Like all other contracts, the charter party becomes dissolved by performance or by the acts of the parties amounting to a cancellation by agreement or waiver of performance. It may, however, be dissolved against the will of the parties and by causes extrinsic to them. Thus, although legal when made, if it becomes illegal before performance, it is as wholly void as if it were illegal at the outset. A state of war, for example, making all commercial intercourse with the enemy illegal, would annul all obligations under a prior charter for a voyage to an enemy port. So would legislation forbidding the importation of the cargo in question. A voyage charter may be dissolved by an accident to the vessel which prevents her making the voyage at the time contemplated. For example, in Jackson v. Union Marine Insurance Co., L. R. 10. C. P. 125, the ship was to proceed with all possible despatch (dangers and accidents of navigation excepted) from Liverpool to Newport, and there to load and carry to San Francisco a cargo of iron rails. She left Liverpool January 2, and on the following day ran aground, sustaining considerable damage. It would necessarily have been many months before she could be got off and put in repair to enable her to continue the voyage. The court held that in the commercial sense the voyage contemplated by the charter party had been brought to an end, and, under those circumstances, the contract was held to have determined. The voyage, if resumed, would have been a different voyage, "as different," in Baron Bramwell's words, "as though it had been described and intended to be a spring voyage, while the other, after the repair, would be an autumn voyage." The season within which the adventure was to be carried out was of importance to both parties, and it was thus easy to imply a condition that, if the voyage became impossible of completion within that season, the contract would be at an end. The exception as to dangers of the sea and accidents of navigation showed that the parties contemplated providing for some delay from these causes, but it was held that they were evidently not contemplating a delay so great that the spring voyage would become altogether impossible.
The particular adventure being a voyage to be carried out within reasonable limits of time furnished a definite standard by which it would be determined whether the delay which actually occurred was or was not within the exception clause. There was, therefore, no inconsistency between the implied condition and the express provisions of the contract.
Termination of a charter by frustration of adventure is not applicable to time charters. Thus the taking of the ship for the use of the government does not dissolve a time charter. This was held by the House of Lords, upon a very full consideration in the recent case of Tamplin Steamship Co. v. Anglo-Mexican Products Co., Ltd., 2 A. C. 397. There a vessel was chartered for five years for a fixed sum per month for the carriage of oil as the charterers or their agents should direct. The charter party contained an exception of arrests and restraint of princes, and the charterers had the liberty of subletting the steamer on admiralty or other service. After the outbreak of the war, when the charter party had nearly three years to run, the steamer was requisitioned for an indefinite period by the admiralty, which made extensive alterations and used her as a transport. The owners contended that the charter party had been determined by the requisition. The charterers, who were willing to continue to pay the charter hire (no doubt in order to entitle themselves as temporary owners to the compensation paid by the government) contended that the charter party had not been annulled and this contention was sustained by the House, which held that the interruption was not of such a character that the court ought to imply a condition that the parties should be excused from further performance of the contract and that the requisition did not determine or even suspend the charter. Earl Loreburn said:
The violent interruption of a contract may always damage one or both the contracting parties. Any interruption does so. Loss may arise to some one whether it be decided that these people are or that they are not still bound by the charter party. But the test for answering the questions is not the loss that either may sustain. It is this: Ought we to imply a condition in the contract that an interruption such as this was to excuse the parties from further performance of it? I think not. I think they took their chances of lesser interruptions and the condition I should imply goes no further than that they should be excused if substantially the whole contract became impossible of performance or in other words impracticable by some cause for which neither was responsible. Accordingly I am of opinion that this charter party did not come to an end when the steamer was requisitioned and that the requisition did not suspend it or affect the rights of the owners or charterers under it and that the appeal fails.[16]
Where the charter provides for the return of the vessel at the expiration of the term in as good condition as when taken, fair wear and tear from reasonable and proper use only excepted, and requires the hirer to make all repairs and assume liability for all loss and damage, an absolute obligation to return her is created and her total loss without any fault on his part will not exempt him from liability; he must return the ship or pay her value, and, if the charter party contains an agreement as to what that value is, that amount will be decreed by the court. In Sun Printing & C. Association v. Moore, 183 U. S. 642, the New York Sun newspaper chartered a yacht from Moore for newsgathering purposes in Cuban waters during the Spanish war. The charter party provided that the hirer was to keep "said yacht in repair and to pay all its running expenses and to surrender said yacht with its gear, furniture and tackle at the expiration of this contract to the owner or his agent ... in as good condition as at the start, fair wear and tear from reasonable and proper use only excepted." It was further provided that "for the purpose of this charter the value of the yacht shall be considered and taken at the sum of $75,000." The charter party was accompanied by a paper in the nature of a surety bond given by the Sun to secure the owner against any loss or damage to the vessel in an amount not exceeding $75,000. The yacht was wrecked and totally lost. Moore sued for $75,000 as representing the agreed value of the yacht. The Sun contended that the figure represented a penalty, enforceable only to the extent of actual damage. The court sustained a recovery of the full amount without deducting the charter hire. Justice White said:
It is elementary that, generally speaking, the hirer in a simple contract of bailment is not responsible for the failure to return the thing hired, when it has been lost or destroyed without his fault. Such is the universal principle.... But it is equally true that where by a contract of bailment the hirer has, either expressly or by fair implication, assumed the absolute obligation in return, even although the thing hired has been lost or destroyed without his fault, the contract embracing such liability is controlling and must be enforced according to its terms....
