THE HIMALAYA CLAUSE – REVISITED

©Prof. William Tetley, Q.C.*

published in (2003) 9 JIML 40-64

INDEX

I. Introduction

1) The Himalaya clause

2) The problem
3) Adler v. Dickson (The Himalaya)
4) The fallacy of the commercial/insurance argument
5) Heterodoxy, heresy, genius
6) Two solutions
a) Amend the law
b) Extend the contract
c) The new law – amend the privity rule

II. The Common Law – Third-Party Benefit

1) Introduction
2) My position
3) Lord Denning and the tort of negligence
4) Lord Reid and agency
5) Consideration and the benefit to society

III. Acceptance of the Himalaya Clause

1) United Kingdom
2) The new U.K. law
3) Canada
a) Lord Reid’s agency theory in Canada

*
Professor of Law, McGill University; Distinguished Visiting Professor of Maritime and Commercial Law,
Tulane University; counsel to Langlois Gaudreau O’Connor of Montreal. The author acknowledges with
thanks the assistance of Robert C. Wilkins, B.A., B.C.L, in the preparation and correction of this article.
See as a source of recent law in particular the author’s website, “Tetley’s Law and Other Nonsense” at
http://tetley.law.mcgill.ca/.
 2

b) Canada’s “principled exception” to the privity doctrine

4) Australia
5) South Africa
6) The United States
a) Pre-1959 jurisprudence
b) Modern Himalaya clauses – U.S.
c) Period of responsibility clause

IV. The Circular Indemnity Clause

V. The Civil Law

1) The basic rule

2) The contract of porte-fort
3) Stipulation for another
a) Introduction
b) May stipulation for another confer a negative benefit?
c) Conditions of a stipulation for another
d) Restrictive interpretation

VI. France

VII. The Hamburg Rules

VIII. Conclusion
 3

THE HIMALAYA CLAUSE -- REVISITED

Prof. William Tetley, Q.C.*

Executive Summary

This article brings up to date the author’s previous writings on the law of third-
party benefit, particularly in respect of the Himalaya clause in bills of lading covering
contracts for the carriage of goods by sea. In Prof. William Tetley, Q.C.’s consistent
practice over the years, the article deals principally with the law of the United Kingdom,
the United States, France and Canada, but contains additional references to the law of
many other jurisdictions, including Australia, Belgium, Germany, Italy, Louisiana, the
Netherlands, South Africa and Spain. The questionable circular indemnity clause is also
treated, and, of course, the U.K.’s Contracts (Rights of Third Parties) Act 1999,
especially its sect. 6(5).

The article is also comparative in the Tetley fashion, in that it relates to civil law
(notably the stipulation for another), as well as to the common law, with its case law and
(more recently) its statutory law approaches to the problem of third-party benefit. The
contribution of the Hamburg Rules in resolving this problem in the international maritime
carriage of goods is of course highlighted.

I. Introduction

1) The Himalaya clause

The Himalaya clause, or a clause benefiting a third party (usually a stevedore) in

maritime matters, sprang on the world by decisions of the House of Lords and the
Supreme Court of the United States just over 40 years ago. Various legal inventions and
subtle recourses to ancient decisions and principles were used and the Himalaya clause
was at last universally accepted. The civil law had much less difficulty in accepting the
concept because of the principle of “stipulation for another”. France had even earlier
given the stevedore a statutory benefit in domestic law.

In the last twenty-five odd years, there have been nuances and improvements in
the principle by the courts, while the major change has been by statute, in particular in the
United Kingdom.

*
Professor of Law, McGill University; Distinguished Visiting Professor of Maritime and Commercial Law,
Tulane University; counsel to Langlois Gaudreau O’Connor of Montreal. The author acknowledges with
thanks the assistance of Robert C. Wilkins, B.A., B.C.L, in the preparation and correction of this article.
 4

2) The problem

May a person benefit from the terms of a contract into which he has not entered?
Or, more particularly, may a stevedoring firm or terminal operator benefit from the terms
of a bill of lading to which it is not a party?

In the various shipping countries of the world a stipulation entitled the ‘Himalaya
Clause’ has been added to bills of lading so that the stevedore, the terminal operator and
even a dry dock company may benefit by certain terms of the bill of lading. The clause in
particular allows third parties to enjoy the package limitation and the one-year delay for
suit of the Hague Rules. A modern Himalaya clause may read as follows:1

“It is hereby expressly agreed that no servant or agent of the carrier

(including every independent contractor from time to time employed by
the carrier) shall in any circumstances whatsoever be under any liability
whatsoever to the shipper, consignee or owner of the goods or to any
holder of this Bill of Lading for any loss, damage or delay of whatsoever
kind arising or resulting directly or indirectly from any act, neglect or
default on his part while acting in the course of or in connection with his
employment and, without prejudice to the generality of the foregoing
provisions of this clause, every exemption, limitation, condition and
liberty herein contained and every right, exemption from liability, defense
and immunity of whatsoever nature applicable to the carrier or to which
the carrier is entitled hereunder shall also be available and shall extend to
protect every such servant or agent of the carrier acting as aforesaid and
for the purpose of all the foregoing provisions of this clause the carrier is
or shall be deemed to be acting as agent or trustee on behalf of and for the
benefit of all persons who are or might be his servants or agents from time
to time (including independent contractors as aforesaid) and all such
persons shall to this extent be or be deemed to be parties to the contract in
or evidenced by this Bill of Lading.”(Emphasis added).2

Permitting a stevedore not a party to a contract to benefit by that contract may be

appealing to ocean carriers because it provides the stevedore with the same rights that a
vessel owner has under law, but by throwing aside a basic principle of law, the door is
left open to incongruity, abuse and, at times, injustice to persons who have contracted in
good faith.

1
This is the modern Himalaya Clause in The Cleveland (Eisen und Metall A.G. v. Ceres Stevedoring Co.
Ltd. and Canadian Overseas Shipping Ltd.) [1977] 1 Lloyd's Rep. 665 and in The Eurymedon (New
Zealand Shipping Co. Ltd. v. A.M. Satterthwaite & Co. Ltd.) [1974] 1 Lloyd's Rep. 534; [1975] A.C. 154 at
p. 165 (P.C.).
2
Note that the clause relies on both the agency theory and the trust theory of a third-party benefit. An even
more modern Himalaya clause adds a circular indemnity provision to the original Himalaya clause. See The
Circular Indemnity Clause, infra and Godina v. Patrick Operations [1984] 1 Lloyd's Rep. 333 at p. 334.
(N.S.W. C.A).
 5

The problem is exaggerated when the clause not only allows the stevedore to
benefit by the package limitation but allows the stevedore to avoid liability altogether by
a non-responsibility clause.

3) Adler v. Dickson (The Himalaya)

The Himalaya clause arose as the result of a decision of the English Court of
Appeal in the case of Adler v. Dickson (The Himalaya).3 Mrs. Adler a passenger on the
S.S. Himalaya, had been injured when a gangway fell, throwing her 16 feet to the quay
below. Because the passenger ticket contained a non-responsibility clause exempting the
carrier, Mrs. Adler took suit against the master (Mr. Dickson) and the boatswain.

The Court of Appeal declared that in the carriage of passengers as well as in the
carriage of goods the law permitted a carrier to stipulate not only for himself, but also for
those whom he engaged to carry out the contract. It was held as well that the stipulation
might be express or implied. In the case of Captain Dickson, however, the Court held that
the passenger ticket did not expressly or by implication benefit servants or agents and
thus Dickson could not take advantage of the exception clause.

After this decision, specially drafted Himalaya clauses benefiting stevedores and
others began to be included in bills of lading.

4) The fallacy of the commercial/insurance argument

The benefit to commerce of allowing stevedores and terminal operators to

completely limit their liability is often put forward by supporters of the Himalaya clause.4
Such reasoning, however, ignores the fact that in the commercial world it is preferable for
persons who cause damage to cargo to be held responsible for that damage.5 Otherwise
they will continue to be negligent and will do nothing to alter their practices.

