freight forwarder may commonly agree to act as agent either consecutively or even simultaneously for one or more of the merchant parties to a contract of carriage, or otherwise assume some role involving the giving of gratuitous advice or other services. Careful enquiry may be often be needed in such circumstances to ascertain precisely whose agent the forwarder is in relation to any particular task the latter undertakes, and also which agent has agreed to bear and pay his charges in such respect. An agent is never simply an agent but is always an agent for some particular purpose.

The fact that a forwarder acts as agent for another merchant in undertaking some discrete work, ancillary to the task of arranging the contract of carriage for his principal customer, does not, without more, mean that that other merchant has assumed liability for the forwarder’s charges generally.

It is customary for a freight forwarder, in addition to arranging the international carriage of goods, to organise the shipping documentation required for the purposes of any letter of credit issued in relation to such goods. In this respect a freight forwarder may receive a copy letter of the credit from a party other than his existing principal who has an interest in the shipping documents conforming to the requirements of that credit. But such a dispatch does not of itself give rise to an implication that such party is intending or offering to assume the role of the freight forwarder’s principal in relation to the transportation of goods, or otherwise to be responsible as the forwarder’s customer for his charges in arranging the movement. Nor will the fact that the freight forwarder then takes steps to secure that the shipping documents are compliant with the letter of credit give rise to any like implication.[N9]

Carrier as agent for merchant or other contractors

Where a contractor does not agree to carry goods through to their ultimate destination, or agrees to carry only by one mode of transport, he may stipulate that he contracts on his own account for some part of the movement, such as any ocean carriage, but as agent for the merchant[N10] in concluding any contracts with third parties for pre-carriage or on-carriage or other related carriage work such as warehousing.[N11] Close regard to the terms of any bill of lading or other contract of carriage may be necessary to determine precisely which segment of the movement the contractor, or any particular contractor where there are several,[N12] agrees to perform as principal and which, if any, as agent for the merchant to arrange.[N13] Even for those parts of the movement the contractor undertakes to perform as principal he will typically also contract with the merchant as agent for other classes of unnamed sub-contractor so as to effect a ‘Himalaya’ style contract between such parties and the merchant.

Lines often have their own liner agency subsidiary, which carries on business as a discrete legal entity as agent for the line in booking and making delivery of cargo.[N14] Such an agent of a carrier might also act as a forwarding agent for the merchant in relation, say, to local delivery or warehousing at the discharge port;[N15] but where a receiving or delivery agent for the carrier merely invoices the consignee for the freight (as where freight is payable on a freight collect basis) or other related carriage charges, in his own name this does not of itself serve to create a contractual or other relationship between agent and consignee.[N16]

Ostensible carrier as bare agent for carrying ship

By a demise clause, a charterer as the ostensible contracting carrier purports to contract, in the small print on the reverse face of the bill of lading, as being no more than a bare agent for an unnamed owner of the vessel, or substitute vessel, in which the goods are actually carried, and thereby alters the perceived position. Such demise clauses may in principle be effective but they often raise various general issues of adequacy of incorporation of terms and repugnancy when they conflict with other terms of the bill of lading and the manner of its signing.

Some factors in identifying a forwarding agency for the merchant

In ascertaining whether a contractor has contracted on behalf of the merchant to carry or to arrange to carry, the following considerations may, in the absence of express provision either way, be relevant:[N17]

(a)        The nature of the business activities normally carried on by the contractor and the extent to which the contractor holds himself out as a carrier in extra-contractual documents or otherwise. Some forwarders make specific reference to the fact that they normally contract as agents in their correspondence.[N18]

(b)        The course of any prior dealings between the parties[N19] and the nature of the communications between the parties before the contract was made and the terminology used, i.e. was the request by the customer to arrange carriage or to carry the goods.

