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Standard Trading Conditions – Time Bar & Limitation of Liability Clauses


Jagan - February 21, 2020 - 0 comments

In order to manage their liability exposures, Carriers and Logistics Service Providers (“LSP”) usually contract using boilerplate wordings / Standard Trading Conditions (“STC”) which provide for both a time bar and limitation of liability. The advantage of incorporating such clauses is that it allows the LSP a shorter period in which the claim can be pursued and / or limit liability to an amount which is economically viable. These provisions, in turn, assist  the LSP to insure their liabilities at affordable premium levels. This article considers the validity of both the time bar and limitation of liability clauses of the various STC’s (British International Freight Association (“BIFA”), Singapore Logistics Association (“SLA”), Federation of Malaysia Freight Forwarders (“FMFF”) and Federation of Freight Forwarders’ Associations in India (“FFFAI”)).

  1. Time Bar: All of the above STC’s have provisions for a 9-month time bar.
    1. BIFA1: The English Court of Appeal in Granville Oil & Chemicals v Davis Turner held that a period of nine months provided under the STC was valid and did not fall foul of the Unfair Contract Terms Act 1977. Accordingly, the time bar provisions in the BIFA STC would be held valid in the UK.
    2. SLA2: The Singapore High Court in Press Automation Technology v Trans-Link Exhibition Forwarding gave a contrary judgement and held that the 9-month time bar in the Singapore Freight Forwarders Association3 STC was invalid. The High Court judgement would be strongly persuasive and would be valid unless this matter is dealt finally on a similar matter by the Court of Appeal. Accordingly, we submit that the validity of the time bar provisions in the SLA STC are suspect at this moment.
    3. FMFF4: While there has been no case on this specific point in the Malaysian Courts, we were advisedthat the Supreme court in New Zealand Insurance Co Ltd v Ong Choon Lin denied the application of a time bar clause in an insurance contract due to the operation of S 29 of the Contracts Act 1950as it limited the time within which the respondent could enforce his right under S 6(1)(a) of the Limitation Act 1953 i.e. 6 years. We submit that the 9-month time bar clause in the FMFF STC would similarly be held as void or inapplicable.
    4. FFFAI7: The Malaysian Contracts Act 1950 has been modelled after the Indian Contract Act 18728 and accordingly the effect should be similar i.e. the validity of the time bar provisions should be held invalid as it bars the other party from the time available under The Limitation Act 1963 and which provides for 3 years for contractual parties. However, if the FF is acting in the role of a rail, road or Multimodal Transport Operator, given that there is specific legislation to deal such matters, then the time allowed would be basis the specific legislation. We take each in turn:
      1. Multimodal Transport: S 24 of the Multimodal Transport Goods Act 1993 provides for a 9 month time bar and which would only apply when the carriage of goods is by at least by two different modes of transport under a multimodal transport contract with the place of acceptance of the goods in India to a place of delivery of the goods outside India i.e. it would not apply for unimodal contracts or for contracts which emanate from outside India.
      2. Road Haulage: The Carriage by Road Act 2007 would apply and which provides for proceedings to be initiated within 180 days. The question would be whether the 9 month provision in the FFFAI STC would contractually override the statutory provision? It is submitted that on a plain reading, the FFFAI STC is not meant to vary the statutory provisions but instead apply as a final cut-off point. Accordingly, we do not believe that the time bar provision of FFFAI STC could vary the time limits provided under The Carriage by Road Act 2007 (although the FFFAI time bar provisions by itself would not be held valid).
      3. Rail Haulage: We have not considered Rail Haulage given that the Railway Act 1989 applies for the carriage by a railway administration. and that SLP’s will not be considered as such.
         
  2. Limitation of Liability:
    1. BIFA9: The English High Court10 had an opportunity to consider the validity of the limitation of liability clause and held that the limitation clause satisfied the requirement of reasonableness under the Unfair Contract Terms Act 1977 and therefore valid. Accordingly, it is submitted that subject to proper incorporation, an LSP would be entitled to limit liability for any losses arising out of their engagement.
    2. SLA11: The Singapore High Court12 in Patec v Translink decided that the limitation clause satisfied the reasonableness test such that the forwarder was entitled to limit liability. Accordingly, an LSP would be entitled to limit liability for any losses arising out of their engagement provided the clause is wide enough to cater for all scenarios.
    3. FMFF13: We submit that S29 of the Malaysian Contract Law would not impede the application of the limitation clause as provided in the FMFF STC. However, we would prefer the wordings to be “wider”14 to ensure that SLP’s are able to limit liability effectively for all claims.
    4. FFFAI15: The FFFAI STC does not provide any specific value and leaves it to the Forwarder to incorporate the same in their STC. Given that the Malaysian Contract Law is modelled after Indian Contract Law, we submit that the effect should be similar i.e. the limitation of liability should be valid.
  3. Conclusion:The STC’s of the various associations appear to have been modelled on BIFA STC. However, given that law is developing differently, it would be appropriate to relook at the time bar provisions provided in SLA, FMFF and FFFAI STC’s. Otherwise, the bite of the STC’s would be of limited effect leading to increased exposures to both the LSP’s and their Insurers.