Transferring the loss to the underwriters of cargo from the underwriters of the
stevedores does not merely shift the cost of insurance. If the stevedores and terminal
operators who have the care and charge of cargo do not act carefully when carrying out
their duties, then responsibility for loss and damage to cargo will not only be shifted but
that loss and damage will be increased as well. Nor are all cargoes or risks fully or even

3
[1954] 2 Lloyd’s Rep. 267, [1955] 1 Q.B. 158 (C.A.).
4
See Lord Wilberforce in The Eurymedon, [1975] A.C.154 at p. 169, [1974] 1 Lloyd’s Rep. 534 at p. 540,
(P.C.). See also Lord Goff in The Pioneer Container [1994] 2 A.C. 324 at pp. 344-345, [1994] 1 Lloyd’s
Rep. 593 at p. 597. (P.C.).
5
Lord Goff seems to have missed this point. Reviewing prior Himalaya clause jurisprudence, he said in a
confusing declaration: “In more recent years the pendulum of judicial opinion has swung back again, as
recognition has been given to the undesirability, especially in a commercial context, of allowing plaintiffs
to circumvent contractual exception clauses by suing in particular the servant or agent of the contracting
party who caused the relevant damage, thereby undermining the purpose of the exception, and so
redistributing the contractual allocation of risk which is reflected in the freight rate and in the parties’
respective insurance arrangements” The Mahkutai [1996] A.C. 650 at p. 661, [1996] 2 Lloyd’s Rep. 1 at p.
6 (P.C.) (emphasis added).
 6

partially insured. For example, it has been estimated that not much more than fifty
percent of shipments by sea on the North Atlantic are actually insured at all.

It is a fundamental principle of good business practice and of efficient, fair and

low-cost insurance that persons who are responsible for losses should be held
accountable, in some way, for those losses.6

5) Heterodoxy, heresy, genius

Does the Himalaya clause represent heterodoxy or heresy or genius? As Viscount

Simonds said in Midland Silicones Ltd. v. Scruttons Ltd.,7 the leading British case on the
subject:

“For to me heterodoxy, or, as some might say, heresy, is not the more
attractive because it is dignified by the name of reform. Nor will I easily
be led by an undiscerning zeal for some abstract kind of justice to ignore
our first duty, which is to administer justice according to law, the law
which is established for us by Act of Parliament or the binding authority
of precedent. The law is developed by the application of old principles to
new circumstances. Therein lies its genius.”(Emphasis added)

To some the clause is heretical, to others it exemplifies genius. To me the

Himalaya clause is an ingenious, short-term solution to a difficult problem, but is a
solution which raises infinitely more problems than it solves.

The basic problem is to find a way to permit third parties who are neither agents
nor servants to limit their liability; specifically, to find a way to allow stevedores and
terminal operators, whom the carrier declares are not his agents or servants but
independent contractors, to nevertheless benefit under the contract of carriage.

6) The two solutions

a) Amend the law

One obvious solution is to amend the law by extending the $500 package
limitation and the one-year delay for suit provision to the stevedore (and terminal
operator), while at the same time extending the period of responsibility to cover the
goods before and after the tackle to tackle operations. This could be done by amendments

6
For example, theft and pilferage continued in epidemic proportions in the Port of Montreal until finally
stevedores and terminal operators were held responsible for negligence by the Quebec courts. Thereafter,
losses were considerably reduced, insurance premiums of shippers and consignees as well as stevedores
and terminal operators were reduced and the port experienced a surge in traffic. See O’Connor J. in The
Federal Schelde [1978] 1 Lloyd’s Rep. 285 at pp. 287-288 (Qué. Supr. Ct.); Walsh J. in The Tarantel
(Circle Sales & Import Ltd. v. The Tarantel) [1978] 1 F.C. 269 at pp. 283 and 295 (Fed. C. Can.); Marceau
J. in Marubeni America Corp. v. Mitsui O.S.K. Lines Ltd. & I.T.O., [1979] 2 F.C. 283 at p. 289 (Fed. C.
Can.)
7
[1962] A.C. 446 at pp. 467-468, [1961] 2 Lloyd’s Rep. 365 at p. 371. (H.L.).
 7

to the Hague and Hague/Visby Rules or to national laws. The Law of June 18, 1966 of
France which applies to local carriage has done just this.8 The Hamburg Rules also have a
“port to port” provision at art. 4.9

b) Extend the contract

A second solution is to include the stevedore (and terminal operator) as a party to

the bill of lading contract, either by his becoming a servant of the carrier or, in the
inverse, by the carrier contracting as an agent for the stevedore, its disclosed principal.
Such genuine contractual arrangements, however, are usually anathema to both carriers
and stevedores because neither wishes to be responsible for the other, nor do they wish to
extend the period during which they are responsible for the goods.10

In effect the carrier and the stevedore (or the terminal operator) wish to add the
stevedore to the contract in only one respect: to enable the stevedore to limit its
responsibility. Calling the stevedore a party to the contract under a Himalaya clause is
thus, at best, a fiction.

c) The new law – amend the privity rule

The major change in the law has been an attack on the privity rule by statute
and/or a redefinition by the courts. Some jurisdictions have passed general statutes that
either modify or abolish the privity rule.11 The United Kingdom, in particular, has
adopted the Contracts (Rights of Third Parties) Act 1999.12

Finally, courts in Canada13 and Australia14 have modified the privity rule if
certain provisions are complied with.

8
Law No. 66-420 of June 18, 1966 (J.O. June 24 at p. 5206), at arts. 50-57.
9
Adopted March 31, 1978 at Hamburg, and in force November 1, 1992.
10
Some enlightened carriers have recently included “port to port” clauses in their bills of lading. This has
been true in certain competitive markets (between liner conference) or when the line owns the terminal.
11
See S. M. Waddams, The Law of Contracts, 4 Ed., Canada Law Book, Toronto 1999, p. 205 at sect. 297.
See, for example, Western Australia’s Property Law Act 1969, No. 32 of 1969, sect. 11; Queensland’s
Property Law Act 1974, No. 76 of 1974, sect. 55; New Zealand’s Contracts (Privity) Act 1982, No. 132 of
1982, sect. 4; New Brunswick’s Law Reform Act, S.N.B. 1993, c. L-1.2, sect. 4. See also the Restatement
(Second) Contracts, 1981, sect. 304 in the United States.
12
U.K. 1999, c. 31, in force May 11, 2000. The Act’s effect on the Himalaya clause is discussed in Stephen
D. Girvin, “The Law Commission’s Draft Contracts (Rights of Third Parties) Bill and the carriage of goods
by sea” [1997] LMCLQ 541 at pp. 545-547. The Act itself is commented upon in P. Kincaid, “Privity
Reform in England”, (2000) 116 L.Q.R. 43; and in A. Burrows, “The Contracts (Rights of Third Parties)
Act 1999 and its implications in commercial contracts” [2000] LMCLQ 540.
13
London Drugs v. Kuehne & Nagel International [1992] 3 S.C.R. 299 (employees benefiting from an
exemption clause in a contract between their employer and another party); Fraser River Pile & Dredge Ltd.
v. Can-Dive Services Ltd. [1999] 3 S.C.R. 108, [2000] 1 Lloyd’s Rep. 199 (third-party insurance
beneficiary).
14
Trident General Insurance Co. Ltd. v. McNiece Bros. Pty. Ltd. (1988) 165 C.L.R. 107 (Aust. H.C.) (third
party insurance beneficiary).
 8

II. The Common Law – Third-Party Benefit

1) Introduction

The common law, traditionally, has not permitted a third party to benefit under a
contract. As Viscount Haldane said:15

“My Lords, in the law of England certain principles are fundamental. One
is that only a person who is a party to a contract can sue on it. Our law
knows nothing of a jus quaesitum tertio arising by way of contract.”

The foregoing citation was relied on by Viscount Simonds in Midland Silicones

Ltd. v. Scruttons Ltd.16 but the “fundamental principle” was questioned by Lord Denning
(dissenting) in the same case as not being so fundamental, but only “a discovery of the
nineteenth century.”17

2) My position

It was and still is my view that under the common law a third party (e.g. a
stevedore or terminal operator) may not benefit from the terms of a contract to which he
is not a party unless that third party is carrying out at least part of the duties of one of the
parties to the contract. In other words, if the carrier undertakes to carry the goods,
discharge and deliver them, then the stevedore may benefit from the contract terms if the
stevedore causes damage during the discharge or delivery. This was in effect the position
taken by the House of Lords in Elder, Dempster Co. v. Paterson, Zochonis & Co.18 where
third-party benefits in the bill of lading between the shipper and the charterer (who signed
it) were granted to the shipowner. It is noteworthy that the shipowner and charterer share
in the responsibilities of the carrier and in the duties under the contract.