As the stipulation for value referred to was binding upon the parties, the trial court rightly refused to consider evidence tending to show that the admitted value was excessive and the circuit court of appeals properly gave effect to the expressed intention of the parties.
Charter-Parties, XVI American Law Review, 6330.
Charter-Parties and Bills of Lading, T. E. Scrutton. London, 1899; Clowes and Cons, Ltd.
Shipping and Admiralty, Parsons, 274-337.
Shipping and Admiralty, Desty, §§ 217-286; 196-285.
Crossman v. Burrill, 179 U. S. 100.
Moore v. Sun Ass'n, 183 U. S. 642.
Boskenna Bay, 36 Fed. 697.
Majestic, 56 Fed. 244.
Centurion, 57 Fed. 412.
Shipping and Admiralty, Parsons, Vol. I, Chapter VIII.
Admiralty, Hughes, Chapters VII, VIII.
Francis, 21 Fed. 715.
Sprott, 70 Fed. 327.
Ronalds, 109 Fed. 905.
Burrill, 65 Fed. 104.
Dene, 103 Fed. 983.
Ely, 110 Fed. 563.
Dixie, 46 Fed. 403.
Mencke v. Sugar, 187 U. S. 248.
Charter-Parties and Ocean Bills of Lading, Poor.
[16] It may be inferred, however, that, if it had appeared that the requisition necessarily rendered the performance of the entire contract impossible, the charter would have been held to be dissolved. In this case, it was the owner, who saw a chance to make more money, who wanted the charter annulled; not the charterer whose adventure was being frustrated in a manner advantageous to him. It is a little difficult to suppose that the court would have required the charterers to go on paying charter hire, had they been unwilling to do so, for a vessel of which the government had deprived them of the use. Still, that conclusion is deducible from the language of the several lords who wrote opinions in the case.
As elsewhere observed, the ship resembles a person in maritime law and has a corresponding liability. In general, she is responsible for every benefit received and every wrong done as well as for every breach of governmental regulations. Particular instances may furnish exceptions to this general rule, but they will be only occasional exceptions. The ship should be considered as a juristic person and her liabilities like those of an ordinary corporation, quite apart from those of the natural persons in charge of her operations or interested in her ownership. The liability of a vessel arising out of contract is discussed elsewhere. The principle governing her liability for torts is laid down in the brig Malek Adhel, 2 How. (U. S.) 210:
The ship is also by the general maritime law held responsible for the torts and misconduct of the master and crew thereof, whether arising from negligence or a willful disregard of duty; as, for example, in case of collision and other wrongs done upon the high seas or elsewhere within the admiralty and maritime jurisdiction, upon the general policy of that law, which looks to the instrument itself, used as the means of the mischief, as the best and surest pledge for the compensation and indemnity to the injured party.
The liability ordinarily extends to the entire ship and all the appurtenances.[17] It may include the freight money and collision damage; it does not include the insurance; and it may be diminished by statutes like the Harter Act or by special agreements in the contract of carriage or similar stipulations.
While it has been said that the liability of the ship and of the owner were convertible terms, the statement is hardly accurate in many cases. The owner may have so chartered the ship as to release him from personal responsibility; he may be wrongfully deprived of her possession; his liability may be limited by law or special agreement to her value. In other words, the ship is frequently liable and the owner is not; and the owner can usually confine his liability to the value of the ship and otherwise go free from her obligations.
