Paul Bugden, Bugden + Co., London
For part I of this article click here.
Standard forwarding terms
If the parties have not expressly agreed whether the forwarder contracts to carry as principal or as agent to arrange, then it is suggested that in many cases it is likely that their contract may best be construed as one which inferentially gives the forwarder, as the contractor, the option, at its election, to perform as principal or agent to arrange. That is also the general position stipulated for in the BIFA 2005A Standard Trading Conditions, which provide:
4(A) Subject to clauses 11 and 12 below, the Company shall be entitled to procure any or all of the services as an agent, or, to provide those services as a principal.
(B) The Company reserves to itself full liberty as to the means, route and procedure to be followed in the performance of any service provided in the course of business undertaken subject to these conditions.
5 When the Company contracts as a principal for any services, it shall have full liberty to perform such services itself, or, to subcontract on any terms whatsoever, the whole or any part of such services.
6(A) When the Company acts as an agent on behalf of the Customer, the Company shall be entitled, and the Customer hereby expressly authorises the Company, to enter into all and any contracts on behalf of the Customer as may be necessary or desirable to fulfil the Customer’s instructions, and whether such contracts are subject to the trading conditions of the parties with whom such contracts are made, or otherwise.
(B) The Company shall, on demand by the Customer, provide evidence of any contract entered into as agent for the Customer. Insofar as the Company may be in default of the obligation to provide such evidence, it shall be deemed to have contracted with the Customer as a principal for the performance of the Customer’s instructions.
A contractual promise may be construed as entitling the promisor, at his election, to choose between two or more alternative designated modes of performance or to exercise the right to substitute for the primary designated mode of performance another designated mode.[N29]
BIFA Condition 4(B) implicitly contemplates a requirement for an election by the contractor between alternative modes of performance, rather than for a default primary mode which might be substituted at the contractor’s option. The condition however makes no provision as to how and when the requisite election is to be exercised; this is a matter which must therefore be determined by the usual common law principles.
Condition 6(A) does not expressly provide that any agency for the customer must have been disclosed by the forwarder to the third party when entering into a contract on his behalf. The likely construction of the clause is that no such implication is required, unless the proper law of that contract, or its terms, do not permit an undisclosed principal to intervene.
Condition 6(B) is probably no more than a statement of the position that would prevail absent such an express provision. Where the contractor has the contractual liberty to perform the contract either as principal or as agent, he must be taken to have elected to contract as principal if he cannot demonstrate to the merchant that he has in fact not made any effective contract as agent with a third party.[N30]
By contrast the 1996 FIATA Model Forwarding Rules are different, but not wholly dissimilar and provide:
7.1 The Freight Forwarder’s liability as Carrier
The Freight Forwarder is subject to liability as principal not only when he actually performs the carriage himself by his own means of transport (performing Carrier), but also if, by issuing his own transport document or otherwise, he has made an express or implied undertaking to assume Carrier liability (contracting Carrier).
However, the Freight Forwarder shall not be deemed liable as Carrier if the Customer has received a transport document issued by a person other than the Freight Forwarder and does not within a reasonable time maintain that the Freight Forwarder is nevertheless liable as Carrier.
7.2. The Freight Forwarder’s liability as principal for other services
With respect to services other than carriage of Goods such as, but not limited to, storage, handling, packing or distribution of the Goods, as well as ancillary services in connection therewith, the Freight Forwarder shall be liable as principal:
when such services have been performed by himself using his own facilities or employees or
if he has made an express or implied undertaking to assume liability as principal.
Again, these terms appear to be very much an expression of the default common law position. To the extent that the contractor specifically agrees to act either as principal or as agent, he is liable in contract for failure to do whatever he has agreed to do unless an effective legal defence can be raised.
On the other hand, where the parties have agreed that the contractor has the option to perform the contract in either capacity, presentation to the customer of a transport document issued to the contractor by a third party, in the customer’s name (or perhaps one in the contractor’s name but on which the customer can intervene), would no doubt be an election by him to perform as agent, just as presentation to the customer of a transport document in the name of the contractor, or actual performance by him, would be an election to perform as carrier.
Forwarding for merchant in ocean carriage
No doubt a contractor describing itself as a forwarding agent[N31] would ordinarily be unlikely to assume the duties of an ocean carrier,[N32] but use of the more modern term freight forwarder perhaps carries rather different connotations.
