Wednesday, June 22, 2011

UK Freight Forwarding Terms Cited In Logistics Court Case

BIFA Terms of Trading are Justified and Legal
Shipping News Feature

UK – The TT Club, ever a source of common sense applicable to shipping industry matters, make a point this week about terms and conditions of trading which may well be relevant to many of our readers. We make no apologies for publishing their comments in full. The TT Club has frequently advised companies, particularly in the freight forwarding and logistics sectors of the industry, to ensure that standard trading conditions are adequately incorporated into trading relationships and the value of this was recently exemplified when the English Courts made clear that two provisions in the UK freight forwarding association (BIFA) conditions can be regarded as reasonable and commercial.

In the recent case of Röhlig (UK) Ltd v Rock Unique Ltd, a freight forwarder sued its customer for unpaid freight. The customer defended the claim and counterclaimed on the grounds that it had been overcharged and that it was off-setting freight against the forwarder’s failure to meet an oral obligation to act as agent.

The BIFA trading conditions include both a provision that the customer pay to the company all sums due immediately and without set off, and also a nine month time bar clause. The customer’s counterclaim was not served within nine months of the date on which the relevant liabilities arose and it, therefore, sought to rely on the UK Unfair Contract Terms Act 1977, arguing that both clauses were unreasonable and therefore unenforceable.

The English Court of Appeal upheld the set off clause, stating that its purpose was to ensure that business cash flow was not interrupted. The judge was apparently influenced by the fact that the customer was a commercially experienced company which understood its obligations under these conditions.

The Court of Appeal also upheld the time bar provision, as being framed in clear and broad terms. The judge referred with approval to the 2003 case Granville Oil & Chemicals v Davies Turner in which it was held that the time bar was reasonable, unless there was fraud.

In many instances, a local forwarding association will have standard trading conditions that should similarly be upheld in court. The TT Club also has drafted model conditions that are suitable and available to its Members via the ’My TT Club’ section on the TT Club website or their usual contact and BIFA terms can be freely used by its members.

Another point which readers should be aware of and mentioned above but worth reinforcing, is the need to make one’s terms and conditions abundantly clear to the customer. In the past Courts have ruled in favour of clients after accepting that the freight forwarder had neglected to ensure that the terms of the contract had been clearly explained to them, hence the Court’s comments on the abovementioned case regarding the commercial experience of the shipper.