How to Identify the Validity of Standard Terms
OVERVIEW
Courts: Shanghai High People's Court.
Date decided: October 14, 2021
Parties: Maersk (Appellant) vs. Heng Sheng Cold Chain Co., Ltd. (Appellee), Jun Tai Biotechnology Co., Ltd. (Appellee)
Revelant Legislations: The Contract Law of the People's Republic of China, The Maritime Code of the People's Republic of China
Citation: (2020) Hu Min Zhong No. 575
FACTS
Hengsheng entered into an agency contract with Jun Tai, On April 16, 2018, Hengsheng entered into a sales contract with a foreign seller to purchase 23,000 tons of Ukrainian corn. The import cargo declaration listed Hengsheng as the domestic consignee. Both parties agreed that Jun Tai should have the contractual responsibility to enshure the quality of the imported goods.
In July 2018, Maersk Line accepted a commission from a third party to transport a batch of grains from Chernomorsk, Ukraine to Yueyang Port, China. Following the commission, Maersk issued Bill of Lading No. 9651XXXXX, listing Maersk as the carrier and Hengsheng as the consignee to be notified at the port of destination. Maersk used nine 40-foot standard containers and seventy-one 40-foot high-cube containers to transport these goods. The front of the Bill of Lading stated a free period of 21 days for container usage at the destination port. The back of the Bill of Lading incorporated transportation terms referencing the carrier's rate table, focusing on free usage time, demurrage, and detention charges for containers and transportation equipment. The bill of lading was endorsed by both the shipper and Hengsheng. The goods were loaded and shipped on July 11, 2018, and arrived at Shanghai Port(a transit port) on August 18, 2018. Upon arrival, Yangshan Customs inspected the goods. The goods were cleared through customs on October 12, 2018, and departed from the port on October 22, 2018. The period staying at Shanghai Port exceeded the free usage time for containers.
Maersk held that Hengsheng, as the consignee of the transported goods, and Jun Tai, as the buyer of the goods, should jointly be liable for any container overdue usage charges during the transit period. The first-instance court, Shanghai Maritime Court, dismissed Maersk's claim. Subsequently, Maersk appealed to the Shanghai High People's Court.
ISSUES
Should Maersk be entitled to claim overdue charges from Hengsheng in this case based on the standard form of the contract and Bill of Lading?
FINDINGS
The Shanghai High People's Court held that according to Article 78 of the Maritime Code of the People's Republic of China[1], the rights and obligations between the carrier and the consignee or the holder of the bill of lading shall be determined based on the provisions of the bill of lading. In this case, the front side of the Bill of Lading only recorded the charging standard overdue usage fees at the destination port, while there was no mention of overdue usage fees for the transit port containers. Although the back side of the Bill of Lading printed a clause regarding the "carrier's rate table," these articles were not highlighted in any significant way. Therefore, it could not be considered that Maersk and Hengsheng had reached an agreement on the charging of overdue usage fees according to the clauses on the Bill of Lading. Furthermore, although Maersk had published the charging standard for overdue usage fees for transit port containers on its official website, the fees were not emphasized as well.
According to Article 62 of the Contract Law of the People's Republic of China,[2] Maersk and Hengsheng did not make a clear agreement regarding the charges of overdue usage fees for transit port containers. Therefore Maersk, as the party obligated to provide containers for shipment, should bear the fees. According to the contract of affreightment and the Bill of Lading, Maersk is liable for providing containers for the entire transportation process from the originating port in Chernomorsk, Ukraine to the unloading port in Yueyang, China. At the transit port, The Shanghai Port, the goods were still under the control of Maersk, and it should bear the obligation to provide containers during a routine customs inspection, as well as pay overdue usage fees for transit port containers. The first-instance ruling that Maersk should pay the fees for transit port containers was appropriate.
COMMENTS
According to the article 511 of the Civil Code of the People's Republic of China[3], the party who provides standard terms, the Maersk in this case, should bear the fees mentioned above because both shipper and consignee have no specific and clear agreements on it.
The provisions on charging fees are not clear in this case. Maersk should have highlighted some provisions in this contract to make the other parties aware of the charging fee provisions, which is an appropriate action that a standard contract provider should take. According to the Civil Code of the People's Republic of China Article 496 [4], if one standard terms provider neglects to highlight some articles that have a material interest, , the other party(s) can argue that the terms are not a part of the contract.
In this case, the standard terms provided by Maersk on the back of the Bill of Lading do not clearly indicate provisions regarding overdue usage fees for containers. Therefore, the Shanghai High People's Court should not support Maersk's claim to charge Hengsheng fees based on the facts and laws.
This case also reminds us that in ordinary commercial transactions, especially when signing standard contracts, it is essential to carefully read and pay attention to clauses that are closely related to our interests. If the other party has not clearly highlighted such clauses, we can also claim that these standard terms are invalid due to the lack of clear highlights.
[3] Where certain content agreed upon by the parties in the contract is ambiguous and cannot be determined in accordance with the provisions in the preceding article, the following provisions shall apply:(6) If the apportionment of the expenses of performance is not clear, the party performing the obligations shall bear the expenses; and any additional expenses of performance incurred because of the creditor shall be borne by the creditor.
[4] Article 496 Where standard terms are adopted for contracting, the party furnishing the standard terms shall define the rights and obligations between the parties under the principle of fairness, remind in a reasonable manner the other party to note the terms excluding or limiting the liability of the party furnishing the standard terms or otherwise related to the material interest of the other party, and explain the terms upon request of the other party. If the party furnishing the standard terms fails to perform the reminding or explanation obligation, resulting in the other party failing to note or understand the terms in which it has a material interest, the other party may argue that the terms are not a part of the contract.
Disclaimer: Information and commentaries in this article does not amount to legal advice to any person on any specific matter. Please contact us in case you would like to reproduce any information or commentaries contained.