Where a vessel is so hired that the charterer has the exclusive possession, control and management, appointing the master and hiring the crew, there is said to be a demise of the ship and a temporary ownership in the charterer. He then becomes responsible for her obligations as if he were the real owner and has similar rights of limitation. The law provides that where a charterer mans, victuals and navigates the ship at his own expense, he shall be considered as owner within the provisions of the statutes limiting liability, and that the ship shall be liable, when so chartered, as if navigated by the owner (Rev. St. § 4286).
These depend upon his possession of the ship. Where he takes possession and operates the ship for his own benefit, he assumes all the responsibilities of ownership but without the right to limit his liability to the value of his interest in the ship. Thus he may become personally liable for wages, supplies and repairs as well as for damages done by negligence. He may, by special arrangements, confine contract liabilities to the ship and, being lawfully in possession, he may create maritime liens upon her. A mortgagee out of possession is not considered as the owner even when he holds the record title under a bill of sale absolute on its face. He may still show that his title was by way of security only and so exempt himself from personal liability for repairs done or supplies furnished for the contracts or negligence of the mortgagor or other person having real ownership of the boat.
The insurers are ordinarily strangers to the ship as far as concerns any authority to instruct the master or incur obligations on her account. Only in case of an abandonment of the vessel to them, when the loss is total or constructively total, and when they have accepted such an abandonment, does such authority arise. An abandonment when properly made, or accepted, vests the property in the underwriter and the master then becomes his agent. The underwriter is then the real owner and has all an owner's liabilities and limitations. There is, however, a very large intermediate class of disasters where the underwriters decline an abandonment and yet take possession of the ship and cargo for the purpose of rescue and repair. Large expenses are thus created for which the damaged ship and cargo may be adequate security. The underwriters are personally liable, in the absence of special contract, for the contracts of their agents, although the nature of the business is such that it is often a practical difficulty to ascertain who were the insurers actually making the engagements and what was the real authority of those assuming to represent them. These questions are usually not raised during the exigencies of salvage operations but may become important when the work is unsuccessful and the expenses are unpaid.
The general maritime law has always been that an owner was not personally liable for the obligations of his ship as distinguished from his own agreements or delinquencies. It regards the ship as a distinct individuality similar to a corporation. The common law, on the contrary, considers the ship like any other kind of personal property and holds the owner correspondingly liable because his agents were in charge and he is liable for whatsoever they do within the scope of their agency. The maritime law retains an earlier notion of the common law, that it is against all reason to put blame or fault upon a man for the negligence of others and declines to hold him personally for what he cannot personally control. It also recognizes the fact that men of means will not invest in ships unless they can be protected against the unlimited liability of the common law. It holds that such a liability is inherently unjust when applied to the shipowner and it also accepts the situation in which the capitalist declines to invest in shipping unless that injustice is averted. Hence came the rule that the owner is not liable on account of the ship beyond the value of his interest therein and her freight pending and the corollary that he might absolve himself from all liability by abandoning the ship to her creditors. The theory is (at least as applied to torts) that:
If you surrender the offending vessel you are free, just as it was said by a judge in the time of Edward III, "If my dog kills your sheep and I freshly after the fact tender you the dog you are without recourse to me."[18]
This rule is in abrupt conflict with the theories of the common law and, while it has been expressed in statutory form in most maritime countries, the courts have been so far influenced by common law doctrines in its application that it does not prevail in its original integrity either in this country or in England. Congress has endeavored to restore it in the United States but the courts, so far, have declined to follow the plain language of the statute.
To a considerable extent there may be an effective limitation of liability by special contract between the parties. The courts hold, generally, that limitations of liability in a contract must be reasonable if they are to be valid and they regard clauses which exempt the shipowner from liability for his own or his servants' negligence as unreasonable and also as contrary to public policy. At the same time, when the ship is not professing to be a common carrier and the contract is plain and on adequate compensation, such clauses may be, and are, enforced. Their efficiency will depend largely upon the contract itself and there is no hard and fast rule which prevents the private carrier from obtaining such limitations as he requires if the other party will agree thereto.