Increasingly, the freight forwarder has become involved in what are known as ‘non-vessel owning carrier operations’ (NVOCs), where the forwarder assumes the responsibility of ocean carrier to his customer and takes and retains a bill of lading from the actual carrier in his own name,[N33] whether or not also issuing a bill of lading in his own name to the customer.
A further variation is the ‘surface freight wholesaler’ who will acquire capacity from carriers operating their own means of carriage and resell the capacity in small parcels to other freight forwarders – particularly smaller freight forwarders who have neither the purchasing power nor detailed knowledge of the market to buy freight space economically and efficiently. Unlike the NVOC operator, the freight wholesaler’s customer is not the end user of the services but, as with the NVOC operator, the freight wholesaler does not operate the means of transport. The freight wholesaler will issue his own bill of lading (usually but not always for consolidated groupage cargo) to his customer, who will in turn issue his own bill to his own customer.
Where a forwarder has entered into a period contract by reference to a specified number of shipments or a certain quantity of cargo to be shipped, it will be a matter of construction of the contract to determine whether the contract is to carry or arrange to carry or perhaps indeed a combination of thereof.[N34]
Although more formality exists with regard to documentation for carriage by sea than carriage by land, the lack of a bill of lading, waybill or consignment note issued by the freight forwarder to his customer may carry little weight in assessing whether the forwarder has contracted as principal.[N35] This is particularly so with regard to groupage operations. Even if the forwarder does not issue a bill of lading himself he might be taken to have contracted as principal when he holds himself out as operating a groupage service, unless, perhaps, if he has agreed to procure a multiple ‘less than container load’ (LCL) bill of lading for his customer from the ocean carrier.
If a forwarder were to be held to have assumed obligations as a carrier but the parties were held not to have adverted to or contemplated the issue of a bill of lading, this could have unfortunate consequences for the freight forwarder. The Hague Visby Rules would not be applicable and the forwarder’s liability for the carriage of the goods would depend upon an application of common law rules and possibly, if relevant, any trading conditions. These, however, would be unlikely to afford the protection normally offered by a bill of lading or by the Hague Visby Rules.[N36]
In one case it was held that in entering into a charterparty in their own name with the owners of the vessel as undisclosed principals for their customer, the defendant forwarders, who charged a fixed fee, were held to have warranted the freight rate at £17 per ton, and thus to have thereby assumed the risk of an increase in costs.[N37]
Forwarding for merchant in multimodal carriage
In this context the term multimodal carriage is used to describe carriage where one operator assumes liability for the carriage of goods by a route involving a number of different modes of transport, most commonly road and sea or road and air. Multimodal transport is generally known in the USA as ‘intermodal transport’ and, in Europe, it is also referred to as ‘combined transport’, although this phrase appears, in recent years, to have been displaced to some extent by the term ‘multimodal transport’.
It is more likely in practice that a freight forwarder will be deemed to be acting as principal in the issue of a multimodal transport document than in the case of pure transport by sea. The FIATA negotiable FBL Multimodal Transport Bill of Lading, commonly issued by freight forwarders and made subject to the UNCTAD/ICC Rules for Multimodal Transport documents (ICC Publication 481), imposes a clear obligation upon the freight forwarder as issuer of the bill for the entire carriage, as do other multimodal transport bills in common usage, eg COMBICONBILL (Combined Transport Bill of Lading published by BIMCO in 1995) and MULTIDOC 95 (Multimodal Transport Bill of Lading) which are subject, like the FIATA bill, to the UNCTAD/ICC Rules 481).
A forwarding agent may agree to act as principal to his customer for an entire multimodal transport movement but then purport to contract as disclosed agent (although in fact unauthorised) for his customer with an actual carrier under, say, an ocean bill of lading, whilst perhaps also supplying a multimodal bill in his own name to his customer. In the result, for the ocean segment of the carriage the customer obtains, a new and further contract with the ocean carrier through the agency of the forwarder, whilst also retaining, for at least the other parts of the movement, if not the whole, a contract of carriage with the forwarder as carrier.
