What happens when the limitation of liability clause in a contract between a shipper and a carrier is inconsistent with the bill of lading? In a recent case, the carrier could end up liable for over $1 million in damages instead of $15,000 after a New Jersey federal court held that a contract overrides a bill of lading.
The Contract v. the Bill of Lading
The contract provided that the carrier is liable for the full invoice value of the shipper'sgoods for any loss or damage subject to a $250,000 limit per occurrence. It also contained an "Entire Contract" clause providing that its terms cannot be modified or waived except in writing signed by both parties, and a provision that where any bills of lading or other documents are inconsistent with the contract, the contract governs.
The bill of lading, issued by a warehouseman on the shipper's behalf, declared that the value of the goods was $2.30 per pound for a total of $15,772.80.
The End Result
The court found that the contract should be given full effect because the "very purpose and intent of the Override Provision is to render a conflicting bill of lading ineffective."
Interestingly enough, the contract between the shipper and the warehouseman prohibited the warehouseman from declaring any value on products shipped. In a prior opinion, the court was quick to note that the shipper may very well have a claim against the warehouseman for the warehouseman's lapse.
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