15
Dunlop Pneumatic Tyre v. Selfridge and Co. Ltd., [1915] A.C. 847 at p. 853 (H.L.). The classic criticism
of this position is A. Corbin, “Contracts for the Benefit of Third Parties” (1930) 46 L.Q.R. 12.
16
[1962] A.C. 446 at p. 467, [1961] 2 Lloyd’s Rep. 365 at p. 371. Relying on Dunlop Pnuematic and
Tweddle v. Atkinson (1861) 1 B. & S. 393, 121 E.R. 762, Lord Reid said: “Although I may regret it, I find it
impossible to deny the existence of the general rule that a stranger to a contract cannot in a question with
either of the contracting parties take advantage of provisions of the contract, even where it is clear from the
contract that some provision in it was intended to benefit him” (A.C. at p. 473, Lloyd’s Rep. at p. 374).
17
Ibid., A.C. at 483, Lloyd’s Rep. at p. 380. See also P. S. Atiyah, Rise and Fall of Freedom of Contract,
1979 at p. 413. Lord Denning attempted judicial reform of the privity rule in other decisions, as well. See in
particular Smith & Snipes Hall Farm v. River Douglas Catchment Board [1949] 2 K.B. 500 (C.A.); Drive
Yourself Hire Co (London) Ltd. v. Strutt [1954] 1 Q.B. 250 (C.A.); Beswick v. Beswick [1966] Ch. 538
(C.A.), aff’d in part, [1968] A.C. 58 (H.L.).
18
[1924] A.C. 522 at p. 534, (1924) 18 Ll. L. Rep. 319 at pp. 321-22 (H.L.). Rechtbank van Koophandel te
Antwerpen, March 14, 1978, [1978] ETL 495. See also The Mahkutai [1996] A.C. 650 at pp. 659-663,
[1996] 2 Lloyd’s Rep. 1 at pp. 4-6 (P.C. per Lord Goff); J. Wilson, “A Flexible Contract of Carriage – the
Third Dimension?” [1996] LMCLQ 187; C. MacMillan, “Elder, Dempster sails on: Privity of Contract and
Bailment on” Terms” [1997] LMCLQ 1.
 9

The weakness of the argument that the stevedore (or terminal operator) may
benefit under the bill of lading contract arises from the fact that the carrier in the bill of
lading undertakes no responsibility after discharge, which is when the stevedore or
terminal usually to be benefited.

3) Lord Denning and the tort of negligence

Lord Denning took the view in Midland Silicones Ltd.19 that the principle, that no
person may benefit from a contract to which he is not a party, has been modified by the
emergence of negligence as an independent tort, as first enunciated in 1932 in Donoghue
v. Stevenson.20

Lord Denning argued that the shipper/consignee (he is vague about how the
consignee becomes involved) has consented to the stevedore taking the risk on himself.
“Even though negligence is an independent tort, nevertheless it is an accepted principle of
the law of tort that no man can complain of an injury if he has voluntarily consented to
take the risk of it on himself.”21 Lord Denning's reasoning, however, has been rarely
followed.22

4) Lord Reid and agency

The accepted method of permitting a stevedore or terminal operator to benefit by

a contract (the bill of lading) to which he is not a party is the agency theory enunciated by
Lord Reid in Midland Silicones Ltd.23 Four conditions must be fulfilled as set out by Lord
Reid:24

“I can see a possibility of success of the agency argument if (first) the bill
of lading makes it clear that the stevedore is intended to be protected by
the provisions in it which limit liability, (secondly) the bill of lading
makes it clear that the carrier in addition to contracting for these
provisions on his own behalf, is also contracting as agent for the stevedore
that these provisions should apply to the stevedore, (thirdly) the carrier has
authority from the stevedore to do that, or perhaps later ratification by the
stevedore would suffice, and (fourthly) that any difficulties about
consideration moving from the stevedore were overcome. And then to
affect the consignee it would be necessary to show that the provisions of
the Bills of Lading Act, 1855, apply.”

19
[1962] A.C. 446 at p. 488, [1961] 2 Lloyd’s Rep. 365 at p. 382 (H.L.).
20
[1932] A.C. 562 (H.L.).
21
[1962] A.C. 446 at p. 488, [1961] 2 Lloyd’s Rep. 365 at p. 382.
22
For example, London Drugs Ltd. v. Kuehne & Nagel International Ltd. [1992] 3 S.C.R. 299 at pp. 457 et
seq. per McLachlin J.
23
[1962] A.C. 446 at pp. 474, [1961] 2 Lloyd’s Rep. 365 at p. 374.
24
Ibid. Actually here are five conditions, the fifth being the last sentence of the dictum – that the Bill of
Lading Act, 1855, 18 & 19 Vict., c. 111, should apply so as to affect the consignee. The 1855 statute was
repealed and replaced by the Carriage of Goods by Sea Act 1992, U.K. 1992, c. 50. It now applies to all
negotiable bills of lading, as well as to sea waybills and ship’s delivery orders.
 10

The main problem of Lord Reid's agency theory is to find “consideration” passing
from the stevedore to the shipper. The answer was supplied in The Eurymedon (New
Zealand Shipping Co. Ltd. v. A.M. Satterthwaite & Co. Ltd.).25 The Privy Council held
that the consideration was the discharging of the goods by the stevedore for the benefit of
the shipper:26

“The performance of these services for the benefit of the shipper was the
consideration for the agreement by the shipper that the appellant
(stevedore) should have the benefit of the exemptions and limitations
contained in the bill of lading.”

The foregoing analysis is generally the law in Commonwealth countries.27 The

rationale is really public policy or the benefit to society.28

Finally, this approach promotes litigation based on technical points of law that
avoids dealing with substantial issues. In the words of Lord Goff:29

“[S]o long as the principle continues to be understood to rest upon an

enforceable contract as between cargo owners and the stevedores entered
into through the agency of the shipowners, it is inevitable that technical
points of contract and agency law will continue to be invoked by cargo
owners seeking to enforce tortious remedies against the stevedores and
others uninhibited by the exceptions and limitations in the relevant bill of
lading contract.”

5) Consideration and the benefit to society

In my view, the consideration found by Lord Wilberforce for Lord Reid's agency
theory and the presumed benefit to society and commerce are doubtful.

It is my view that, only if the carrier himself also undertakes to discharge the
goods and care for them after discharge, may he be able to benefit his servants or
independent contractors by his contract with the shipper.

25
[1975] A.C. 154, [1974] 1 Lloyd’s Rep. 534 (P.C.).
26
Ibid., A.C. at p. 168, Lloyd’s Rep. at p. 539.
27
See The Rigoletto [2000] 2 Lloyd’s Rep. 532 at p. 542 (C.A.), where Rix, L.J. declared: “Lord Reid’s
fourfold test for the successful invocation of a direct contract between shipper and stevedore via a
Himalaya clause contained in a contract of carriage between shipper and carrier is set out in Midland
Silicones v. Scruttons …. Forty years on, there now tends to be little difficulty in giving successful effect to
that test: see The Eurymedon, [1974] 1 Lloyd’s Rep. 534; [1975] A.C. 154, The New York Star, [1980] 2
Lloyd’s Rep. 317; [1981] 1 W.L.R. 138, The Mahkutai, [1996] 2 Lloyd’s Rep. 1 at p. 8, [1996] A.C. 650 at
pp. 664-665.”
28
See The Mahkutai [1996] A.C. 650 at p. 664, [1996] 2 Lloyd’s Rep. 1 at p. 8 (P.C.), where Lord Goff
held: “Nevertheless there can be no doubt of the commercial need of some such principle as this [the
Himalaya clause], and not only in cases concerned with stevedores; and the bold step taken by the Privy
Council in The Eurymedon, and later developed in The New York Star, has been widely welcomed.”
29
The Mahkutai, ibid.
 11

Lord Wilberforce gave the rationale for his judgment in the following paragraph
in The Eurymedon:30

“In the opinion of their Lordships, to give the appellant the benefit of the
exemptions and limitations contained in the bill of lading is to give effect
to the clear intentions of a commercial document, and can be given within
existing principles. They see no reason to strain the law or the facts in
order to defeat these intentions. It should not be overlooked that the effect
of denying validity to the clause would be to encourage actions against
servants, agents and independent contractors in order to get around
exemptions (which are almost invariable and often compulsory) accepted
by shippers against carriers, the existence, and presumed efficacy, of
which is reflected in the rates of freight. They see no attraction in this
consequence.” (Emphasis added).

