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Who Shall Bear the Risk Cargo Lost, Buyer or Agent?

Kevin Liu settled this case in Shandong High Court in 2016, successful winning

Qingdao company (hereafter refer to Qingdao) imported paper from Australia, Qingdao is importer, and SEA company is import agent of Qingdao. Bothe parties signed the long term agency agreement. When the paper cargos were imported in China, and stored in warehouse in Qingdao port, and unfortunately fire occurred, the cargos were all damaged and lost. Because SEA company as agent of Qingdao had paid all money to Australian seller. So SEA company claimed compensation of one million dollars from Qingdao.

According to law, agent shall perform its duties according to agency contract, the rewards of business belongs to principal, agent shall not bear risk during business except that it violated the agent contract or acted surpass limits empowered by principal. So, from simple fact of this case, that Qingdao was buyer in the trade, then shall bear the loss of cargo. But from the points of Qingdao, they did not store the cargo in warehouse, they did not receive the cargo, so they did not control the cargo during this period, they are innocent, it is unfair for them to bear all the loss.

Qingdao as defendant entrusted me to defend itself in court. After I reviewed this import agency contract, I focused this articles which stated that if Qingdao paid to SEA, then SEA delivered the cargo to Qingdao. From this article, I could conclude that titles of cargos were belonging to SEA before payment of Qingdao. And in this case, Qingdao did not pay to SEA. So if SEA had the title of cargo, then this was not just agency relationship. This relationship shall be sales contract relationship. Furthermore, if SEA had the title of cargo, then SEA should bear the risk of fire. According to Chinese property law, rights of property include right of possession, right of using, right of yields, right of profit, right of disposition. All these rights were in the hands of SEA.

From their past business custom, first, Qingdao paid to SEA, then SEA issued documents of picking up cargo, then Qingdao got the documents and picked up the cargo from warehouse. The cargo was under the control of SEA. Without the order of SEA, Qingdao could not pick up the cargo.

I declared my legal opinions in court hearing, and clarified the fact that both parties relationship was not agency, but sales relationship. SEA argued that they only obtained little agency fee in this contract, about 0.05% basis on value of cargo, not sales profit, so this was not sales contract relationship. And in contract, it is clearly stated that SEA was agent of Qingdao.

 

The Shandong high court judged that according to Chinese contract law, as for the paid service contract, if it has stipulation in law, then it shall be bounded by law, if it has no stipulations in law, then it shall be referred to sales contract. In this case, the law does not stipulate who shall bear risk in import agency contract, so it shall be referred to sales contract. And, according to laws of sales contract, seller shall bear risk before delivering the cargo, and buyer shall bear the risk after receiving the cargo. In this case, the cargos were in warehouse and under the control of SEA, Qingdao did not receive the cargo, so SEA shall bear this risk of cargo lost.

So, the court judged that claiming of SEA in this case be denied.

 

 

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