Case Law Summaries

Danzas Corp. v. Lollytogs Ltd.

• Opinion Date: April 5, 2001
• Business Law
• E-Mail

AGENCY; BILLS OF LADING—When an importer engages a freight forwarder to make shipping arrangements, the forwarder has agency authority to bind the importer to the terms of a bill of lading.

An importer purchased merchandise from a foreign clothing supplier and contacted a global freight forwarding company to arrange for shipping the goods to the United States. The shipping company arranged for shipping with a wholly-owned subsidiary which was its non-vessel operating common carrier. That carrier, in turn, arranged the actual shipping with a vessel operating common carrier. The freight forwarding company’s affiliate issued four bills of lading, one for each container in which the subject goods were being shipped. The consignee was identified as a particular bank because the goods were being purchased by the importer using a letter of credit issued by that bank. The importer was named in the bill of lading as the designated party to be notified, and reflected that the goods were being shipped “freight collect.” This meant that the shipper was not obligated to pay shipping charges. The ship went down during a storm, and the cargo was lost. The bill of lading provided that: “Freight shall be deemed earned on receipt of the goods by the Carrier and shall be paid in any event ship lost or not lost.” Consequently, the freight forwarder paid the vessel carrier for the freight charges, claiming that such charges were paid on the account of the importer. The importer argued that it was not a party to the bill of lading, specifically relying on the fact that it was not named as a consignee in the bill of lading. This left the question as to whether the importer was bound by the terms of the bill of lading that made freight payable irrespective of delivery. The importer claimed that the freight forwarder was an agent of the shipper, but the Court disagreed because it was undisputed that the importer engaged the freight forwarder to arrange for shipping. “Accordingly, [the freight forwarder] became the agent of the [importer] for that purpose, not the shipper.” Further, there was no evidence that the importer had limited the authority of the freight forwarder, its agent, in making the shipping arrangements. Consequently, “[a]pplying ordinary principles of agency to this factual scenario, it becomes clear that [the freight forwarder] had authority to bind its principal to the terms of the bill of lading and [the importer was] liable for the freight charges pursuant to its terms.”

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