It is submitted that this rationale is erroneous and that the foregoing paragraph
expresses most of the questionable arguments supporting the Himalaya clause. For
example, “…the clear intention of a commercial document…” is fallacious because:

a). the document is one of adhesion insofar as it concerns the shipper;

b). the stevedore never became a party to the document; and
c). the stevedoring company was not identified except generically in the document.

The remark “they see no reason to strain the law…” strains, rather the reader’s
credulity; extending the rights of a contract to a person who is not a party to the contract
is “to strain the law”. It is a concept that has tortured courts and jurists all over the world.
The strain was such that in The Eurymedon decision itself that the three judges in the
New Zealand Court of Appeal31 ruled the clause to be invalid, as did two of the five
judges of the Privy Council. (Beattie J. in first instance ruled in favour of the clause.)32

The words “They see no attraction to this consequence” and what proceeds is a
commercial and social argument. If the rationale of a judgment, however, is to be the
commercial and social attractiveness of the Himalaya clause, then the court of first
instance should permit proper argument and proof on the commercial and social
advantages of the Himalaya clause. The court should then openly render judgment on the
commercial and social merits, as well as (or instead of) on the legal merits.

As to the commercial argument of Lord Wilberforce, it is submitted that it is

questionable because it is a principle of society and commerce that the person who causes
damage should be held responsible under the law; otherwise that person will continue to
be negligent. This is especially true in the carriage of goods by land and sea.

30
[1975] A.C. 154 at p. 169, [1974] 1 Lloyd’s Rep. 534 at p. 540 (P.C.).
31
[1972] 2 Lloyd’s Rep. 544, [1973] 1 N.Z.L.R. 174 (C.A.).
32
[1971] 2 Lloyd’s Rep. 399, [1972] N.Z.L.R. 385.
 12

A fair, commercial, and practical solution is to hold stevedores and terminal

agents responsible for their acts but to permit them to benefit by the exculpatory clauses
of the Hague and Hague/Visby Rules. Bills of lading which contain Himalaya clauses,
however, also often contain non-responsibility clauses which have been ruled effective in
relieving the stevedores and other third parties of all responsibility.33 Seemingly, it is
only if the non-responsibility clause is clearly in breach of the Rules that the third party
will be deprived of its protection despite the Himalaya clause.34

III. Acceptance of the Himalaya Clause

Despite the difficulty of finding the legal basis for its acceptance, the validity of
the Himalaya clause is recognized in most jurisdictions today.

1) United Kingdom

Since The Eurymedon 35decision of the Privy Council, the extension of rights to
third parties in virtue of the Himalaya clause has been acknowledged in the United
Kingdom. The New York Star 36 tested the clause, particularly after the majority of the
High Court of Australia37 had rules (I consider correctly) that the stevedoring contractor
could not be protected from responsibility for negligent acts which took place after
discharge if the carrier did not itself take responsibility after the discharge.38 The Privy
Council solved the problem (to its satisfaction, at least) by holding that the contract of
carriage ends at delivery to the consignee (despite the fact that the carrier takes no
responsibility after discharge) and therefore the stevedores was within the contract terms
and could benefit by the exemption clauses of the bill of lading.39

33
See, for example, Glebe Island Terminals Pty. Ltd. v. Continental Seagram Pty. Ltd. (The Antwerpen)
(1993) 40 N.S.W.L.R. 206, [1994] 1 Lloyd’s Rep. 213 (N.S.W. C.A.), where a Himalaya clause extended
to a terminal operator the benefit of two non-responsibility clauses in a bill of lading, which clauses, read
together, resulted in the terminal operator being exonerated from liability even for the willful, unauthorized
post-discharge delivery of cargo by its employees to thieves – an occurrence which the Court
acknowledged to be a “fundamental breach” of the bill of lading contract.
34
In The Starsin [2001] 1 Lloyd’s Rep. 437 at p. 462 (C.A.), Rix, L.J. held: “Art. III, r. 8 of the Hague
Rules is incompatible with the idea that third parties to whom the benefit of the carrier’s defences are
extended, should have a blanket exemption from liability…. Since the carrier would have no exemption for
negligent stowage, it follows that its independent contractor, typically a stevedore but here the shipowner
itself, can have no exemption either.”
35
(New Zealand Shipping Co. Ltd. v. A.M. Satterthwaite & Co. Ltd.) [1975] A.C. 154, [1974] 1 Lloyd’s
Rep. 534 (P.C.).
36
Port Jackson Stevedoring Pty. Ltd. v. Salmond & Spraggon (Australia) Pty. Ltd. [1980] 2 Lloyd’s Rep.
317 at p. 324 (P.C.).
37
[1979] 1 Lloyd’s Rep. 298.
38
Ibid., at pp. 310, 323 and 326.
39
[1980] 2 Lloyd’s Rep. 317 at p. 324. “These provisions must be interpreted in the light of the practice
that consignees rarely take delivery of goods at the ship’s rail but will normally collect them after some
period of storage on or near the wharf. The parties must therefore have contemplated that the carrier, if it
did not store the goods itself, would employ some other person to do so.”
 13

On the other hand, it has been held that the forwarding agent who had charge of
goods on the dock company’s premises, could not by means of the Himalaya clause
benefit from the package limitation in the ocean carrier’s bill of lading, because the
contract of carriage had not commenced.40 Similarly, where a stevedore had not yet
performed any services referable to the contract of carriage at the time of the cargo theft
(before loading), the Himalaya clause in the bill of lading could not operate to protect the
stevedore from liability for that loss.41

Nor can anyone entitled to benefit under a Himalaya clause receive greater
exemptions than those to which an original party to the contract is entitled. Consequently,
if a contract of carriage of goods by sea is governed by the Hague/Visby Rules, the
benefits granted by a Himalaya clause in that contract are limited by art. 3(8) of the
Rules.42

In The Pioneer Container,43 the Privy Council, guided by “common sense and
practical convenience,” accepted a wide reading of Elder, Dempster Co. v. Paterson,
Zochonis & Co.44 It permitted a shipowner to take advantage of a jurisdiction clause in a
contract between the shipper and charterer through the device of bailment on terms, as
developed by Lord Denning M.R.in Morris v. C.W. Martin & Sons Ltd.45

But in The Mahkutai,46 the Privy Council, severely limited this approach, advising
that bailment and contract do not operate independently of one another.47 Rather, the
contract, and any Himalaya clause it might contain, were deemed to alter the bailment.48
The Privy Council thus seriously questioned the use of bailment as an alternative method
to the Himalaya clause for avoiding the privity rule. It thus reaffirmed the principle of
privity of contract and that the Himalaya clause was the preferred means of conferring a
benefit on a third party under a bill of lading.

