The London Circuit Commercial Court has held that the well established common law rule in shipping law that “a claim in respect of cargo cannot be asserted by way of a deduction from freight” extends to air freight.
In this landmark case, the contract was for the carriage of chia seeds between a well known specialist in the transportation of goods by road, rail, air and sea, and a seller of raw materials. The Defendant asserted that it was a condition of the contract that the goods would be delivered within seven days. They were considerably delayed. The dispute arose because the Claimant sought recovery of its air freight (i) which the Defendant denied was due, or alternatively (ii) from which the Defendant wished to make deductions on the basis that the only freight payable was the sea freight equivalent, ie that payable if the goods had been transported by sea.
Also in issue was whether the British International Freight Association (“BIFA”) standard trading conditions were incorporated into the contract. If they were, clause 21A provides: “The punctual receipt in full of sums falling due from the Customer to the Company is critical to the operation of the Company’s business and its performance of its obligations to the Customer. Accordingly the Customer shall pay to the company in cash, or as otherwise agreed, all sums when due, immediately and without reduction or deferment on account of any claim, counterclaim or set-off…”
This led to a consideration of whether the common law rule, which originates in shipping law, extends to air freight. Considerable weight was given to the Claimant’s expert’s evidence, to the effect that the rule is the basis upon which the market for freight currently contracts. Although it was acknowledged that the basis for the original rule, namely cash flow, would not alone justify the extension of the rule to air freight, given the shorter time periods involved, the Court was influenced by the fact that the rule has already been extended to international and domestic road haulage. It found that there is “no logical or sensible distinction between the three means of transport for the purpose of the common law rule”. As the expert pointed out, there could be considerable uncertainty otherwise in relation to multi-modal freight contracts. It was also held that the rule as applied in relation to air freight extends to claims for delay.
This means that in such cases, air freight will need to be paid in full, and any cargo related claim, including one for delay, will need to be made by way of separate claim.