(c)        The type of carriage contemplated by the contract, including whether it is to be performed domestically or otherwise, and whether the contractor operates his own means of transport in this respect. However, it may be easy to infer that a freight forwarder contracts for carriage by road as a principal even though he is known not to own or operate trucks. Forwarders may also market their own sea freight services as so-called NVOC operators so that they might be regarded as carriers by sea, absent provision to the contrary.[N20] The fact that it is known that another person will or may perform the services or part of them does not mean that the contract is one of agency. In each case it has to be asked as a matter of construction into which category the contract falls.[N21]

(d)       Whether the contractor takes a bill of lading from the sea carrier naming himself as shipper, may be some evidence of an intention to subcontract rather than to make arrangements as agent. But if the contract is truly one of agency between contractor and customer, the latter can always intervene as undisclosed principal on the bill of lading contract.[N22]

(e)        Whether the contractor takes, or agrees to take, actual possession of the goods and, if so, for what purpose,[N23] and whether and to what extent and for what purpose possession is subsequently retained throughout the movement by him, either personally or through any sub-bailee, and the manner in which, and between whom, delivery and redelivery of the goods carried is made.

(f)        The style, manner of signature[N24] and terms of any receipt or other carriage document issued by the contractor in his own name to his customer.[N25]

(g)        The extent, if at all, to which the contractor discloses the terms of any contract made by him with any actual carrier or other bailee and, in particular, whether he contemporaneously provided to his customer an original or copy bill of lading or other transport document issued by any actual carrier in respect of the goods, so that the customer could exercise control over the goods in transit, and the manner in which delivery of the goods was effected at the place of destination.

(h)        The method of charging the customer. In particular it may be relevant whether a compendium rate was charged for the work or whether the freight was charged at cost, together with a commission.[N26] The making of a commission charge is usually regarded as strong evidence of agency for some principals[N27] (although not perhaps necessarily the party responsible for the agent’s fees) and the charge of an all-in rate is a good indication of the converse. But it is quite possible for an agent to be remunerated by way of a commission based not on a mark-up or percentage but on the difference between whatever better price he is able to negotiate with the third party and that which his principal has agreed with him to pay.[N28]

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[N1] R Hutchinson A Treatise on the Law of Carriers as Administered in the Courts of the United States and England (Callaghan and Co 1882) ch 4 paras 155–57: ‘The words “to forward” or “to be forwarded” are of frequent use in the receipts of carriers, and it sometimes becomes important to determine their meaning in the connection to which they are employed, as the whole question of the liability of the carrier may depend upon their interpretation. In Reed v. The United States Express Co, 48 NJ 462 … it was held, by a divided court however, that the carrier by the acceptance of the package and the contract “to forward” had bound itself as a forwarder only beyond the terminus of its own route, the words “to forward” in the receipt of being constructed as equivalent to the words “to send”; and it being shown that the defendant had safely delivered the package to the connecting carrier for transportation towards its destination, it was held that it had discharged its contract and was not liable for its subsequent loss. But where there are no circumstances which will control the conclusion as to the meaning of the parties in the use of these terms, the weight of authority is in favour of giving to them the signification which was contended for by the dissenting portion of the court in the foregoing case, and they will be construed as having been intended to mean to carry or transport and not to merely to send as a forwarder’; and see also ch 2 paras 69–71 of the same work.

[N2] Harlow & Jones Ltd v P J Walker Shipping & Transport Ltd [1986] 2 Lloyd’s Rep 141 at 144 (Bingham J).

[N3] As in the case where a del credere agent in the sale of goods warrants payment of the price by the third party to his principal.

[N4] Aqualon (UK) Ltd v Vallana Shipping Corp [1994] 1 Lloyd’s Rep 669 at 673 (Mance J), considering M Bardiger v Halberg Spedition Aps Lexis Library Commercial Court (26 October 1990) (Evans J), where the not dissimilar position of the French Civil law commissionaire de transport was considered.

[N5] Wong Mee Wan v Kwan Kin Travel Services Ltd [1996] 1 WLR 38 (PC); Mercantile International Group Plc v Chuan Soon Huat Industrial Group Ltd [2002] EWCA Civ 288, [2002] 1 All ER (Comm) 788.

[N6] As to the importance of the identity and capacity of the signatory in the case of a written contract see Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2003] UKHL 12, [2004] 1 AC 715 at paras 182, 186–88.