40
Burke Motors v. Mersey Docks [1986] 1 Lloyd’s Rep. 155 at p. 162.
41
The Rigoletto [2000] 2 Lloyd’s Rep. 532 at p. 545 (C.A.).
42
The Starsin [2001] 1 Lloyd’s Rep. 437 at pp. 462, 471 and 476 (C.A.)
43
The Pioneer Container [1994] 2 A.C. 324, [1994] 1 Lloyd’s Rep. 593. (P.C.).
44
[1924] A.C. 522, (1924) 18 Ll. L. Rep. 319 (H.L.).
45
[1966] 1 Q.B. 716, [1965] 2 Lloyd’s Rep. 63 (C.A.).
46
[1996] A.C. 650, [1996] 2 Lloyd’s Rep. 1 (P.C.). Lord Goff’s speech provides a critical review of prior
English Himalaya clause jurisprudence. While the Privy Council (A.C. at p. 665, Lloyd’s Rep at pp. 8-9)
assumed without deciding that a shipowner qualifies as a “sub-contractor”, as that term was used in the
charterer’s bill of lading, the Court of Appeal of Hong Kong ([1994] 1 H.K.L.R. 212) answered it in the
negative. But Colman J., in The Starsin [2000] 1 Lloyd’s Rep. 85 at p. 99, held that shipowners did fall
within the term “independent contractors” as it was employed in the particular Himalaya clause at issue
there and, hence, could enjoy the benefits of the clause – a holding upheld on appeal. See The Starsin
[2001] 1 Lloyd’s Rep. 437 at p. 461 (C.A.).
47
This is directly opposite to what the Privy Council had advised in The Pioneer Container (Owners of
Cargo Lately on Board the Vessel K.H. Enterprise v. Owners of the Vessel Pioneer Container) [1994] 2
A.C. 324 at p. 344, [1994] 1 Lloyd’s Rep. 593 at p. 603) (P.C.).
48
See C. MacMillan, “Elder, Dempster sails on: Privity of Contract and Bailment on Terms” [1997]
LMCLQ 1; S. Nossal, “Bailment on Terms, Himalaya Clauses and Exclusive Jurisdiction Clauses: The
Decision of the Privy Council in The Mahkutai” (1996) H.K.L.J. 321; S. Baughen, “Bailment’s Continuing
Role in Cargo Claims” [1999] LMCLQ 393 at pp. 401-405.
 14

Lord Goff also held that a valid Himalaya clause could confer only benefits and
had to be distinguished from terms embodying mutual agreements. Because a jurisdiction
clause confers mutual rights and obligations, rather than purely unilateral benefits, its
protection could not be extended to a third party by a Himalaya clause.49 Such protection
could, however, be so extended if the clause itself expressly mentioned the exclusive
jurisdiction clause as one of the benefits conferred.50

2) The new U.K. law

Finally, in response to longstanding criticism of the privity rule,51 and a report by

the Law Commission in 1996,52 the United Kingdom Parliament, some three years later,
passed the Contracts (Rights of Third Parties) Act, 1999.53 This statute, the full title of

49
[1996] A.C. 650 at p. 666, [1996] 2 Lloyd’s Rep. 1 at p. 9 (P.C.), holding that the exclusive jurisdiction
clause in the bill of lading at issue was not an “exception, limitation, condition or liberty”, nor was it a
“provision”, a term which, in the context of the clause concerned, was interpreted to mean a term benefiting
the carrier in the same way as an exception, limitation, condition or liberty. See also Bouygues Offshore
S.A. v. Caspian Shipping (No. 2) [1997] 2 Lloyd’s Rep. 485 at p. 490.
50
See the unreported decision of Mr. Justice Moore-Bick in United Arab Shipping Co. & Ors. v. Galleon
Industrial Ltd. (High Court of Justice 2000, Folio 792), at paras. 24-29, where the shipowner, held to be an
independent contractor under a bill of lading issued by a charterer, was given the benefit of an exclusive
jurisdiction clause in the bill of lading the Himalaya clause of which mentioned, not only “every defence,
exception, limitation, condition and liberty applicable to the Carrier”, but also referred expressly to the
jurisdiction clause.
51
The criticism came from both judicial and academic circles. See Jack Beatson, "Reforming the Law of
Contracts for the Benefit of Third Parties: a Second Bite at the Cherry" (1992) 44 CLP 1. See also A.
Burrows, “The Contracts (Rights of Third Parties Act) 1999 and its implications for commercial contracts
[2000] LMCLQ 540, who notes that calls for the reform of the privity rule were voiced as early as 1937 by
the Law Revision Committee, chaired by Lord Wright. One of the strongest criticisms was expressed by
Lord Diplock in Swain v. The Law Society [1983] 1 A.C. 598 at p. 611 (H.L.), where he described the rule
as: “an anachronistic shortcoming that has for many years been regarded as a reproach to English private
law.” See also Steyn, L.J. in Darlington Borough Council v. Wiltshier Northern Ltd. [1995] 1 W.L.R. 68 at
p. 76 (C.A): “The case for recognizing a contract for the benefit of a third party is simple and
straightforward. The autonomy of the will of the parties should be respected. The law of contract should
give effect to the reasonable expectations of contracting parties. Principle certainly requires that a burden
should not be imposed on a third party without his consent. But there is no doctrinal, logical, or policy
reason why the law should deny effectiveness to a contract for the benefit of a third party where that is the
expressed intention of the parties. Moreover, often the parties, and particularly third parties, organise their
affairs on the faith of the contract.” For academic commentary on the privity doctrine, see, for example,
Francis Reynolds, “Privity of Contract, the Boundaries of Categories and the Limits of the Judicial
Function” (1989) 105 L.Q.R. 1; J.N. Adams & R. Brownsword, “Privity of Contract – That Pestilential
Nuisance” (1993) 56 Modern L. Rev. 722.
52
U.K. Law Commission Report No. 242, “Privity of Contract: Contracts for the Benefit of Third Parties”,
H.M.S.O., London, 1996, with draft bill. For commentary, see A. Burrows, “Reforming Privity of Contract:
Law Commission Report 242” [1996] LMCLQ 467; A. Tettenborn, “Third Party Contracts – Pragmatism
from the Law Commission” [1996] J.B.L. 602. The Report followed the publication by the Law
Commission of a Consultation Paper, entitled “Privity of Contract: Contracts for the Benefit of Third
Parties”, Consultation Paper No 121, H.M.S.O., London, 1991.
53
U.K. 1999, c. 31, assented to and in force, November 11, 1999, but which (by sect. 10(2)) is applicable
only to contracts concluded six months later (i.e. on or after May 11, 2000), unless the contract expressly
provides for the statute’s earlier application to it (sect. 10(3)). Among the many learned commentaries on
the statute are those by A. Burrows, “The Contracts (Rights of Third Parties) Act 1999 and its implications
for commercial contracts” [2000] LMCLQ 540; C. MacMillan, “A Birthday Present for Lord Denning: The
 15

which is the “An Act to make provision for the enforcement of contractual terms by third
parties”, provides that a third party may “in his own right” enforce a term of a contract
where the contract expressly provides that he may do so (sect. 1(1)(a)). Such enforcement
is also possible where the contract purports to confer a benefit on the third party, even if
he is not designated by name, but only as a member of a class (sect. 1(1)(1)(b) and 1(3))
(e.g. stevedores, subsequent owners, subsequent tenants), or as a person answering a
particular description, unless on a proper construction of the contract the parties did not
intend the term to be enforceable by such persons (sect. 1(2)). Even third parties not yet
in existence when the contract is made (e.g. unborn children, future spouses and
companies to be incorporated) may then enforce rights stipulated in their favour.54
“Negative rights” (e.g. exclusion and limitation clauses) may also benefit third parties
under the statute (sect. 1(6)).

The statute also contains provisions on the variation and rescission of third party
benefits by the contracting parties (sect. 2); defences available to the promisor (sect. 3);
the right of the promisee to enforce contractual terms (sect. 4); and the protection of the
promisor for double liability (sect. 5).