Forwarding for merchant in carriage by rail
Traditionally, forwarders and other intermediaries have invariably acted as agents to arrange rail carriage rather than as principals.[N38] But there is no legal impediment to a freight forwarder holding himself out as providing a rail service as principal contractor whether or not the freight forwarder owns any track access rights or any locomotives or other rolling stock.[N39]
Internationally, the United Kingdom is a party to the COTIF Convention (Convention (concerning International Carriage by Rail) incorporating the CIM Uniform Rules for International Carriage of Goods by Rail. COTIF 1999 has been in force since 1 July 2006.[N40] Under the previous version of COTIF, the COTIF 1980, the Convention had no application unless a CIM Consignment Note was issued. Under the 1980 Convention, as amended by the 1993 Supplementary Provisions, ‘Railway’ was defined as ‘the provider of rail carriage services on CIM lines’,[N41] effectively identifying only train operating companies as CIM carriers.
A railway that sought to avoid liability under the 1980 Convention could therefore easily do so by neglecting to issue a consignment note to its customer. Hitherto, when virtually all carriage by rail had been within the province of state undertakings, the matter occasioned little difficulty. The 1999 CIM Uniform Rules have altered this position. The Uniform Rules apply to every contract of carriage of goods by rail for reward, and specifically provide for application of its rules even where a consignment note has not been issued. The contract of carriage is with the carrier, who is defined as the contractual carrier with whom the consignor has concluded the contract of carriage pursuant to CIM, or a subsequent carrier who is liable on the basis of this contract.[N42]
Combined rail–road transport is promoted and supported by the International Union for Road–Rail Combined Transport (UIRR), which represents organisers of combined transport trains as well as operators of transhipment terminals.[N43] UIRR members generally issue CIM consignment notes for combined transport and trade on UIRR General Terms and Conditions.[N44] Under these conditions liability for the rail carriage is aligned with CIM and in other cases to the CMR-like level of SDR 8.33 per kilogram gross weight. For non-rail carriage, overall limits of SDR 300,000 per transport unit inclusive of goods or 2 million SDR per loss apply.
Forwarding for merchant in carriage by air
Carriage by air, both internal and domestic, is for all practical purposes exclusively governed by international conventions. Carriage by air is highly regulated, both in relation to the terms upon which parties contract, security matters, hazardous cargoes and other issues, not only by reason of the almost universal applications of the Warsaw Convention in its various forms together with the more recent Montreal Convention of 1999 but also by reason of the strong influence of IATA (International Air Transport Association), of which most scheduled airlines are members.
In the United Kingdom, forwarders seeking to undertake air cargo business will invariably be IATA approved agents. It is quite possible for a forwarder to assume liability for carriage by air, even though he owns or charters no aircraft. This may be so even though the forwarder is not acting as a consolidator, although forwarding companies are particularly active in the field of consolidation of air cargo. Forwarders’ air waybills are commonplace. There is no impediment at common law or under the international conventions why a person should not contract as a carrier by air even though he does not own or operate aircraft.[N45]
Nearly all the major freight forwarders have substantial air-freight divisions. Much of the cargo forwarded under a forwarder’s air waybill will be consolidated cargo. Usually, there will be little difficulty in ascertaining whether a freight forwarder has contracted to carry by air as a principal.[N46] If he has issued an air waybill, save in the most exceptional circumstances, he will be taken to have so contracted.
Most contract conditions and the conditions of carriage of air cargo carriers provide that where cargo is carried to the airport of departure or beyond the airport of destination, by carriage other than by air, the airline makes such arrangements as forwarder and agent for the customer, unless and to the extent that services are provided by the carrier himself.[N47]
Nothing in the Warsaw or Montreal Conventions prevents an air carrier limiting its liability in any way it thinks fit, or to consenting to act as agent only, in respect of any transport other than by air beyond the aerodrome limits or, in any event, when the goods are not in the carrier’s charge.[N48]
Forwarding for merchant in carriage by road
It may be a nice question as to whether a forwarder has contracted with the merchant to carry by road or arrange the same as agent but so far as domestic local deliveries are concerned the general inference may strongly favour the former.
Only ‘Contracts for International Carriage by Road’ are governed by the CMR Convention[N49] and the freight forwarder in a pure agency relationship does not come within the terms of the Convention. For the purposes of the Convention, a carrier is not restricted to a person who in fact carries goods and actually performs a contract of carriage, but includes a person who contracts to carry goods even if the actual performance of the entire carriage has been subcontracted to someone else.[N50] It has been said that the main criteria in determining whether the contract is one to arrange or rather one to carry are likely to be:[N51] (a) the terms used by the parties in making their contract; (b) any description adopted in relation to a party’s role; (c) the course of any prior dealings; (d) the nature and basis of charging; and (e) the terms of any CMR note.
