In brief - Freight carriers should take steps to minimise the risk of disputes
You should ensure that your customers sign an acknowledgement at the outset that your standard conditions of carriage apply, before any goods are carried.
Standard conditions of carriage vital to limit risk
It is industry practice for carriers of goods to contract on the basis of standard conditions of carriage that, among other matters, seek to exclude liability on the part of the carrier for negligence, breach of bailment, consequential loss and other causes of action or losses that may arise during the course of carriage.
Such conditions of carriage are important not only to limit the risk to which a carrier of goods is exposed in the event of loss or damage to goods, but also from the perspective of indemnity under carriers' goods in transit and other similar policies of insurance.
Disputes following incidents during transit involving damage to goods
While it is commonly understood in the transport industry that carriage is ordinarily conducted on such terms (with the risk of loss, damage or delay in respect of the carriage of the goods falling not on the carrier, but rather upon the consignor, the consignee or their insurers), disputes habitually arise following an incident during transit involving damage to goods.
Often in such disputes, one of the central areas of argument between the parties is whether a carrier's standard conditions of carriage have been properly incorporated into and form part of the contract of carriage between the parties and consequently, whether they are capable of providing a contractual defence to the carrier.
It is therefore imperative that carriers that wish to rely upon their standard conditions of carriage have proper systems in place to ensure that their conditions of carriage form part of the terms of the contract of carriage, to minimise disputes regarding their application in the event of an incident.
Sending standard conditions to customers after carriage of goods completed
It is not uncommon for carriers to issue invoices to customers which, although they refer to or even annex or set out the carrier's standard conditions of carriage, are issued after the carriage of goods has already been completed.
In such circumstances, in the event of an incident involving the goods, a properly advised claimant is likely to argue that by the time the carrier issues its invoice, the carriage was complete and the terms of the contract were already agreed and it is too late for the carrier to seek to incorporate further terms limiting the carrier's liability.
Need for strong evidence if relying upon a prior course of dealing
Whilst the courts recognise that terms and conditions can be deemed to be incorporated by virtue of a prior course of dealing between a carrier and a regular customer, it can be difficult to succeed in such an argument. The courts require evidence of numerous transactions in which there has been a proper incorporation of the standard conditions of carriage between the carrier and the customer.
In addition, evidence that the customer at any point rejected or disputed the carrier's terms and conditions can be fatal to the carrier's contractual defence. It can also be particularly difficult to establish that the customer had actual knowledge or was referred explicitly to or accepted the carrier's standard terms and conditions at an early stage of the business relationship.
Written acknowledgement that the customer accepts your standard conditions
Ideally, carriers should request their customers to sign an acknowledgement that the standard conditions apply to the carriage and attach those conditions at the very outset, before any goods are carried.
Such an acknowledgment can take the form of a properly drafted commercial credit application or consignment note which sets out the terms and conditions, is evidence of the contract of carriage and sets out any instructions given to the carrier.
Seek legal advice to ensure your standard conditions will exclude your liability for loss
Carriers should seek legal advice regarding the procedures and documentation that they have in place to ensure that the risk of a dispute about the incorporation of their standard conditions of carriage is minimised and that their rights under any policies of goods in transit insurance (or similar) are not prejudiced.
Finally (and obviously), care also needs to be taken regarding the wording of the conditions of carriage, as the courts have historically viewed clauses which exclude liability for loss and damage caused by the carrier or the carrier's agents, strictly. Carriers should obtain legal advice to ensure that their standard conditions of carriage will be effective to exclude liability for loss resulting from faults by the carrier.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2022.