Sect. 6 of the statute deals with exceptions to the right of a third party under sect.
1 to enforce a contractual term benefiting him. In particular, by sect. 6(5)(a), a third party
has no right to enforce such a term for his benefit, in the case of a contract for the
carriage of goods by sea. A “contract for the carriage of goods by sea” is defined as a
contract either "contained in or evidenced by a bill of lading, sea waybill or a
corresponding electronic transaction" (sect. 6(6)(a)) or one "under or for the purposes of
which there is given an undertaking which is contained in a ship's delivery order or a
corresponding electronic transaction" (sect. 6(6)(b)).55

There is, however, one major exception to this exception, permitting the third
party beneficiary, in reliance on sect. 1, to "… avail himself of an exclusion or limitation
of liability in such a contract" (sect. 6(5)(a)). It is this exception to an exception in the
Contracts (Rights of Third Parties) Act 1999 which, in effect, puts the Himalaya clause
on a statutory footing in the U.K.56 As the Explanatory Note to sect. 6(5) states:

Contracts (Rights of Third Parties) Act 1999” (2000) 63 Modern L. Rev. 726; P. Kincaid, “Privity Reform
in England” (2000) 116 L.Q.R. 43; and Chitty on Contracts, 28 Ed., Sweet & Maxwell, London, 1999 at
pp. 1003-1017.
54
See A. Burrows, “The Contracts (Rights of Third Parties) Act 1999 and its implications for commercial
contracts”, supra, note 53 at p. 542.
55
Under sect. 6(7)(a), a bill of lading, sea waybill and a ship's delivery order are given the same meaning as
they have in the Carriage of Goods by Sea Act, 1992, U.K. 1992, c. 50, while a “corresponding electronic
transaction” is a “transaction within section 1(5) of that Act which corresponds to the issue, indorsement,
delivery or transfer of a bill of lading, sea waybill or ship's delivery order.” (sect. 6(7)(b)).
56
For a consideration of the effects of the 1999 statute on the carriage of goods by sea, see Sir G.H. Treitel,
“The Contracts (Rights of Third Parties) Act 1999 and the Law of Carriage of Goods by Seas”, being chap.
17 of F.D. Rose, ed., Lex Mercatoria (Essays on International Commercial Law in Honour of Francis
Reynolds), LLP, London, 2000 at pp. 345-379; Sir G.H. Treitel & F.M.B. Reynolds, eds., Carver on Bills of
Lading, Sweet & Maxwell Ltd., London, 2001 at paras. 7-071 to 7-079.
 16

“Subsection (5), which excludes certain contracts relating to the carriage

of goods, nevertheless does not prevent a third party from taking
advantage of a term excluding or limiting liability. In particular, this
enables clauses which seek to extend an exclusion or limitation of liability
of a carrier of goods by the sea to servants, agents and independent
contractors engaged in the loading and unloading process to be enforced
by those servants, agents or independent contractors (so called ‘Himalaya’
clauses).”

It must be noted, however, that the 1999 statute does not repeal existing statutory
and common law exceptions to the privity doctrine, such as the exceptions of agency,
assignment and trust of a promise.57 Nor does it modify or repeal pre-1999 statutory
provisions which, in some cases, accorded rights to third party contractual beneficiaries.58
It nevertheless affects English commercial law generally in many important areas,
including insurance, construction contracts and contracts for the issuance of securities.59

One may therefore conclude that Lord Reid’s agency theory may still be applied
to Himalaya clauses in bills of lading subject to English law, where the conditions of that
theory are met. But the 1999 statute provides a simpler basis for enforcing the standard
Himalaya clause, because the statute merely requires the third party beneficiaries to be
identified with sufficient clarity, either expressly (sect. 1(1)(a)), or by class, name or
description (sect. 1(1)(b) and 1(3)). Concerns about the carrier’s authorization from the
third party to stipulate the clause, the third party’s ratification of the benefit conferred by
the provision, and about the passing of consideration, need no longer preoccupy either
merchants, lawyers or judges.

3) Canada

a) Lord Reid’s agency theory in Canada

The Supreme Court, in The Lake Bosomtwe (Canadian General Electric Co. Ltd.
v. Pickford & Black Ltd.),60 relied on Midland Silicones61 and denied the right of a
stevedore to benefit from a Himalaya clause. When, however, the Privy Council adopted
The Eurymedom,62 the lower courts of Canada began to validate the third-party benefit of

57
By sect. 7(1) of the 1999 Act, rights or remedies of third parties existing or available apart from the Act
are preserved. See A. Burrows, supra, note 53 at pp. 549-550.
58
Among the existing statutory provisions that continue to operate, and which already provided third
parties with enforceable contractual rights before the 1999 statute was adopted, are the Bills of Exchange
Act 1882, U.K., 45-46 Vict., c. 61; the Carriage of Goods by Sea Act 1992, U.K. 1992, c. 50; and various
U.K. statutes conferring third party rights in accordance with international conventions to which the U.K. is
a party in the fields of road, rail and air transport. Accordingly, no rights are conferred on a third party by
sect. 1 of the 1999 Act in the cases of contracts on such bills, notes or instruments (sect. 6(1) and 6(5)(b)).
Another important exclusion, at sects. 6(3) and (4), prohibits the 1999 Act being used by third parties to
enforce terms of an employment or other work contract against the employees or workers covered by it.
59
Burrows, supra, note 53 at pp. 553-554.
60
[1971] S.C.R. 41 at pp. 43-44.
61
[1962] A.C. 446 at pp. 474, [1961] 2 Lloyd’s Rep. 365 at p. 374 (H.L.).
62
[1975] A.C. 154, [1974] 1 Lloyd’s Rep. 534 (P.C.).
 17

the Himalaya clause, on the condition that the prerequisites of Lord Reid’s agency theory
in Midland Silicones were complied with.63

Finally, the Himalaya clause was upheld in the Buenos Aires Maru64 by the
Supreme Court of Canada, which, in so doing, provided the following legal justification
for the extension of the bill of lading’s exemption clauses to third parties (stevedores and
terminal operators) in respect of liability before loading and after discharge.65 According
to the Supreme Court the bill is not only evidence of the contract of carriage and of the
obligations of the carrier as carrier under that contract, but is also evidence of the terms
of the bailment which arises from reception of the goods until loading and from discharge
until delivery and of the obligations of the carrier as bailee. The bill of lading therefore
produces effects both before and after the period governed by the Rules. The stevedores
and terminal operators employed by the carrier are acting as sub-bailees when the carrier
is acting as bailee, and can therefore benefit from the exemptions which the bill grants to
the carrier when the latter is acting as bailee. The Supreme Court then went on to give, as
its basic reason for accepting the Himalaya clauses, a most dangerous argument: that it
does not matter much which party is responsible because the loss will be covered by
insurance.66

Whatever may be the validity of the Himalaya clause it must clearly specify who
is being benefited, while the stevedore/carrier contract (or terminal agent/carrier contract)
must specifically authorize and instruct the carrier to contractually benefit the stevedore
(or the terminal agent) in the bill of lading.67 It is, however, not even essential (according

63
Miida Electronics v. Mitsui O.S.K. Lines [1982] 1 F.C. 406 at pp. 414, 421 and 422, (1981) 124 D.L.R.
(3d) 33 at pp. 39, 46 and 46 (Fed. C.A. of Can.). See also St. John Shipbuilding v. Kingsland Maritime
Corp. (1982) 126 D.L.R. (3d) 332, 1984 AMC 568 (Fed. C.A. of Can.); The Cleveland (Eisen und Metall
A.G. v. Ceres Stevedoring Co. Ltd.), [1977] 1 Lloyd’s Rep. 665 (Qué. C.A.); Colonial Yacht Harbour Ltd.
v. The Octavia [1980] 1 F.C. 331 at pp. 336-337 (Fed. C. Can.). In Greenwood Shopping Plaza v. Beattie
[1980] 2 S.C.R. 228 at p. 238, McIntyre J., in delivering the opinion of the Supreme Court of Canada,
referred to The Eurymedon solution to Lord Reid’s agency problem of consideration but did not express an
opinion on whether it was applicable in Canada.
64
(ITO – Int’l Terminal Operators v. Miida Electronics) [1986] 1 S.C.R. 752 at pp. 782-794, 1986 AMC
2580 at pp. 2604-2613. See Tetley, “The Buenos Aires Maru” (1988) 10 Supreme Court L. R. 399. On
Canadian maritime law and Admiralty jurisdiction in Canada generally, see also Mr. Justice Arthur J.
Stone, “Canada’s Admiralty Court in the Twentieth Century” (2002 ) 47 McGill L.J. 511. Himalaya
clause jurisprudence, especially The Buenos Aires Maru, is reviewed by Iacobucci J. in London Drugs v
Kuehne & Nagel International [1993] 3 S.C.R. 299 at pp. 430-436. Lord Reid’s third criterion has been
addressed in Sears Ltd. et al. v. Ceres Stevedoring Co. et al. (The Tolya Komar) (1989) 88 N.R. 296 at pp.
302-303 (Fed. C.A. of Can.); Fibreco Pulp Inc. v. Star Shipping A/S (1998) 145 F.T.R. 125 at p. 132,
[1998] 3 F.C. D-41 (Fed C. Can.), upheld (2000) 257 N.R. 291 (Fed. C.A. of Can.); Kodak v. Racine
Terminal (Montreal) Ltd. (1999) 165 F.T.R. 299, 1999 AMC 2628 (Fed C. Can.).
65
[1986] 1 S.C.R. 752 at pp. 798-799, 1986 AMC 2580 at pp. 2618-2619.
66
[1986] 1 S.C.R. 752 at p. 800, 1986 AMC at p. 2619: “I think is important in determining what was
within reasonable contemplation, to recognize that this is a commercial contract between two parties who,
in essence, are determining which of them is to bear the responsibility for insurance at various stages of the
contract.” (Emphasis added!) For commentary, see Tetley, supra, note 64.
67
Miida Electronics, supra, [1986] 1 F.C. 406 at p. 422, 124 D.L.R. (3d) 33 at p. 46 (Fed. C.A. of Can.),
The Suleyman Stalskiy (Calkins & Burke Ltd. v. Far Eastern Steamship Co.) [1976] 2 Lloyd’s Rep. 609 at
p. 618 (B.C. S.C.), St John Shipbuilding v. Kingsland Maritime Corp., supra, 126 D.L.R. (3d) 322 at p.
337, 1984 AMC 568 at p. 575 (Fed. C.A. of Can.). See also Kodak v. Racine Terminals (Montreal) Ltd.
 18

