Article

Note: To pay for the purchase of a shipment of ladies pants from Mulitex Ltd, Force 13 (Applicant/ Buyer) procured an LC from HSBC (Issuing Bank) in favor of Mulitex Ltd (Seller). Seller received its supply from Xiamen (Supplier), and also procured a back to back letter of credit in favor of the Supplier. Per Applicant/Buyer's recommendation, Seller hired Joyspeed Global Cargo (China) Ltd. (Bailee) as the freight forwarder to assist in the delivery of goods.

Bailee subsequently sued Seller for unpaid freight charges in the amount of USD 28,855.00. Seller filed a cross-suit against Bailee for losses in the amount of USD 117,663.60 because seller contended that Bailee released the Seller's goods to Buyer/Applicant without producing an original bill of lading and Buyer/Applicant subsequently refused to pay. The District Court, Judge S P Yip, gave judgment for the Bailee and dismissed the Seller's counterclaim.

The court found at the time of the shipment's delivery that the Bailee failed to tender the two bills of lading to Applicant/Buyer's agent (corresponding with two letters of credit that were to be used in Seller's respective transactions with Supplier and Applicant/Buyer). As a result, the Applicant/Buyer refused to pay the Seller.

Bailee is seeking payment of its freight charges, arguing that based on prior dealings with Seller, there was an understanding that the goods could be released without the presentation of the bills of lading. Furthermore, Bailee argued that it was not aware of the back-to-back LC arrangement between Seller and Seller's Supplier and Seller and Applicant/Buyer and without express instructions from the Seller, could not have been reasonably expected to switch the bills of lading to correspond with the LC arrangements at the time of the delivery.

The court found that Seller failed to give express instructions to the Bailee about the production of the bills of lading and that the nature of freight forward delivery by air requires an immediate transfer of goods. The court held that Bailee's performance was reasonable and damages should be awarded in the amount of the unpaid freight charges.

[ALC]

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This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.