 


  1. BIFA Clause 27(A):Any claim by the Customer against the Company arising in respect of any service provided for the Customer, or which the Company has undertaken to provide, shall be made in writing and notified to the Company within 14 days of the date upon which the Customer became, or ought reasonably to have become, aware of any event or occurrence alleged to give rise to such claim, and any claim not made and notified as aforesaid shall be deemed to be waived and absolutely barred, except where the Customer can show that it was impossible for him to comply with this time limit, and that he has made the claim as soon as it was reasonably possible for him to do so.
    (B) Notwithstanding the provisions of sub-paragraph (A) above, the Company shall in any event be discharged of all liability whatsoever and howsoever arising in respect of any service provided for the Customer, or which the Company has undertaken to provide, unless suit be brought and written notice thereof given to the Company within nine months from the date of the event or occurrence alleged to give rise to a cause of action against the Company.
  2. SLA STC: 32. (a) The Company shall be discharged of any liability whatsoever unless:
    (i) notice of any claim, such notice being a condition precedent to any liability on the part of the Company, is received in writing by the Company or its agent within 7 days after the date specified in (b) below; and

    (ii) The Company shall be discharged of any liability whatsoever unless suit is brought in the proper forum within 9 months after the date specified in (b) below.
    (b) The date referred to in Clause 32(a) above shall:
    (i) i
    n the case of damage to Goods, the date of delivery of the Goods, and in the case of loss of the Goods, the date the Goods should have been delivered;

    (ii) in the case of delay or non-delivery of the Goods, the date that the Goods should have been delivered; and
    (iii) in any other case, the event giving rise to the claim
  3. who have since renamed themselves as Singapore Logistics Association.
  4. FMFF STC: 8.3. Unless otherwise expressly agreed in writing, the company shall be discharged from all claims and any further liability for any direct and indirect loss of or damage to the goods provided that action is brought within nine calendar months after the delivery of the goods, or the date when the goods should have been delivered, or the date when the goods is treated as lost.
  5. We thank Ms Adeline Lee of Berkley Insurance Asia for updating us on this judgement.
  6. S 29. Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent. ..
  7. Time Bar : The forwarder shall, unless otherwise expressly agreed, be discharged of all liability under these Conditions, unless a suit is brought within 9 months, after the delivery of the Goods, or the date when the Goods should have been delivered or the date when failure to deliver the Goods which would give the consignee the right to treat the Goods as lost.
    With respect to other loss, other than the loss of or damage to the Goods, the nine months period should be computed from the time of failure of the Forwarder, thereby giving the right to the Customer to claim against the Forwarder.
  8. Clause 29 of the Malaysian Contracts Act 1950 mirrors Clause 28(a) of the Indian Contract Act 1872
  9. Clause 26 A: Subject to clause 2(B) and 11(B) above and sub-clause (D) below, the Company’s liability howsoever arising and, notwithstanding that the cause of loss or damage be unexplained, shall not exceed:
    (i) in the case of claims for loss or damage to Goods:
    (a) the value of any loss or damage; or
    (b) a sum at the rate of 2 SDR per kilo of the gross weight of any Goods lost or damaged whichever shall be the lesser.
    (ii)subject to (iii) below, in the case of all other claims:
    (a) the value of the subject Goods of the relevant transaction between the Company and its Customer; or
    (b) where the weight can be defined, a sum calculated at the rate of 2 SDR per kilo of the gross weight of the subject Goods of the said transaction; or
    (c) 75,000 SDR in respect of any one transaction,
    whichever shall be the lesser.
  10. Frans Mass (UK) Ltd v Samsung Electronics (UK) Ltd. [2004] 2 Lloyd’s Rep. 251
  11. 29. Except in so far as otherwise provided by these Conditions, the liability of the Company howsoever arising and notwithstanding that such liability shall have arisen from the neglect or default of the Company, shall not exceed:
    (a)  in respect of all claims other than those subject to the provisions of Clause 30(b) below, the lesser of
    (i)  the value of the Goods lost, damaged, misdirected, misdelivered or in respect of which a claim arises; or
    (ii)  S$5.00 per gross kilogram of the said Goods,
  12. Press Automation Technology Pte Ltd v Trans-Link Exhibition Forwarding Pte Ltd [2002] SGHC 286
  13. 7.8 In the event the company is proven to be liable for any loss or damage, including any financial loss resulting from any error or omission suffered by the customer, the liability shall be based on the principle of indemnity and limited to RM2,800.00 (Malaysian Ringgit Two Thousand Eight Hundred Only) payable per shipping unit or RM5.00 (Malaysian Ringgit Five only) per gross kilogram weight on the goods lost or damaged. Notwithstanding the limitation contained herein, the maximum liability of the company for any loss or damage shall not under any circumstances exceed RM100,000.00 (Malaysian Ringgit One Hundred Thousand only) or such other amount in equivalent currency whichever is applicable.
  14. For e.g. howsoever / whatsoever arising
  15. (i) Loss of or damage to the Goods
    Notwithstanding the provisions of Condition 11.3, the Forwarder becomes liable for any loss of or damage to the Goods, then the liability of the Forwarder to pay compensation shall not exceed Rs. ______ per kilogram of gross weight of the Goods, unless a larger amount is recovered by the Forwarder from the defaulting person unless he proves that no fault or neglect on his part or that of his servants or agents had caused or contributed to such loss or damage.

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