An illustration is found in the case of the Royal Sceptre, 187 Fed. 224, where the charter provided:
The ship is to be in no way liable for any consequences of ... perils of the sea, ... collisions, stranding, or other accidents or errors of navigation even when occasioned by the negligence, default, or error in judgment of the pilot, master, mariners, or other servants of the shipowners.
Judge Hough said:
The quoted charter provision delimits the obligations of the ship, in so far as it goes, when reasonably interpreted. If therefore the proximate cause of this loss be a peril of the sea (or river), a stranding, an error of the pilot or negligence of the master, it may be assumed that libellant cannot recover; for, without any written limitation of liability, all that the bailor-libellant could require or expect from the bailee-claimant was the use of ordinary care and skill and that expectation has been (in part) bargained away for a consideration presumably expressed in the rate of charter hire.
The original law was enacted in 1851 (Rev. St. §§ 4284-4286; Comp. St. 1916, 8020-8027); that provided an absolute protection against loss by fire unless caused by the design or neglect of the owner, and in case of practically all losses which might occur without the "privity or knowledge" of the owner, his liability was limited to the value of his interest in the ship and freight pending; provision was made for a general average of creditors and transfer to a trustee; in 1872 the Supreme Court promulgated rules of practice under which its benefits might be more efficiently applied by the admiralty courts. It was held that these statutes were enacted to restore the old doctrine of the maritime law, to encourage shipbuilding and the employment of ships in commerce, and for the public benefit. Hence they must be liberally construed in favor of shipowners. In a series of great decisions, commencing about 1870, the Supreme Court held the law constitutional; that foreign shipowners were entitled to its benefits; that the valuation of the owner's interest might be made as of the termination of the voyage or immediately after the disaster so that if the loss is total the liability is practically nil; that insurance was no part of the owner's interest in the ship or freight and need not be surrendered; and that the protection of the act extended to underwriters to whom the ship had been abandoned.
The original law had been passed with much difficulty and its language, as the result of compromise and concession, was subjected to much criticism as uncertain and ambiguous. The shipping interests of the country continued to decline and among the reasons assigned were the responsibility and liabilities left open or undefined by the law. About 1880, in connection with a vigorous attempt to revive the merchant marine, the entire subject received full consideration by Congress. The Act of June 26, 1884, was subsequently passed, and, expressly repealing all laws in conflict therewith, declared in a few words that "the individual liability of a shipowner shall be limited to the proportion of any and all debts and liabilities that his individual share of the vessel bears to the whole, and the aggregate liabilities of all the owners of a vessel on account of the same shall not extend the value of such vessel and freight pending." An amendment seeking to insert the condition that such debts must have been incurred without the owner's privity or knowledge was deliberately rejected. The courts, however, have declined to enforce the law according to its terms and held that Congress really intended to insert the condition as to privity or knowledge in spite of the omission of the words and the rejection of the amendment which sought to insert them. The result is that the owner is still liable without limit for all obligations which arise out of matters of contract, according to the rules of the common law and in many instances of negligence on the part of his employees the same result seems to follow. His liability can not be limited where "privity or knowledge" is imputable to him and no accurate definition of these terms is yet available.
Under the present law, the voyage is the unit in respect to which limitation may be granted. Probably the shipowner may claim the benefit of the law at any time before he pays a final judgment in favor of the damage creditors, but he must account for the value of the ship as it was at the termination of the voyage on which the liability was created. The courts will not permit him to continuously operate the ship at the expense of her creditors and then finally abandon her to them loaded with the liens of many voyages. The rule is only a practical one and in special cases may work injustice to shipowners, as where ships make a continuous number of short trips between contiguous points. Part-owners are only liable according to the proportion of their shares, and the personal fault or privity of one does not necessarily implicate the others. It is not necessary that they should join in the same proceeding. The exemption is several and may be claimed by each without reference to the others.