[N7] See eg Muschamp v Lancaster & Preston Junction Railway (1841) 8 M&W 421.

[N8] In Maggs v Marsh [2006] EWCA Civ 1058 at paras 24–26, Smith LJ stated: ‘The parties did not write down what they had agreed. No complete record was made. Accordingly, the only way to decide what had been agreed then was to hear evidence about it at the trial, two or three years later. The accuracy of the parties’ recollections was mutually disputed. In those circumstances, it is plain to me, as a matter of general principle, that, for the purpose of testing the accuracy of those recollections, it is highly relevant to hear evidence about what the parties had said and done about the disputed matters in the meantime… Determining the terms of an oral contract is a question of fact. Establishing the facts will usually, as here, depend upon the recollections of the parties and other witnesses. The accuracy of those recollections may be tested and elucidated by things said and done by the parties or witnesses after the agreement has been concluded. Receiving evidence of such words or actions does not mean that the judge is losing sight of his task of deciding what the parties agreed at the time of the contract. It is simply helping him to decide whose recollection is right’.

[N9] See Bertling v Tube Developments Ltd [1999] 2 Lloyd’s Rep 55 (Court of Session, Commercial Court (Scotland)), where Lord Hamilton observed that such an agent may nevertheless be an agent of such interested party for a more limited purpose; and R B Chellew SN Co Ltd v WMH Muller & Co (London) Ltd (1927) 28 Ll L Rep 154 at 156 (MacKinnon J): ‘It may be said, and I think probably would be true, the bargain having been concluded between Messrs. Howe, Robinson & Co, on the one hand, and Messrs. Muller & Co., agents for the charterers, on the other hand, that Messrs. Howe, Robinson & Co., as agents for the plaintiffs, impliedly said to Messrs. Muller & Co.: ‘Well, you get this charter-party written out in America in the usual way according to the terms we have agreed’; and it may be that, Messrs. Muller & Co, accepting that mandate, they would impliedly undertake to carry out that request carefully and without negligence. For that reason it may be that if they carried out the request, compliance with which they volunteered, so negligently as to cause damage to Messrs. Howe, Robinson’s principals, they would be liable for damages in that respect’.

[N10] Landauer & Co v Smits & Co (n 9); James v Europe West Indies Lines (UK) Ltd (CA) Lexis Library (8 October 1997, unreported) (invoice issued by the defendant liner agents for the ocean freight to the claimant making no reference to any charge being made on behalf of the ocean carrier issuing the bill of lading, at most showed that the defendant had been acting as agent for the ocean carrier rather than forwarding agent for the claimant himself); and Heskell v Continental Express Ltd [1950] 1 All ER 1033 (Devlin J).

[N11] Cliffe v Hull & Netherlands SS Co Ltd (1921) 6 Ll L Rep 136 (CA), where the defendants who had issued a bill of lading for carriage by sea and onward by train were held to have arranged the rail movement as agents for the rail carrier.

[N12] The first carrier may contract to carry as principal for the segment movement he intends to perform personally but as agent for other named carriers for such further segments of the movement as are intended to be successively performed by them.

[N13] Muschamp v Lancaster & Preston Junction Railway (n 7).

[N14] Ibid, where the similar role of railway company booking agents is discussed.

[N15] See eg Chartered Bank of India, Australia and China v British India Steam Navigation Co Ltd [1909] AC 369 at 373 (PC) (landing agents in the position of intermediaries owing duties to both parties – agents for the shipowners as long as the contract of affreightment remained unexhausted and agents for the consignees as soon as the bill of lading was produced with delivery order indorsed).

