Damage to commercial cargo in transit is a recurring feature of international trade. When such damage occurs, Sri Lankan law affords the cargo owner a range of remedies against the carrier, the seller, terminal operators and/or the cargo insurer. These remedies, however, are subject to strict notice requirements and short limitation periods.
This article outlines the legal framework applicable in Sri Lanka and the steps a business should take, from the moment of delivery, to preserve and pursue its claim.
Conduct at the Time of Delivery
The consignee should inspect the cargo at the point of delivery and before signing any delivery receipt. Where damage is apparent, its nature and extent should be specifically recorded on the delivery documents. A clean receipt may later be relied upon by the carrier as evidence that the goods were delivered in good order and condition.
The consignee should also preserve evidence of the condition of the goods, including photographs of the container, seals, packaging and cargo, and should retain damaged packaging and segregate the affected goods. An independent marine surveyor should be appointed forthwith, and the carrier and the insurer invited to attend a joint survey.
Notice of Loss or Damage
In respect of carriage by sea, the Carriage of Goods by Sea Act, No. 21 of 1982 gives the force of law to the Hague-Visby Rules in relation to bills of lading issued in Sri Lanka, and bills of lading covering inbound cargo commonly incorporate the same or comparable rules by contract. Under Article III, Rule 6, written notice of loss or damage should be given to the carrier at the port of discharge before or at the time the goods are removed into the custody of the person entitled to delivery or, where the damage is not apparent, within three (03) days. Failure to give notice does not extinguish the claim, but raises a presumption that the goods were delivered as described in the bill of lading.
In respect of carriage by air, the Carriage by Air Act, No. 29 of 2018 gives effect to the Montreal Convention, 1999. Article 31 requires a written complaint to the carrier within fourteen days of receipt of the cargo, or within twenty-one days in the case of delay.
Identifying the Liable Party
Under the Hague-Visby Rules, the carrier is responsible for loss or damage arising during the period of carriage, subject to the exceptions in Article IV, which include insufficiency of packing and inherent defect of the goods. Its liability is limited to a prescribed sum per package or per kilogram unless the nature and value of the goods were declared before shipment.
Similar limits apply to air carriers under Article 22 of the Montreal Convention. Port and terminal operators, warehouse keepers and inland hauliers may be separately liable for damage occurring while the goods were in their custody.
Recourse against the seller depends on the sale contract and the applicable trade term, such as FOB (Free on Board) or CIF (Cost, Insurance and Freight). Once risk has passed to the buyer, loss in transit is ordinarily to be pursued against the carrier or the insurer. Where, however, the goods were defective or inadequately packed before shipment, the seller may be liable in contract. A buyer intending to reject the goods should do so promptly, as retaining them beyond a reasonable time may amount to acceptance under the Sale of Goods Ordinance, No. 11 of 1896.
Insurance Claims
Where the cargo is insured, the insurer should be notified forthwith and the policy conditions as to survey, documentation and time strictly observed. Upon indemnifying the insured, the insurer is subrogated to the insured's rights against the carrier and other responsible parties. The insured must therefore avoid any act or omission that prejudices those rights, as this may affect its own entitlement under the policy.
Limitation Periods
Under Article III, Rule 6 of the Hague-Visby Rules, the carrier is discharged from all liability unless suit is brought within one year of delivery, or of the date on which the goods should have been delivered. The period may be extended only by agreement made after the cause of action has arisen.
Under Article 35 of the Montreal Convention, the right to damages is extinguished unless an action is brought within two years. Settlement negotiations do not suspend either period. Claims against sea carriers fall within the admiralty jurisdiction of the High Court under the High Court of Sri Lanka (Admiralty Jurisdiction) Act, No. 40 of 1983. In appropriate cases, a claimant may proceed in rem and secure the arrest of the vessel as security for its claim.
Conclusion
The recovery of losses arising from damaged cargo depends to a significant degree on prompt and methodical action. Careful inspection at delivery, contemporaneous documentation, timely written notice and close attention to limitation periods will preserve the cargo owner's rights against the carrier, the seller and the insurer.