to the Supreme Court of Canada) that the exemption clause be specific and exclude
“negligence”.68 The clause, one presumes, still cannot exclude gross negligence or faute
lourde.69

b) Canada’s “principled exception” to the privity doctrine

In London Drugs v Kuehne & Nagel International,70 the Supreme Court relaxed
the privity rule. It allowed warehouse employees whose negligent performance of the
contract between their employer and a customer had damaged the customer’s property to
avail themselves of the limitation of liability clause contained in the contract, even
though they were strangers to it and even though there was no Himalaya clause in the
warehousing contract. The Court, without abolishing the privity doctrine itself,
nevertheless made an incremental change to the common law, which it deemed necessary
in the interests of justice and policy. It laid down two basic conditions for relaxing the
privity bar to third party benefit. The two-part test, announced in the majority decision of
Iacobbuci, J., requires that:71

“1) The limitation of liability clause must, either expressly or impliedly,

extend its benefit to the employees (or employee) seeking to rely on it; and

2) the employees (or employee) seeking the benefit of the limitation of

liability clause must have been acting in the course of their employment
and must have been performing the very services provided for in the
contract between their employer and the plaintiff (customer) when the loss
occurred.”

In the Supreme Court’s subsequent judgment in Fraser River Pile & Dredge Ltd.
v. Can-Dive Serfices Ltd., 72 where the issue was the right of the demise charterer of a
barge to rely on a waiver of subrogation clause in the insurance contract between the
barge-owner and its insurer, Iacobucci, J. made it clear that the Court had not intended
the “principled exception” to the privity doctrine announced in London Drugs to be
limited to the employer-employee context. Rather, he restated the exception in wider
terms, so as to make it clear that henceforth in common-law Canada, third parties will be

(1999) 165 F.T.R. 299, 1999 AMC 2628 (Fed. C. Can.), where a new carrier, who took over the business of
a previous carrier, was found to have no authority from the stevedore to include Himalaya clauses in its
bills of lading.
68
Buenos Aires Maru [1986] 1 S.C.R. 752 at pp. 794-799, 1986 AMC at pp. 2614-2619. See also W.
Tetley, Marine Cargo Claims, 3 Ed., Les Éditions Yvon Blais, Inc., Montreal, 1988, at Chap. 39:
“Limitation, Non-Responsibility and Disclaimer Clauses”.
69
The Cleveland (Eisen Und Metall A.G. v. Ceres Stevedoring Co. Ltd.) [1977] 1 Lloyd’s Rep. 665 (Qué.
C.A.).
70
[1993] 3 S.C.R. 299. On the London Drugs decision and its impact on Canadian common law, see
generally M.G. Baer, “Comment” (1993) 72 Can. Bar. Rev. 385; S.M. Waddams, “Privity of Contract in
the Supreme Court of Canada” (1993) 109 L.Q.R. 349; N. Siebrasse, “Third Party Beneficiaries in the
Supreme Court: Categorization and the Interpretation of Ambiguous Contracts” (1995) 45 U.T.L.J. 47.
71
Ibid., at p. 448.
72
.[1999] 3 S.C.R. 108. For an analysis of this decision, see J. Brock, “A ‘Principled’ Exception to Privity
of Contract” (2000) 58 U.T. Fac. L.R. 53.
 19

permitted to benefit from contracts between other parties where the following two-part
test is met: 1) the parties to the contract must intend to extend the benefit to the third
party seeking to rely on the contractual provision; and (b) the activities performed by the
third party seeking to rely on the contractual provision must be the very activities
contemplated as coming within the scope of the contract in general, or the provision in
particular, as determined by reference to the intentions of the parties.73

It would appear that the first limb of the test could easily be satisfied in the case
of the typical bill of lading Himalaya clause, particularly as the provision ordinarily states
expressly the intention of the parties to extend the carrier’s limitations and exceptions to
stevedores, terminal operators and often other third parties. The second limb of the test
would also appear to pose little problem, because it is normally as a result of performing
the “very activities” which the Himalaya clause contemplates that the would-be third-
party beneficiary seeks the shelter of the clause’s protection from liability to the cargo
claimant.

Nevertheless, because the agency theory of Lord Reid has been so fully accepted
and so frequently applied by Canadian courts in decisions dealing with Himalaya clauses,
and because the “principled exception” to privity established by the judicial reform
effected by London Drugs and Fraser River does not expressly abrogate the earlier
common law exceptions to the privity doctrine, it would seem likely that that the agency
theory will remain the principal (although perhaps no longer the sole) pillar supporting
the validity of Himalaya provisions in Canadian maritime law, at least in the short term.
The “principled exception”, however, like the United Kingdom’s Contracts (Rights of
Third Parties) Act 1999,74 provides a simpler mechanism for upholding Himalaya
stipulations in bills of lading, excluding as it does complications relating to authority,
ratification and consideration which inevitably attend judicial application of the agency
theory.

4) Australia

The Australian courts have adopted the finding of the Privy Council in The New
York Star.75 In Godina v. Patrick Operations Pty Ltd.,76 Hutley J. was troubled by the
fact that the carrier's responsibility ends at delivery to the wharf77 but nevertheless
accepted Lord Wilberforce's dictum in The New York Star that consignees rarely take

73
Ibid., at p. 109. See generally M.H. Ogilvie, “Privity of Contract in the Supreme Court of Canada: Fare
Thee Well or Welcome Back?” [2002] J.B.L. 163, which also contains a revealing comparison of the
Canadian judicial relaxation of the privity doctrine with the statutory approach of the United Kingdom in
its Contracts (Rights of Third Parties) Act 1999.
74
U.K. 1999, c. 31.
75
[1980] 2 Lloyd’s Rep. 317 (P.C.). The Himalaya clause has also been upheld in Rockwell Graphic v.
Fremantle Terminals (1991) 106 F.L.R. 294 (WA, Sup. Ct., F.C.); Carrington Slipways Pty. Ltd. v. Patrick
Operations Pty. Ltd. (The Cape Comorin) (1991) 24 N.S.W.L.R. 745 (N.S.W. C.A.); Glebe Island
Terminals Pty. Ltd. v. Continental Seagram Pty. Ltd. (The Antwerpen) [1994] 1 Lloyd’s Rep. 213 (N.S.W.
C.A.).
76
[1984] 1 Lloyd’s Rep. 333 (Supr. Ct. N.S. Wales in Appeal).
77
Ibid., at p. 335.
 20

delivery of goods, at ship's rail and therefore the contract of carriage was contemplated to
have extended until delivery.78

5) South Africa

In Santam Insurance Co. Ltd. v. S.A. Stevedores Ltd. (The Sanko Vega),79 the
Himalaya clause was upheld under Roman-Dutch law80 and Wilson J. adapted Lord
Reid’s criteria to conform to Roman-Dutch law. Firstly, he interpreted the third criterion,
the requirement that the carrier either have authority from stevedores or else that they
ratify the grant, in light of the Roman-Dutch doctrine of stipulatio alteri.81 Secondly, the
fourth criterion, consideration, was dropped as it is irrelevant to a binding contract under
Roman-Dutch law.

