Principal decision regarding a shipping agent’s liability from the Norwegian Supreme Court

On the 6th of February 2019 the Norwegian Supreme Court pronounced a principal decision regarding a shipping agent’s liability after failing to comply with a seller’s instruction not to deliver goods to a buyer. The court ruled in favor of the seller, with one dissenting judge.

The case involved a delivery of shoes between a Canadian company, Genfoot Inc., and a Norwegian distributor, Portland Norge AS. Initially, the payment for the shoes was meant to take place prior to shipment, however, the seller accepted that the shoes be purchased on credit. The buyer, Portland, entered into an agreement with a shipping agent, SCHENKERocean Ltd. for the delivery of the shoes from Genfoot’s suppliers in China to Portland’s place of business in Norway.

After the shipment had arrived in Oslo, but before the shipment was handed over to the buyer, the buyer’s bank terminated its engagement with the buyer as a result of outstanding payments. As a consequence of this the seller instructed the shipping agent to hold back the delivery of the goods to Portland. After some negotiations between the shipping agent and Portland the goods were delivered, contrary to Genfoot’s instructions. A few days later Portland was declared bankrupt. Genfoot sued the shipping agent for damages for not complying with its instructions not to deliver the goods.

The contract between Genfoot and Portland was governed by the laws of Quebec. Accordingly the first question for the Supreme Court to consider was whether the buyer had the right to suspend delivery pursuant to Article 71, second paragraph of the United Nations Convention on Contracts for the International Sale of Goods (CISG). The shipping agent made several objections; firstly, it claimed that the delivery was already paid. Secondly, that the conditions for suspending obligations were fulfilled before delivery was made to the shipping agent, and accordingly could not be made while the goods were in transit. Thirdly, that once the shipment had reached Oslo harbor the shipping agent had to be considered a representative of Portland, and the goods were therefore deemed to be delivered. Finally, the shipping agent argued that it is a condition for suspending performance that notification is made to the byer in accordance with Article 71, third paragraph of the CISG.

The court held that none of the objections could be heard. In relation to the final objection, the court ruled that giving notification to the buyer could not be considered an absolute condition for stopping delivery according to Article 71 of the CISG.

The second question for the Supreme Court to consider was whether non-compliance with the instruction not to deliver the goods was negligent according to Norwegian tort law. The question was governed by Norwegian law because the plaintiff (the seller) was not a party to the shipping contract. The court held that the shipping agent owed a duty of loyalty to the parties of the underlying sales contract and therefore could not deliver the goods to the buyer contrary to instructions when the agent had knowledge of the buyer’s failing financial situation. The defendant’s (shipping agent’s) other objections, relating to the seller’s contributory negligence and that the debt had to be seen as remitted, was not heard.