Limitation of liability can not be had against any loss or obligation unless incurred without the privity or knowledge of the shipowner. These words, by judicial construction, still remain as a condition or qualification of the law and it is unfortunate that no plain definition of their meaning has been yet supplied. The words have been discussed in many cases and there are many decisions in particular instances granting or denying the benefit of the law, but the expression is still undefined and perhaps is incapable of accurate legal definition. Some judges have held that "privity or knowledge" means the shipowner's own willful or negligent acts as distinguished from those of his agents or employees. This gives the broad and liberal construction of the law which the Supreme Court directed in its earlier decisions on the subject. On the other hand, judges of equal learning have been inclined to treat the matter by the standards of the common law and held that the acts or faults of agents or servants are those of the principal and that he must be as personally liable as if he had done them himself. These would limit the protection of the law to the acts of the master of the ship when beyond control of the owner and give it a close construction against the shipowner. This has been the tendency of the later decisions of the Courts of Appeals and the Supreme Court has so far acquiesced in them. There has also been a development of a doctrine to the effect that there can be no limitation against the enforcement of the shipowner's personal contracts, and engagements made by various employees and managing owners have been held to be within this class. This rule depends on the theory of privity or knowledge, as, of course, there can be no such thing as a contract relation without privity or knowledge of its subject-matter. Thus in the recent case of Luckenbach v. McCahan Sugar Ref. Co., 248 U. S. 139, decided December 9, 1918:
But the liability of the owners sought to be enforced here is one resting upon their personal contract; and to such liabilities the limitation acts do not apply.
Similarly in another recent case, Pendleton v. Benner Line, 246 U. S. 353:
The contract was between human beings, and the petitioner, by his own act, knowingly made himself a party to an express undertaking for the seaworthiness of the ship. That the statute does not limit liability for the personal acts of the owners, done with knowledge, is established by Richardson v. Harmon, 222 U. S. 96. It was said in that case, p. 106, that § 18 leaves the owner "liable for his own fault, neglect, and contracts."
*****
It is said that the owners did their best to make the vessel seaworthy, and that if it was not so the failure was wholly without the privity or knowledge of the petitioner. But that is not the material question in the case of a warranty. Unless the petitioner can be discharged from his contract altogether he must answer for the breach, whether he was to blame for it or not.
In the case of corporate shipowners it is said that the privity or knowledge must be that of the managing officers, but there is no definition of who the managing officers are and the term is not capable of accurate definition. The law of limitation of liability of shipowners in the United States is not now plain or simple nor is it in harmony with the general maritime law or that of other commercial countries. Where the owner can prove that the loss occurred without his privity or knowledge he will obtain protection, but just what facts or ignorance of facts he must prove to reach this result can not be stated at the present time.
This law was enacted by Congress in 1893, and corresponds to a similar English statute of about the same date. It may be found in 7 Comp. St., 1916, §§ 8029-8035. The text of the act follows:
Chapter 105. An act relating to navigation of vessels, bills of lading, and to certain obligations, duties, and rights in connection with the carriage of property.
Be it enacted by the senate and house of representatives of the United States of America in congress assembled, that it shall not be lawful for the manager, agent, master or owner of any vessel transporting merchandise or property from or between ports of the United States and foreign ports to insert in any bill of lading or shipping document any clause, covenant or agreement whereby it, he, or they shall be relieved from liability for loss or damage arising from negligence, fault or failure in proper loading, stowage, custody, care, or proper delivery of any and all lawful merchandise or property committed to its or their charge. Any and all words and clauses of such import inserted in bills of lading or shipping receipts shall be null and void and of no effect.
Sec. 2. That it shall not be lawful for any vessel transporting merchandise or property from or between ports of the United States of America and foreign ports, her owner, master, agent, or manager, to insert in any bill of lading or shipping document any covenant or agreement whereby the obligation of the owner or owners of said vessel to exercise due diligence, properly equip, man, provision, and outfit said vessel, and to make said vessel seaworthy and capable of performing her intended voyage, or whereby the obligations of the master, officers, agents, or servants, to carefully handle and stow her cargo and to care for and properly deliver the same, shall in any wise be lessened, weakened or avoided.
Sec. 3. That if the owner of a vessel transporting merchandise or property to or from any port in the United States of America shall exercise due diligence to make the said vessel in all respects seaworthy and properly manned, equipped and supplied, neither the vessel, her owners or managers, agents or charterers, shall become or be held responsible for damages or loss resulting from faults or errors in navigation or in the management of said vessel, nor shall the vessel, her owner or owners, charterers, agent, or master be held liable for losses arising from dangers of the sea or other navigable waters, acts of God, or public enemies, or the inherent defect, quality or vice of the thing carried, or from the insufficiency of package, or seizure under legal process, or for loss resulting from any act or omission of the shipper or owner of the goods, his agent or representative, or from saving or attempting to save life or property at sea, or from any deviation in rendering such service.
