Mon, Oct

Limitation of action and Limitation of time


Limitation of action and Limitation of time. In all disputes an action must be brought within a limited period.

The main reason for this is the possibility that evidence will eventually deteriorate or weaken as time passes. Moreover, it may be unjust to keep the person against whom a claim may be made in indefinite legal suspense. Some jurisdictions have specific legislation, for example, in the United Kingdom, the Limitation Act 1980, governs when an action should be brought. Other jurisdictions have no limit whatsoever, which means that the carrier or shipowner in a contract of carriage may be under a serious burden at any time in the future. This would be very difficult to predict and to take into account when making commercial and financial decisions. The limitation rules under the United Kingdom system are quite complex but, generally, actions for personal injury must be brought within three years. Contractual disputes are restricted to six years from the time the breach of contract occurs. Tortious actions, except those related to personal injury, are also limited to six years.

Limitation of time is protective of the person against whom a claim is being made. If this person is a businessman, for commercial certainty he may require the limitation to be reduced. For example, the limitation of time within which to bring an action for breach of contract under the 1924 Hague Rules was one year after the goods were delivered or should have been delivered (Art. III, r. 6). This could work against a cargo claimant who may meet difficulty collecting evidence for a successful action against the shipowner, so a cargo claimant may bring an action in tort, when he could have a longer time in which to strengthen his case. This would work against the carrier. Accordingly, when the Hague Rules were modified in 1968, the Hague-Visby Rules introduced a new Art. IV bis which provides the carrier (and his servants and agents) with the same protection under the Rules whether sued for breach of contract or in tort. In fact, even the Hamburg Rules provides this protection although the time limit is increased to two years.

It is important to note that the one-year time limit is related to delivery not discharge of the goods. Actual delivery occurs when the carrier or carrier’s agent gives physical possession to the consignee or cargo receiver. “Constructive delivery” occurs when the carrier or his agent gives the consignee notice (directly or by advertisement) of the ship’s arrival, the goods are discharged into a safe place (for example, a warehouse) and they are ready for delivery. The consignee should have a reasonable time within which he can take delivery of the goods.

In both the Hague-Visby Rules and the Hamburg Rules the time limit may be increased by agreement or declaration by the carrier, respectively. In both regimes, there is also a provision allowing an action for indemnity against a third party to the main contract of carriage longer than the one year (or two years) and within the law of the place where the dispute may be brought (Art. III, r. 6 bis).

Such an action for indemnity may arise, for example, in the situation of through carriage. A carrier may issue one bill of lading. At an intermediate port, he may entrust the cargo to a sub-contracted carrier. If the goods are damaged or lost, the original issuer of the through bill of lading may be sued by the cargo interest who is limited to the one year, and the original carrier can then bring an action for indemnity against the sub-carrier, outside the one-year limitation. The time limit for an indemnity against a third party is not to be less than three months after settlement of the principal claim. This is a minimum within which the principal carrier can bring a recourse action.

Bringing an action is not the same as making a claim for loss of or damage to or delay in delivery of the goods. Under the Hague-Visby Rules notice of loss or damage should be formally made before or at the time of removal of the goods from the carrier. If the loss or damage is not apparent, the notice must be given within three days. No notice is required if the goods have been subject to a joint survey at the time of their delivery by the carrier.

Under the Hamburg Rules the notice of loss or damage must be given within one working day after the goods are handed over to the consignee. If the loss or damage is not apparent, the notice must be given within 15 days after delivery. These Rules reduce the carrier’s protection. If a claim is to be made for delay in delivery of the goods, the cargo interest is allowed 60 days after delivery in which to give the notice of claim. If the carrier is to make a claim on the shipper, for the latter’s breach of the contract of carriage, the time limit is 90 consecutive days after the breach or delivery of the goods, whichever is later.

Limitation of action is taken advantage of by some issuers of bills of lading by inserting appropriate printed clauses. For example, in the FIATA bill of lading, it is stated:

”Time bar

The Freight Forwarder shall be discharged of all liability under the rules of these Conditions unless suit is brought within nine months after:

(i) the delivery of the goods, or

(ii) the date when the goods should have been delivered, or

(iii) the date when ... failure to deliver the goods would, in the absence of evidence to the contrary, give to the party entitled to receive delivery, the right to treat the goods as lost.”

Such a clause is clearly unfair to the users of the freight forwarder’s services as a non-vessel owning earner.

The words “suit is brought” in such clauses and also in the Hague-Visby Rules (Art. III, r. 6) includes, in addition to an action in court, a notice or request for arbitration. In some jurisdictions, if a dispute is referred to arbitrators, and if there is unjustifiable delay in prosecution, the courts are permitted to strike out the arbitration.