Term Paper: Shipping Law Working for Peanuts: A Case

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Shipping Law

Working for Peanuts: A Case Study of International Shipping Liability, Responsibility, and Property Transfer

The globalized world of business that currently exists has led to a variety of new opportunities and advantages for companies and consumers in many countries, but has also created complex challenges to the conducting of business in a secure, efficient, and reliable manner. Evidence of both the benefits and the complications of global business can be seen in any case of international shipping gone wrong -- the transfer of substitute goods, delays in travel, or damage to merchandise in transit all create legal and financial entanglements that could significantly threaten existing and emerging business and even create tensions between various nations if they are allowed to escalate. The following case study will examine several detailed points of UK law as they apply to international shipping, using the specific facts of the case at hand to determine conclusions regarding liabilities and responsibilities of various entities involved in the shipping process, and interpreting current laws and case findings regarding the transfer of property and ownership.

Facts

At issue is a shipment of peanuts (also known as groundnuts; referred to as peanuts for the remainder of this document) purchased by BigNut Corp of Galveston, Texas (in the United States) from SudanNut, a Sudanese nut producer. Five-thousand metric tons of peanuts were purchased and scheduled to be transported during the month of March, 2011, with UK law specified as the doctrine to which the CIF-termed contract would adhere.

On April 10, 2011, the shipment of peanuts arrived at the designated port in Galveston and the goods were discharged, to be examined by BugNut's agents on April 11. Also on April 10, shipping documents were presented to BigNut as per the contractual agreement with SudanNut. Several discrepancies were found between the shipping documents and the information obtained through the examination of goods made by BigNut's agents, and there were significant problems in both the quality and the quantity of goods offloaded in Galveston. As reported to BigNut by the company's agents on April 12, only 4,750 tons of peanuts arrived, rather than the five thousand tons that had been purchased; the peanuts were found to contain 5.5% humidity (the contract called for no less than five percent humidity and the Sudanese Standards and Metrology Organization had certified the peanuts as containing 4.5% humidity at the type of shipment) and 7.5% foreign matter (the contract had again called for no more than five percent and the SSMO had certified the shipment at 5.05%); salt water was found in the peanuts suggesting a significant breach of the containers; the peanuts were packed in Jute bags as per the terms of the contract, yet many of the bags were ripped or otherwise damaged; and finally, there was evidence that the loading of the peanuts had not been completed until 9:00 AM on April 1, 2011, while the contract called for shipment during the month of March.

Several other details were made known in the days following that also have a bearing on the legal implications of this case. BigNut has clearly suffered a loss, but at whose hands and to what degree this loss can be effectively recouped is not immediately clear. Key areas of concern and potential remedy for the company in accordance with UK law are examined and discussed below.

Notice of Appropriation

According to the contract established between BigNut and SudanNut, a notice of appropriation was to be furnished to the buyer within seven days of the date furnished on the bill of lading. The notice of appropriation was to contain the ship's name, the date of the bill of lading, and the approximate quantity of the shipment being made. These are standard components of international maritime shipping agreements and do not constitute deviations from law or practice (Wilson, 2008; Bridge, 1999). The contract also stipulated that any slight variation in the ship's name as provided on the notice of appropriation would not invalidate the notice, which is again a common element of such agreements (Bridge, 1999).

In accordance with the contract, SudanNut provided BigNut with a notice of appropriation on the 4th of April, 2011, with a bill of lading date given as March 31, 2011 (five days prior) stating that five thousand tons of peanuts were loaded onto the vessel Al Sudin. Immediate objection was made by BigNut on the grounds that no ship named Al Sudin could be found to exist. On April 7, 2011, now eight days after the date given on the bill of lading, SudanNut issued a second notice of appropriation with the name of the vessel corrected to Al Sudan. No other errors or discrepancies were noted on the original notice of appropriation or during the shipping process, however after receiving the goods evidence emerged suggesting that the date on the bill of lading and the notice of appropriations was incorrect, and that loading had in fact taken place/been completed on April 1, 2011. BigNut questions the validity of the notice of appropriation and the potential remedies in this regard.

It must be concluded given the bare facts of the contract and established case law that the notice of appropriation is essentially valid. As the contract explicitly stated that minor variations in the ship's name would not invalidate the original notice of appropriation, and as this was the only error noted or indeed made on the notice of appropriation, the notice must be considered valid. There is a discrepancy and indeed a serious concern regarding the date on the bill of lading, which is repeated on the notice of appropriation, however the notice of appropriation is bound by contract and by practice to provide the date that appears on the bill of lading without regard to whether this date is correct (Dockray & Thomas, 2004). While the bill of lading might be questionable due to the discrepancy with the actual date of loading and while this discrepancy (and the very fact that the shipment was made during April instead of March) might invalidate the contract as a whole, the notice of appropriation itself is not directly invalidated by this issue. The notice was given within the allotted timeframe, and though the corrected notice of appropriation was given one day following the expiration of this seven-day period the original notice of appropriation, still valid despite the error, satisfied contractual time constraints.

Remedies Regarding the Notice of Appropriation

BigNut cannot effectively seek remedies from SudanNut as the result of perceived issues or questionable aspects of the notice of appropriation for several reasons. The fact that the notice of appropriation must be considered valid and the portion of the contract requiring the provision of this notice within seven days of the date on the bill of lading is one of these reasons, of course; certainly the errors in the notice of appropriation cannot be considered valid grounds to terminate the contract or seek full recovery of the loss from SudanNut. The only issue with the notice of appropriation that remains somewhat questionable in terms of liability is the stated quantity of goods; a difference of two hundred and fifty tons cannot be considered a reasonable approximation, and thus the notice of appropriation contains a meaningful and relevant deviation from the physical shipment received in Galveston. According to the facts presented, however, it is likely that several containers were lost when the Al Sudan encountered extremely rough weather during the crossing of the Atlantic, and this likely accounts for the shortage observed in Galveston. Case law makes it quite clear that documents for goods lost at sea may be tendered even with the seller's knowledge of such a loss (and of course without such knowledge, as well); the notice of appropriation must be assumed to be accurate to the best knowledge of SudanNut at the time of its creation and delivery, and no loss at sea renders the notice moot or invalid (C. Groom Ltd. v. Barber [1915], 1 KB 316). No remedies for any loss can be sought by BigNut against SudanNut as a results of the notice of appropriation.

Rights in Respect of Documents

The notice of appropriation is valid, however this does not mean that BigNut's rights in accordance to the documents of the sale provide no potential remedies for their loss or avenues for the redress of negligence or fraud potentially committed by SudanNut. As noted above, there are concerns with the date on the bill of lading and with several other documents associated with the purchase and shipment of the peanuts from SudanNut to BigNut. Analysis of relevant case law is essential to interpreting the facts in this regard (Bridge, 1999).

Of major specific concern is the bill of lading, specifically the date of March 31, 2011 that appears on this document. The date on the bill of lading should correspond, by law and by practice, with the date on which the goods were actually aboard the vessel, in this case… [END OF PREVIEW]

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