Sec. 4. That it shall be the duty of the owner or owners, masters, or agent of any vessel transporting merchandise or property from or between ports of the United States and foreign ports, to issue to shippers of any lawful merchandise a bill of lading or shipping document, stating, among other things, the marks necessary for identification, number of packages or quantity, stating whether it be carrier's or shipper's weight, an apparent order or condition of such merchandise or property delivered to and received by the owner, master, or agent of the vessel for transportation, and such document shall be prima facie evidence of the receipt of the merchandise therein described.
Sec. 5. That for a violation of any of the provisions of this act the agent, owner, or master of the vessel guilty of such violation, and who refuses to issue on demand the bill of lading herein provided for, shall be liable to a fine not exceeding two thousand dollars. The amount of the fine and costs of such violation shall be a lien upon the vessel whose agent, owner, or master is guilty of such violation, and such vessel may be libeled therefor, in any district court of the United States within whose jurisdiction the vessel may be found. One-half of such penalty shall go to the party injured by such violation and the remainder to the government of the United States.
Sec. 6. That this act shall not be held to modify or repeal sections forty-two hundred and eighty-one, forty-two hundred and eighty-two, and forty-two hundred and eighty-three of the Revised Statutes of the United States, or any other statutes defining the liability of vessels, their owners or representatives.
Sec. 7. Sections one and four of this act shall not apply to the transportation of live animals.
Sec. 8. This act shall take effect from and after the first day of July, eighteen hundred and ninety-three. Approved February 13, 1893.
The general purpose of the act is understood to have been to regulate the relations between ship and cargo, so as to provide a limitation of liability, beyond that granted by the earlier statutes as to damages in general, by providing that if the owner exercised due diligence to make his ship seaworthy neither he nor his vessel should be liable for losses resulting from fault or error in the navigation or management of the vessel. The courts, however, have construed the statute closely against the shipowner and it is doubtful whether it has not rather increased his original liabilities instead of limiting them. He is still held to his warranty of absolute seaworthiness at the beginning of the voyage; stipulations in the bill of lading are prohibited which tend to relieve him from liability for loss arising from negligence, fault or failure in proper loading, stowage, care or proper delivery and he is forbidden to insert any clauses lessening his common-law obligations as a carrier.
In the Carib Prince, 170 U. S. 655, the damage to cargo was caused by latent defects in a rivet, from which the head had come off, leaving a hole through which water entered and injured libellant's merchandise. The defect was due to too much hammering during the construction of the hull, causing the rivet to become brittle and weak. By reason of this defect the vessel was unseaworthy at the time the bill of lading was issued, although the owner did not know it. The bill of lading exempted the owner of the vessel from liability on account of "latent defects in the hull." The court held that the bill of lading was intended to confer exemption only to latent defects arising subsequent to sailing and consequently that there was no contractual limitation of liability, and with reference to the exemption from liability claimed under the Harter Act, said:
Because the owner may, when he has used due diligence to furnish a seaworthy ship, contract against the obligation of seaworthiness, it does not at all follow that when he has made no contract to so exempt himself he nevertheless is relieved from furnishing a seaworthy ship, and is subjected only to the duty of using due diligence. To make it unlawful to insert in a contract a provision exempting from seaworthiness where due diligence has not been used, cannot by any sound rule of construction be treated as implying that where due diligence has been used, and there is no contract exempting the owner, his obligation to furnish a seaworthy vessel has ceased to exist. The fallacy of the construction relied upon consists in assuming that because the statute has forbidden the shipowner from contracting against the duty to furnish a seaworthy ship unless he has been diligent, that thereby the statute has declared that without contract no obligation to furnish seaworthy ship obtains in the event due diligence has been used.
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The exemption of the owners or charterers from loss resulting from "faults or errors in navigation or in the management of the vessel," and for certain other designated causes, in no way implies that because the owner is thus exempted when he has been duly diligent that thereby the law has also relieved him from the duty of furnishing a seaworthy vessel. The immunity from risks of a described character, where due diligence has been used, cannot be so extended as to cause the statute to say that the owner when he has been duly diligent is not only exempted in accordance with the tenor of the statute from the limited and designated risks which are named therein, but is also relieved as respects every claim of every other description from the duty of furnishing a seaworthy ship.
