Goods Shipping and the Law

Date: Oct 01, 2012
Document Type: Newsletter

With many businesses beginning to take advantage of online trading, sending goods by consignment (a legal term for having them carried by someone else) is becoming much more common for smaller businesses. The advantages of online trading are clear, especially for higher-value items that would be costly to maintain in a traditional brick and mortar retail outlet. Shipping, however, is well-established area of law with practices that date back several hundred years, and has found new everyday exposure through consumer demand for convenience, specialisation and speedy delivery.

This article will be an overview on what legal issues your business needs to consider in shipping goods, and what you can do to balance legal protections with keeping your customers happy.

Getting the right services

When you ship goods with a carrier, the terms and conditions that apply to your consignment will be in a standard form. This means that you are not really in any position to negotiate special legal terms, but you can (and should) arrange for services that are necessary and appropriate for your shipment. For example, telling someone on the phone that you have fragile goods and then later failing to pack them properly is not a wise course to pursue. It pays to understand what your carrier can offer you and not to skimp on what is needed to ensure that the goods arrive safely in your buyer's hands. In many cases, contracts of carriage expressly state that you (as the shipper/consignor) have packed the goods properly, protected them against expected risks in shipping, and provided anything special that might be needed to load or unload them.

Risk and ownership

When your goods are accepted by the carrier, you retain the legal ownership until your contract of sale with the buyer transfers ownership (typically upon delivery and finalisation of payment). However, the carrier has possession of your goods and is responsible for damage to them as determined by your contract of carriage. It would not be an exaggeration to say that most carriers disclaim as much responsibility as the law permits (which is quite a lot). As such, insurance is an essential component of any shipping arrangement.

Most carriers will offer some form of insurance, although this will be through a different body and will have its own separate terms and conditions. Taking the time to understand this is important, especially if you anticipate that you will have multiple shipments with the same company. There is also no requirement that you use the courier company's recommended insurer - it is totally up to you as to how you would like to insure the goods (provided an insurer agrees to take on the risk). As insurance contracts are ‘contracts of utmost good faith’, you have an obligation to tell your insurer everything about the shipment (as they can deny coverage if you hid a material fact from them in seeking insurance).

Other issues

There are a few other major issues that you should consider when shipping goods:

  • ‘force majeure’ situations, such as earthquakes, floods or riots can happen and are almost always excluded from any form of insurance coverage;
  • certain goods may be prohibited from carriage, especially if the shipment is going overseas; and
  • international commercial shipments may create complex issues of customs and export clearance - it may pay to use the services of a customs broker if your transaction is valuable enough.

This certainly sounds like a lot to consider when starting to ship goods to your customers. However, much like other aspects of business – you perform the initial groundwork and planning of what you need, and you review things as you go to see how the arrangement is working. Part of this planning process should include legal advice on obtaining proper insurance coverage and documentation for your own contracts of sale. If you put in the work at the beginning, there should be far fewer surprises down the track.

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