Steve Block, Foster Pepper PLLC, USA
Whether master contract trumps conflicting bill of lading is a question of fact not properly decided on summary judgment.
Shipper-carrier volume cargo arrangements typically are documented by master contracts stating general terms of the agreement, and then separate bills of lading for each load transported under the agreement. To accommodate potentially conflicting terms, the master contract often will specify which document controls over the other. When shippers draft the contract, they tend to provide it controls over bills of lading, and vice versa when carriers draft it.
The U.S. District Court for the District of New Jersey recently threw up its hands trying to figure out whether a GE Healthcare (GE) master contract prevailed over a UPS Ground Freight bill of lading when it came to a limitation of liability dispute. GE and motor carrier UPS Ground Freight had entered into a Less-than-Truckload Transportation Contract which provided for the carrier’s full cargo liability up to a max of $250,000. The contract also provided it would control over any conflicting terms contained in bills of lading.
GE’s warehouseman was authorized to ship cargo under a released value of $2.30/pound of cargo, which was a far cry from the seven figure value two cargoes of drugs GE shipped interstate from Memphis, or even the contract’s $250,000cap. Something unexplained in the court’s opinion happened to the cargo, apparently causing a total loss.
Parties are free to issue multiple contract documents, specifying which governs in the event of conflict. Many courts have made quick work rejecting arguments that such terms are unenforceable. Here, however, the court focused on the fact the documents weren’t interlocking or simultaneously executed. By GE’s version of events, any number of bill of lading terms, including limitation, would be superfluous if the master contract negated them. The law seeks to avoid meaningless terms. Summary judgment was denied.
This is an interesting commentary, but it disregards the nature of transportation service arrangements. In that context, it defeats, or at least diminishes, parties’ freedom to contract. Not a good direction to go in.
Ref: Indemnity Ins. Co. of North America v. UPS Ground Freight, Inc., 2016 WL 1261266 (D. NJ 2016)