The CMR consignment note is prima facie evidence of the making of the contract of carriage, the conditions of the contract and the receipt of goods by the carrier.[N52] The party shown as carrier on the consignment note is prima facie therefore the carrier, or one of the carriers, but this is only a rebuttable presumption. The evidential value of the CMR note may be low where it only comes into existence after the contract had been made and where it is completed by the driver, who is unlikely to be giving his mind to the legal or antecedent factual position, even if he is aware of it.[N53]
The conclusion to be perhaps drawn from this review is that, where the merchant contracts with an actual carrier (or other like bailee) for a movement by sea, rail or air or multimodal combination thereof, the distinction throughout the various aspects of the contemplated movement between the role of forwarder and carrier remains tolerably clear in practise under the commonly encountered conditions of carriage employed by such parties. But this distinction often becomes far less clear in almost all cases where international road transport is concerned and also in any case where the merchant’s contract is a with ‘forwarder’ or some other like contractor who holds himself out as undertaking a wide spectrum of carrier and related bailment roles through third parties whilst not agreeing to taking possession of the goods himself.
In these cases there is usually a large degree of informality in the parties’ contractual arrangements. The multiplicity of possible hybrid arrangements (even within the same contract between the same parties) and the necessarily open nature of the standard forwarding terms in common use, coupled with the fact that parties seldom think to address the point specifically in their negotiations, means that in such cases resort must often be had to the somewhat subjective task of scrutiny of the myriad features of the factual matrix in attempt to divine what the parties are objectively to be taken to have intended to have agreed in this respect.
[N29] Price v Nixon (1814) 5 Taunt 338; Reed v Kilburn Co-operative Society (1875) LR 10 QB 264.
[N30] J I MacWilliam Co Inc v Mediterranean Shipping Company SA (The Rafaela S)  EWCA Civ 556,  UKHL 11.
[N31] Heskell v Continental Express Ltd (1950) 83 Ll L Rep 438 at 449 (Devlin J): ‘the forwarding agent’s normal duties are to ascertain the date and place of sailing, obtain a space allocation if that is required, and prepare the bill of lading. The different shipping lines have their own forms of bill of lading which can be obtained from stationers in the city, and it is the duty of the forwarding agent to put in the necessary particulars and to send the draft stamped to the loading broker. His duties include also arranging for the goods to be brought alongside, making the customs entry and paying any dues on the cargo. After shipment he collects the completed bill of lading and sends it to the shipper’.
[N32] In Langley, Beldon and Gaunt v Morley (n 24), Mocatta J thought that it would be exceptional for a forwarder to put himself into the position of a carrier by sea. A rather wider and, it is suggested, more accurate view was expressed in Landauer & Co v Smits & Co (n 10) (Roche J): ‘A forwarding agent may take more or may take less responsibility. He always takes some; as a rule he takes more. It may be only an obligation to use due care in making proper contracts with regard to the forwarding of goods. It may be a great deal more. He may choose to contract to arrange for the whole carriage, and incidentally he may make for the person for whom he acts contracts with the shipowner and other persons of which the customer may avail himself. The forwarding agent may also act as a carrying contractor’.
[N33] For a good example of such a case see eg J Evans & Son (Portsmouth) Ltd v Andrea Merzario  2 All ER 930,  1 WLR 1078.
[N34] Fyffes Group Ltd and Caribbean Gold Ltd v Reefer Express Lines Pty Ltd (The Kriti Rex)  2 Lloyd’s Rep 171 at 187 (Moore-Bick J), where it was unsuccessfully argued that a contract of affreightment between the parties was a contract of carriage between the parties only in those particular cases where a particular vessel used to fulfil the contract was owned by the defendant and was in other cases one under which the defendant merely undertook to procure contracts of carriage between shipowners and the claimant. A forwarder might also issue a multimodal bill whereby he contracts to carry as principal on a door-to-door basis but also at the same time procure an ocean bill of lading from a line as agent for the merchant so that the merchant has two contracts of carriage.
