Fri, Oct

Paramount clause


Paramount clause. (Also termed Clause Paramount.) This clause is generally found in a bill of lading but can also be found in a charterparty.

The main purpose of such a clause is to incorporate the terms and conditions .of the Hague or Hague-Visby Rules (or the Hamburg Rules) into the document which is (or which evidences) the contract of carriage of goods by sea. The Paramount clause can also incorporate particular legislation, such as the United States Carriage of Goods by Sea Act 1936.

Paramount clause. The word “paramount” means “supreme” or “above all others”. It is related to some feature that prevails over everything else. The phrase ‘‘paramount clause’ would seem to imply that all other clauses in a printed contract of carriage, whether it be contained in a charterparty or bill of lading, would be subject to the terms incorporated by the paramount clause. For example, if the clause stated that the carriage of goods was subject to the Hague-Visby Rules, these Rules would then become part of the contract of carriage and would establish express, contractual obligations and rights of the parties. If the clause stated that the carriage was subject to the United States Carriage of Goods by Sea Act 1936, this Act, which implements the 1924 Hague Rules, will govern the contract of carriage.

Without the incorporation of the Hague Rules/Hague-Visby Rules or Hamburg Rules, the parties to a contract of carriage are free to allocate the obligations and rights between themselves. This was established by the English House of Lords in Court Line v. Canadian Transport, 1940. Far too much freedom would allow a stronger party, for example the shipowner, to impose obligations on the charterer or shipper and exclude his own liability.

Accordingly, the legislatures of many countries may attempt to restrict the freedom of contract of carriers in a just manner by requiring that a contract of carriage of goods by sea from that country should contain a clause making the contract subject to some “Rules”. For example, in the United Kingdom Carriage of Goods by Sea Act 1924, section 3, provided:

“Every bill of lading or similar document of title, issued in Great Britain or Northern Ireland which contains or is evidence of any contract to which the Rules apply shall contain an express statement that it is to have effect subject to the provisions of the said Rules as applied by this Act.”

There was no sanction or penalty for failure to comply with this requirement. However, this did seem to interfere with the sacred doctrine of “freedom of contract” and when the 1924 Act was replaced by the Carriage of Goods by Sea Act 1971, this provision was missing. Now, in English law, the Hague-Visby Rules merely have the force of law when they apply to carriage of goods as provided for under the Rules and the Act.

Even before the Act was repealed, this freedom to contract and allocation of obligations and liabilities between the parties came under fire in the English courts. For example, in Pyrene v. Scindia, 1951, it was said of the Hague Rules, especially Art. III, r. 2:

“Their object.. . is not to define the scope of the contract service but the terms on which that contract has to be performed.. . I see no reason why the Rules should not leave the parties free to determine by their own contract the part which each has to play. On this view the whole contract of carriage is subject to the Rules but the extent to which loading and discharging are brought within the carriers s obligation is left to the parties themselves to decide.”

Therefore the carrier may insert a clause in the contract of carriage specifying how he will load, handle, carry, care for and discharge the goods. The Rules require his operations to be proper and careful. Therefore, even though the Rules are incorporated into a charterparty by a paramount clause, the actual loading operations may be the obligations of the charterer. For example, in the New York St Produce Exchange form time charterparty the “employment clause” provides St that the loading, stowage and trimming of the cargo is at the charterers’ expense under the supervision of the master.

If a paramount clause is used in a charterparty it may not only make the contract of carriage under the charter subject to the Rules but may also require that all bills of lading issued under the charterparty must contain the paramount clause. For example, in the NORGRAIN 89 North American Grain Charterparty, clause 37 states:

“If the vessel loads in the USA, the USA Clause Paramount shall be incorporated in all Bills of Lading and shall read as follows: ‘This Bill of Lading, shall have effect subject to the provisions of the Carriage of Goods by Sea Act of the United States, approved April 16, 193,6, or any statutory re-enactment thereof, which shall be deemed to be incorporated herein, and nothing herein contained shall be deemed a surrender by the carrier of any of its tights or its immunities or an increase of any of its responsibilities or liabilities under said Act. If any term of the Bill of Lading be repugnant to said Act to any extent, such term shall be void to that extent but no further.’”

It has been observed that some shippers and charterers insist on the deletion in bills of lading of the paramount clause. This is particularly so in the oil trades. The paramount clause does allow the carrier to limit his liability if not exclude it and is a protective clause. Deletion may cause the carrier to face strict and unlimited liability. This may cause problems if the carrier is a shipowner because most shipowners’ P. and I. Associations insists on their members incorporating in every bill of lading and other contract of carriage of goods by sea a paramount clause. Shipowners should resist such pressure in the negotiation stages.