In the Wildcroft, 201 U. S. 378, a cargo of sugar was injured by an opening of a valve in the ship's side in such a manner that water got into the cargo. The vessel was in all respects seaworthy at the beginning of the voyage, and the court held that having discharged the duty of providing a seaworthy ship the vessel was relieved from liability arising out of an unseaworthy condition, which devolved after the beginning of the voyage and without the fault of the owners. It was emphasized, however, following the case of the Southwark, 191 U. S. 1, that the burden is upon the owner of a vessel
to show by reasonable and proper tests that the vessel was seaworthy and in a fit condition to receive and transport the cargo undertaken to be carried and that if, by failure to adopt such tests and furnish the required proofs, the question of the ship's seaworthiness was left in doubt, that doubt must be resolved in favor of the shipper, because the vessel owner had not sustained the burden cast upon him by the law to establish that he had used due diligence to furnish a seaworthy vessel.
As it emerges from the interpretation of the courts, the effect of the Harter Act seems to amount to this:
The act says to the shipowner:
1. You may make a valid bargain by which you will be exempted from liability, if you use due diligence to make the ship seaworthy at the beginning of the voyage, and some defect develops which eluded your diligence. Unless you make such a bargain, your obligation to provide a ship which is seaworthy at the commencement of the voyage is absolute, and, in no event, can you bargain to relieve yourself from using due diligence.
2. You cannot bargain away your duty and obligation to use due diligence to see that your vessel is maintained in seaworthy condition during the voyage, but you may, if you like, bargain that if you use due diligence and your ship nevertheless become unseaworthy, you shall be relieved from responsibility for damage to cargo on that account.
3. If you use due diligence to employ a competent master and crew and their skill in navigation fails or the ship encounters perils of the sea and accident happens to the cargo you are not responsible for the damage. Your exemption from responsibility in this case is given by the statute and you do not need to bargain for it.
4. Your exemption from liability does not extend to damage due to improper loading and stowage.
Where the shipowner is entitled to the benefits of the Limited Liability Law, his liability is terminated by a surrender or abandonment of the ship and her pending freight. He may retain the insurance and her creditors can not claim it. He is not obliged to account for the insurance money which he may have collected for the loss or damage to his vessel. In this respect the law of the United States is more liberal to the shipowner than that of many other countries. The question was decided in the cases of the City of Norwich, 118 U. S. 468, and the Scotland, in the same volume at page 507. The latter will illustrate the rule; the Scotland and the Dyer were in collision and both sunk; the lower court held the Scotland at fault and awarded the owners of the Dyer upwards of $250,000, as damages. The value of the Scotland before the collision was about $500,000, and her owners had collected insurance on her to the amount of $299,867.42. The value of her wreckage was $4,927.85. The Supreme Court held that her owners' liability was limited to this last amount and that the owners of the Dyer could not claim any part of the insurance.
This is a form of organization which has the advantages of the general law of corporations in limiting the liability of shareholders to the amount of their stock. If such a corporation has all its capital invested in a single ship, its liability is, of course, limited to the amount of the investment and if the shares have been paid in full there can be no further calls upon the shareholders. When the ship is lost, all liabilities are lost with her except such as the shareholders may have personally guaranteed or assumed. The corporation which owns several ships will obviously not have the same degree of limitation. Hence the popularity among investors, particularly in England, of the single ship company. As far as the corporate affairs are concerned the laws of the State in which it is incorporated must be observed. In the maritime law, its status is that of an individual shipowner. The privity or knowledge of its managing officers may preclude it from the protection of the admiralty law of limited liability; if so, it cannot retain the insurance or any other part of its capital against its creditors, but, when the capital is lost or exhausted, the stockholders who have paid in full for their shares will have no further responsibility.
Admiralty (1910), Benedict, Chapter XXXV.
Carriers, Wheeler, Chapters I-III.
Admiralty, Hughes, Chapters VIII and XVI.
Collisions at Sea, Marsden (1904), Chapter VII.
Limitation of Liability, Van Santvoord, 1887.
Rebecca-Ware (Fed. Cas. No. 11,629).
Trans. Co. v. Wright, 13 Wall. 104.
Benefactor, 103 U. S. 247.
Scotland, 105 U. S. 24.
City of Norwich, 118 U. S. 468.
O'Brien v. Miller, 168 U. S. 287.
La Bourgogne, 210 U. S. 95.
Richardson v. Harmon, 222 U. S. 96.
Pendleton v. Benner Line, 246 U. S. 353.