[N35] Hanjin Shipping Co Ltd v Procter & Gamble (Philippines) Inc  2 Lloyd’s Rep 341 at 344 (Longmore J) (no bill of lading issued but nevertheless contract between the shipping agent (RGV) and shipowner): ‘I asked Mr Popplewell to say how that contract came into existence. He reminded me that in fact it was part of both parties’ case that there was a contract and therefore one need not go into legal niceties. It was even agreed that the contract contained the terms of the known and contemplated bill of lading although no bill of lading was in fact issued. I accept that. It is perhaps necessary to say, however, that the contract can be derived from the application made by RGV for booking space, the instructions given by RGV to the shipowners for the filling in of the bill of lading, the shipment of the goods and receipt of them by the shipowners on the vessel, and also an invoice for freight’.
[N36] In such a case the forwarder would be much better placed under the Rotterdam Rules 2008 (United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea 2008) as these Rules apply irrespective of whether the carriage contract is contained in a bill of lading or any other transport document and indeed in liner transportation it is not even necessary that a transport document is issued.
[N37] Harlow & Jones Ltd v PJ Walker Shipping & Transport Ltd (n 2).
[N38] Jones v European & General Express Co Ltd (n 22).
[N39] HSBC Rail (UK) Ltd v Network Rail Infrastructure Ltd  1 Lloyd’s Rep 358 (CA).
[N40] Implemented into English law by the Railways (Convention on International Carriage by Rail) Regulations 2005 (SI 2005/2092).
[N41] No 3 of the 1993 Supplementary Provisions to CIM, App B to COTIF 1980.
[N42] CIM 1999 arts 1(1), 3(a) and 6(2).
[N44] The CIM consignment note for combined transport was developed for the specific purposes and needs of combined transport by UIRR and UIC (International Union of Railways) within CIT (International Rail Transport Committee).
[N45] This view, however, is not accepted in all jurisdictions that apply the Warsaw and Amended Warsaw Conventions. See in particular the commentary in L Goldhirsch The Warsaw Convention Annotated: A Legal Handbook (Kluwer Law International 2000) on this subject in relation to art 1. See also Western Digital Corp v British Airways Plc (n 24) paras 9–17.
[N46] See Salsi v Jetspeed Air Services Ltd  2 Lloyd’s Rep 57 (Donaldson J), where it was held that the defendant airfreight brokers had contracted as principals with other brokers and not merely in an agency capacity on behalf of the actual carrier: ‘The defendants, as Mr Salsi must have known from his visit to their offices in Gatwick, were not a large organization. This points to the defendants acting as agents rather than as principals. The negotiations with Mr Salsi appeared to be dependent upon parallel negotiations with the airline. This again points in the same direction, although it may be said that if the defendants were contracting as principals they would need to ensure that both their contracts coincided in all respects except the freight rate. The reference to a commission is equivocal. On the other hand, the very extensive use of the personal pronoun by the defendants tends to point to liability as a principal’; and also Panalpina v Densil Underwear  1 Lloyd’s Rep 187 at 188 (HHJ Fay).
[N47] In Victoria Fur Traders Ltd v Road Line (UK) Ltd  1 Lloyd’s Rep 570 at 574, Mocatta J had no hesitation in concluding that the then current British Airways’ conditions on the reverse of their air waybill had the effect of making British Airways an agent for the merchant in respect of any on-carriage effected by them.
[N48] The mandatory regime of the air conventions covers international air carriage and non-authorised substitute transport to the agreed air carriage, but not designated carriage by other means and outside the airport; insofar as relevant see arts 1, 18.3, 31 and 32 of the Warsaw Convention 1929; and arts 1, 18.4, 27, 38 and 49 of the Montreal Convention.
[N49] CMR art 1.
[N50] Ulster Swift Ltd v Taunton Meat Haulage Ltd  1 Lloyd’s Rep 346 (CA).
[N51] Aqualon (UK) Ltd v Vallana Shipping Corp (n 4) at 674 (Mance J), approved in Lukoil Plc v Tata Ltd & Global Marine Transportation Inc  2 Lloyd’s Rep 129 at 137 (CA). Consider also the approach adopted in the Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) (n 6), emphasising the predominance of the main commercial terms (eg as to the identity of the parties to the contract and the capacity in which they contract) over other, more subsidiary terms; see also Victoria Fur Traders Ltd v Road Line (UK) Ltd (n 46).
[N52] CMR art 9.
[N53] Elektronska Industria TVA v Transped (n 24); 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 (n 24).