[N16] Flateau, Dick and Co v Keeping (1931) 36 Com Cas 243 (CA); Heskell v Continental Express (n 15); Soc Anon Angelo Castelletti v Transmaritime Ltd [1953] 2 Lloyd’s Rep 440 at 443 (Devlin J): ‘Transmaritime Ltd … acted in a number of capacities as forwarding agents frequently do. They were the ship’s agents – that is, the cross-Channel ship – so that they got the commission on the freight there; they were actually Woodward’s agents for the purpose of clearing the goods through the Customs, and they were, at the same time, sub-agents of the plaintiffs, who were Woodward’s forwarding agents, for the purpose of receiving the goods and collecting the money due on the waybills, and for that they received some commission which is shown on the waybills’; and Neptune Orient Lines Ltd v JVC (UK) Ltd (The Chevalier Roze) [1983] 2 Lloyd’s Rep 438 at 443 (Parker J): ‘It is true that the defendant knew that Cory Brothers were the plaintiff’s [ocean carrier’s] agents but this does not mean that they could act only as the plaintiffs’ agents or in this instance were acting only as the plaintiffs’ agents. In the notice of arrival for example they offer to deal with customs clearance on behalf of the consignee and it is clearly possible for them to undertake the arrangement of onward carriage on behalf of the consignee or to contract for such carriage on their own behalf’.

[N17] Aqualon (UK) Ltd v Vallana Shipping Corp (n 4); and Royal & Sun Alliance Plc v MK Digital [2006] EWCA Civ 629, [2006] 2 Lloyd’s Rep 110 (CA). For an American view see Zima Corp v MV Roman Pazinski, 493 F. Supp. 268, 273 9 SDNY (1980) (Connor J), citing Chicago, Milwaukee, St. Paul & Pacific RR Co v Acme Fast Freight Inc., 336 U.S. 465, where reliance was placed on the following factors: (1) the way the party’s obligation is expressed in documents pertaining to the agreement, although the party’s self-description is not always controlling; (2) the history of dealings between the parties; (3) issuance of a bill of lading, although the fact that a party issues a document entitled ‘bill of lading’ is not in itself determinative; (4) how the party made its profit, in particular, whether the party acted as ‘agent of the shipper … procuring the transportation by carrier and handling the details of shipment’ for fees ‘which the shipper paid in addition to the freight charges of the carrier utilized for the actual transportation’. See generally W Tetley Marine Cargo Claims Vol 2 (4th edn, Thomson & Carswell 2008) ch 33.

[N18] But see in this respect Elektronska Industria TVA v Transped [1986] 1 Lloyd’s Rep. 49 at 52, (Hobhouse J).; “To carry on the business of ‘agent’ is not the same as saying that you are contracting in the capacity of agent for a principal. In the present case the description which the defendants chose to give themselves certainly did not carry any implication, let alone a clear one, that they were not prepared to make contracts for carriage as principals.” and Lee Cooper Ltd v CH Jeakins & Sons Ltd [1964] 1 Lloyd’s Rep. 300 at 308, Marshall J.

[N19] Marston Excelsior Ltd v Arbuckle, Smith & Co Ltd [1971] 2 Lloyd’s Rep 306 at 311 (CA) (Phillimore J): ‘If you always do dealings with forwarding agents on terms that that was how they were to act, then if you want to employ them in a completely different capacity, it is up to you to enter into a contract which makes it clear that there can be no question whatever that they are to act as carriers in this particular matter. It would, of course, be a very odd thing if a firm which owned no vehicles, no ships, no low loaders – nothing of the sort which would enable them to carry goods, should all of a sudden, and never apparently having done this sort of thing before, enter into a contract as carriers. But no doubt it is possible’. See also James v Europe West Indies Lines (UK) Ltd (n 10) and CA Pisana & Co Ltd v Brown, Jenkinson & Co Ltd (1939) 64 Ll L Rep 340 (CA), where Goddard LJ described a forwarding agent as someone who is: ‘willing to forward goods for you … to the uttermost ends of the earth. They do not undertake to carry you, and they are not undertaking to do it either themselves or by their agent. They are simply undertaking to get somebody to do the work, and as long as they exercise reasonable care in choosing the person to do the work they have performed the contract’.

