Whose Freight Is It Anyway? Consignee Liability for Unpaid Ocean Freight( continued from page 8)
But when the shipper / consignor is unavailable to recover against( due to insolvency or similar issues), carriers are motivated to find alternative targets for payment.
When the shipper / consignor is unavailable to recover against( due to insolvency or similar issues), carriers are motivated to find alternative targets for payment.
The obvious option is the consignee, as the party who received the shipped goods and thereby received the benefit of the cargo’ s shipment. Accordingly, it is not uncommon for an unpaid carrier to attempt to recover against the consignee based on the bills of lading under a breach of contract theory. 5
Will a court hold the consignee liable for the outstanding charges? As one district court explained:
A party is not bound to the terms of a bill of lading unless the party consents to be bound. Although intended third-party beneficiaries may enforce contract terms in their favor, the mere fact that a party is a beneficiary does not create contractual obligations for that beneficiary. Contractual obligations cannot be imposed on an intended beneficiary absent a showing that the third party manifested acceptance to be bound... The mere fact that a party is a consignee or third-party beneficiary is insufficient to warrant a finding that [ that party ] was bound by the terms contained in the bills of lading. 6
I Didn’ t Agree to That, Did I? There are a few recognized methods by which a nonparty to a bill of lading will be held bound by the document’ s terms.
First, a non-party consignee may accept the terms of the bill of lading if it files a lawsuit under the bill( say for damage to the cargo occurring during the voyage) and thereby attempts to benefit from the bill’ s terms. 7
( continued on page 10)
7. Kawasaki Kisen Kaisha, Ltd. v. Plano Molding Co., 696 F. 3d 647, 655( 7th Cir. 2012). See also Kukje Hwajae Ins. Co. v. M / V HYUNDAI LIBERTY, 408 F. 3d 1250, 1254( 9th Cir. 2005)(“ We have held that a cargo owner‘ accepts’ a bill of lading to which it is not a signatory by bringing suit on it.”).
8. See, e. g., Sea – Land Service, Inc. v. Landis, No. Civ. A. 94 – 6153, 1996 WL 4120( E. D. Pa. Jan. 3, 1996)( holding that a consignee defendant was bound by the terms of a bill of lading where“[ f ] or approximately ten years, the defendant had been using the [ common carrier ] to deliver goods,”“ all of the [ common carrier’ s ] invoice-freight bills and bills of lading contained the provision [ at issue ]” and“ there [ was ] absolutely no evidence that the plaintiff had ever contested the terms during th [ e ] contractual relationship”).
9. See Neilsen v. Jesup, 30 F. 138, 139( S. D. N. Y. 1887); OOCL( USA) Inc. v. Transco Shipping Corp., 2015 WL 9460565, at * 4( S. D. N. Y. Dec. 23, 2015). See also Ingram Barge Co., LLC v. Zen-Noh Grain Corp., 3 F. 4th 275, 282( 6th Cir. 2021)( White, J., dissenting)(“[ W ] hat matters when dealing with a negotiable bill of lading is who physically presents the bill and accepts delivery of the cargo under it.”).
10. See, e. g., Laufer Grp. Int’ l v. Tamarack Indus., LLC, 599 F. Supp. 2d 528, 531( S. D. N. Y. 2009); A. P. Moller – Maersk A / S v. Ocean Express Miami, 550 F. Supp. 2d 454( S. D. N. Y. 2008).
9 • MAINBRACE