[17] Liability does not extend to parts of a tow having no motive power of their own when attached to a tug whose faulty navigation caused a collision even though the damage resulted from the impact of the tow and the tug itself did not physically come into collision at all, and this is so notwithstanding the tug belongs to the same owner. Liverpool &c. Navigation Co. v. Brooklyn Eastern Dist. Terminal, U. S. Advance Sheets, 1919-20, 85, decided by the Supreme Court December 8, 1919.
[18] Justice Holmes in Liverpool, etc., Navigation Co. v. Brooklyn Eastern Dist. Terminal (supra).
In general and within the limits hereinafter mentioned, every service rendered to a ship and every injury done by a ship, creates a maritime lien upon her for the benefit of the individual who did the work or suffered the wrong.
Those who furnish supplies or fuel or provisions, or make repairs, or render services, as well as the members of the crew and officers (except the master) acquire such liens for the collection of the amounts due them. A like right or privilege accrues for the damage done through negligence on the part of the ship resulting in damage to persons or property, as by collision or injury to cargo. So these liens are divided into two classes, those ex contractu (arising out of agreements, express or implied) and those ex delicto (arising out of wrongs or torts).
The authority of the master to obligate the ship so that a lien arises has been discussed under the title "Master."
The managing owner, ship's husband, master or any person to whom the management of the vessel at port of supply is entrusted may by ordering supplies, repairs, render the vessel liable to a maritime lien. If the master be drunk or disabled and another person is discharging his duties and is in effect for the time being master of the ship, such person may create a valid lien. Thus it has been held that the vessel is bound for supplies ordered by the mate acting during the illness of the master. The vessel is also bound for supplies furnished on the order of any member of the ship's company and with the master's knowledge and acquiescence. It is customary in the administration of a large modern ship for the head of each department, e.g., the steward, chief engineer, to order supplies and for these the vessel is responsible, but only on the theory that the purchases are made with the master's authority, and if the person contracting the obligation has acted in excess of the powers delegated to him by the master, the ship will not be bound. It is incumbent on the person furnishing goods to a vessel to inquire into the authority of the individual ordering the same. Moreover, if the goods ordered are greatly in excess of the vessel's needs, it is incumbent upon the supplier to know that fact and if the goods ordered, even by the master personally, are greatly in excess of the vessel's needs the ship will not be bound.
A maritime lien attaches to the offending ship only, and not to her cargo (except for unpaid freight) and this is true even though the cargo belonged to the owner of the offending ship. As was said by Mr. Justice Brown in the case of the Bristol, 29 Fed. 867:
The cargo, except for the collection of the freight due, cannot be held for the faults of the ship. There being no lien beyond freight due, no proceeding in rem lies against the cargo for damages by collision, if the freight be paid, whether the cargo belongs to the owner of the offending vessel or not; and, if arrested, the cargo must be released upon the payment of the freight due.
A maritime lien, being essentially a remedy against the vessel, may attach even in a case in which the owners are not personally responsible; as for instance, where a state pilot, in charge of a ship under a state statute which renders his employment compulsory, negligently brought the ship into collision, she was subjected to a lien for the damage done, although the pilot was in no sense the agent of the owners, and no personal liability rested upon them. The China, 7 Wall. 53.
The lien attaches only by virtue of contracts or torts which are wholly maritime in their nature. It is frequently difficult to determine the nature of a contract or tort. Thus persons digging ice and snow from around a vessel on a beach, and about to be launched did not acquire a maritime lien because the service was performed on shore. Whereas persons who floated a vessel which had been carried far ashore were held to have performed a maritime service and to be entitled to a lien. In a case in which a vessel communicated fire to a wharf to which she was made fast, it was held that the tort was not maritime, whereas, had she been in the stream and had communicated fire to another vessel in the stream, the tort would have been maritime and would have given rise to a maritime lien (Hough v. Trans. Co., 3 Wall. 20). Conversely a tort having its inception on land and completed on shipboard will give rise to a lien. As for example where a man working on board ship was injured by a piece of lumber thrown through a chute by a man working on a wharf. (Herman v. Mill Co., 69 Fed. 646).
A lien arises in favor of the owners or temporary owners of a vessel upon cargo actually on board for unpaid freight and for demurrage. This is the only case in which possession of the security is essential to the existence of a maritime lien. If the cargo is removed from the ship the maritime lien is lost. In this class of cases suit to enforce the lien should be instituted before the cargo is discharged.