[N20] Owners of the Cargo Lately Laden on Board the SS Galileo v Thomas Wilson Sons and Co Ltd (The Galileo) [1914] P 9 at 22 (CA); Cliffe v Hull & Netherlands SS Co Ltd (n 16); Langley, Beldon & Gaunt Ltd v Morley [1965] 1 Lloyd’s Rep 297 (Mocatta J): ‘There was, in the evidence called before me as to custom, some difference among the witnesses as to the functions of a forwarding agent, and it appears that some of them (not all, but some of them) carry on land in their own vehicles; some of them make contracts of carriage with hauliers, but, as far as the evidence went in this case in relation to sea transit, they merely make a contract on behalf of their clients. There are, in the books, one or two examples of cases where, even in relation to sea transit, a forwarding agent has put himself, by the form of his contract, in the position of a carrier, but that I am satisfied is exceptional, and none of the witnesses who gave evidence in this case spoke to such a state of affairs’; Western Digital Corp v British Airways Plc [2000] 2 Lloyd’s Rep 142 (CA).

[N21] Muschamp v Lancaster & Preston Junction Railway (n 7); Wong Mee Wan v Kwan Kin Travel Services Ltd (n 5) at 42 (Lord Slynn).

[N22] Harlow & Jones Ltd v PJ Walker Shipping & Transport Ltd (n 2).

[N23] Jones v European & General Express Co Ltd (1920) 4 Ll L Rep 127 at 127 (Rowlatt J): ‘it must clearly be understood that a forwarding agent is not a carrier; he does not obtain the possession of the goods; he does not undertake the delivery of them at the other end unless prevented by some excepted cause of loss or something which affords an excuse. All that he does is to act as agent for the owner of the goods to make arrangements with the people who do carry – steamships, railways, and so on – and to make arrangements so far as they are necessary for the intermediate steps between the ship and the rail, the Customs or anything else; so that the liability of the defendants, if there is any, depends upon their failing – if they have failed – to carry out those duties which I have thus described’.

[N24] As to importance of manner of signature see Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) (n 6) at paras 182, 186–88 and the discussion above regarding demise clauses.

[N25] Elektronska Industria TVA v Transped [1986] 1 Lloyd’s Rep 49 at 50 (Hobhouse J); Royal and Sun Alliance Insurance Plc v MK Digital (n 17); Aqualon (UK) Ltd v Vallana Shipping Corp (n 4); and Tetroc v Cross-Con (International) Ltd [1981] 1 Lloyd’s Rep 192 (HHJ Martin) and note also possibility of issue of such a document giving rise to an estoppel, waiver or variation as considered above. See also Liberty Mercian Ltd v Cuddy Civil Engineering Ltd [2013] EWHC 2688 (TCC) (Ramsey J).

[N26] Tetroc Ltd v Cross-Con (International) Ltd (n 24); Elektronska Industria TVA v Transped (n 24) at 52: ‘the evidence was that although the defendants did on occasions perform various services on an agency basis, charging their principals for their disbursements plus an agency commission, their normal way of conducting business involving the carriage of goods by road was to agree different freights with the actual carrier on the one hand and the goods’ owner on the other, making a profit which was the difference between the two freights. This is a typical contract and subcontract situation and would need very clear evidence to make it reconcilable with an agency role as contended for by the defendants’; Western Digital Corp v British Airways Plc (n 19).

[N27] Cf Kitson v PS King & Son Ltd (1919) 36 TLR 162 (agency commission terms in publishing trade did not establish relation of principal and agent).

[N28] Mercantile International Group Plc v Chuan Soon Huat Industrial Group Ltd (n 5); and especially Ex p Bright re Smith (1879) 10 Ch D 566 at 570 (Jessel MR); Umbro International Ltd v Revenue [2009] EWHC 438 (Ch) (Proudman J). In Western Digital Corp v British Airways Plc (n 19) at para16 Mance LJ stated: ‘I do not see why a principal and agent may not contract on terms that the agent will arrange a contract for the principal with a third party for whatever he can, but that the principal will only pay the agent a limited sum. Further difficulty might, I suppose, arise if the third party contract was at a greater freight than the principal had agreed to pay, but that is unlikely in the present situation, and may in any event represent a risk that the principal incurs under conditions such as LEPs’.