6) The United States

a) Pre-1959 Jurisprudence

American law early on accepted the right of the parties to a contract to benefit a
third party where the contracting parties clearly so intended, even if the third party had
not furnished “consideration” in order to become a participant in the contractual
bargain.82 America thus rejected the mid-nineteenth English notion of privity as
articulated in Tweddle v. Atkinson,83 and as reaffirmed subsequently in English and
Commonwealth case law. This respect for party intention continues to be reflected in the
Restatement (Second) Contracts 1981,84 sect. 304 of which provides: “A promise in a
contract creates a duty in the promisor to any intended beneficiary to perform the
promise, and the intended beneficiary may enforce the duty.”85 Comment (b) to sect. 304
states: “This Section reflects the basic principle that the parties to a contract have the
power, if they so intend, to create a right in a third person.”

Early American judgments extended bill of lading exceptions even where the bill
of lading clauses in question were far from specific. Thus in National Federation of

78
[1980] 2 Lloyd’s Rep. 317 at p. 324. See generally, M. White, ed., Australian Maritime Law, 2 Ed., The
Federation Press, Annandale, New South Wales, 2000 at para. 4.6.2.
79
1989 (1) S.A. 182 (D). See also Bouygues Offshore v. Owners of the MT Tigr 1995 (4) S.A. 49 (Cape
High C.).
80
See Hilton Staniland, The Himalaya Clause in South Africa, [1992] LMCLQ 317.
81
Staniland, ibid., at pp. 321-322; John Hare, Shipping Law & Admiralty Jurisdiction in South Africa, Juta
& Co., Ltd., Kenwyn, S. Africa, 1999, para. 11.1-7 at pp. 402-405.
82
The major early U.S. decision on the point is Lawrence v. Fox (1859) 20 N.Y. 268 (N.Y. C.A.).
83
(1861) 1 B. & S. 393, 121 E.R. 762.
84
American Law Institute Publishers, St. Paul, Minn., 1981.
85
Sect. 302(1) of the Restatement (Second) Contracts provides: “Unless otherwise agreed between
promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to
performance in the beneficiary is appropriate to effectuate the intention of the parties and either (a) the
performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or
(b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised
performance.
 21

Coffee Growers of Colombia v. Isbrandtsen Co.,86 the Supreme Court of New York
extended the benefits of the one-year delay for suit of COGSA to the terminal operator,
who was the carrier's agent, without any specific clause in the bill of lading. In U.S. v.
The South Star87 the Second Circuit extended the one-year delay for suit to the ship's
agent and to the stevedore in a charterparty suit.

The turning point in America was Herd & Co. v. Krawill Machinery Corp.,88
when the Supreme Court of the United States refused to extend the $500 per package
limitation to stevedores who had been employed orally by the carrier. The Court
commented in detail on the text of the Hague Rules and their adoption by the United
States Congress:89

“The debates and Committee Reports in the Senate and the House upon
the bill that became the Carriage of Goods by Sea Act likewise do not
mention stevedores or agents. There is, thus, nothing in the language, the
legislative history or environment of the Act that expressly or impliedly
indicates any intention of Congress to regulate stevedores or other agents
of a carrier, or to limit the amount of their liability for damages caused by
their negligence.”

The Court then reviewed and disposed of previous leading decisions, including
A.M. Collins & Co. v. Panama R. Co.,90 Gilbert Stokes v. Dalgety 91and Waters Trading
Co. Ltd. v. Dalgety.92 It then pointed out the true ratio decidendi of Elder, Dempster v.
Paterson, Zochonis,93 relying on Wilson v. Darling Island Stevedoring.94

The Supreme Court, in the penultimate sentence of this long, reasoned judgment,
left the narrowest of four-word openings:95

“No statute has limited its liability, and it was not a party to nor a
beneficiary of the contract of carriage between the shipper and the carrier,
and hence its liability was not limited by that contract.” (Emphasis added).

Against this tiny opening, third parties have surged and quickly passed through.

b) Modern Himalaya Clauses – U.S.

86
185 N.Y.S. 2d 392, 1957 AMC 1571 (N.Y. Supr. Ct. 1957).
87
210 F.2d 44, 1954 AMC 418 (2 Cir. 1954). See also A.M. Collis v. Panama R. Co., 197 F.2d 893, 1952
AMC 2054 (5 Cir. 1952); Ford Motor Co. v. Jarka Corp. 1954 AMC 1095 (Mun. Ct. N.Y. 1954).
88
359 U.S. 297, 1959 AMC 879 (1959).
89
Ibid., U.S. at pp. 301-302, AMC at 883.
90
197 F.2d 893, 1952 AMC 2054 (5 Cir. 1952).
91
(1948) 81 Ll. L. Rep. 337 (N.S.W. S.C.).
92
[1951] 2 Lloyd’s Rep. 385 (N.S.W. S.C.).
93
[1924] A.C. 522, (1924) 18 Ll. L. Rep. 319 (H.L.).
94
[1956] 1 Lloyd’s Rep. 346 (Aust. High Ct.).
95
359 U.S. 297 at 308, 1959 AMC 879 at p. 888 (1959).
 22

Today the Himalaya clause benefiting the stevedore and the terminal operator is
valid in the United States in virtue of Herd v. Krawill,96 but certain conditions must be
complied with:

(i). There must be a contractual relationship between the contracting party and anyone
who purports to claim the benefit of any clause in that contract.97 Furthermore, the party
claiming the benefits bestowed by a Himalaya clause must be performing part of the
contract that actually contains the clause.98 When faced with an independent contractor
seeking the benefit of a Himalaya clause, some courts have required that the operation
being performed be of a “maritime nature”.99

(ii). The language of the Himalaya clause must be very specific as to who is being
protected.100 Courts will not interpret bills of lading to benefit third parties not mentioned
in any way whatever.101 Describing third parties merely as “bailees” or as “all persons
rendering services in connection with the performance of this contract” did not meet the
test of specificity in the past,102 although greater flexibility is evident in more recent

96
359 U.S. 297, 1959 AMC 879, [1959] Lloyd’s Rep. 305 (1959). The main judgments are Brown & Root
v. Peisander 648 F.2d 415 at p. 422, 1982 AMC 929 at p. 939 (5 Cir. 1981); Bernard Screen Printing Corp.
v. Meyer Line 464 F.2d 934 at pp. 935-36, 1972 AMC 1919 at pp. 1920-22 (2 Cir. 1971). See Nicholas
Healy, “Carriage of Goods by the Sea: Application of the Himalaya Clause to Subdelegees of the Carrier”
(1977) 2 Maritime Lawyer 91.
97
Lucky Goldstar v. S. S. California Mercury 750 F. Supp 141, 1991 AMC 1018 (S.D. N.Y. 1991);
Mikinberg v. Baltic S.S. 988 F.2d 327, 1993 AMC 1661 (2 Cir. 1993); Mori Seiki USA, Inc. v. M.V.
Alligator Triumph 990 F.2d 444 at pp. 448-450, 1993 AMC 1521 at pp. 1528-1529 (9 Cir. 1993); Colgate
Palmolive Co. v. M/V Atlantic Conveyor 1997 AMC 1478 at p. 1488 (S.D. N.Y. 1996); The Nippon Fire &
Marine Insurance Company v. M.V. Tourcoing 979 F. Supp 206, 1998 AMC 89 (S.D. N.Y. 1997); Komori
v. Howland Hook 1998 AMC 2894 (S.D. N.Y. 1998); Prebena Wire Bending Machinery Co. v. Transit
Worldwide Corp. 1999 AMC 2623 (S.D. N.Y. 1999), where the court held that lack of contractual privity
foreclosed any Himalaya clause benefit; But in Akiyama Corporation of America v. M.V. Hanjin Marseilles
162 F.3d 571 at p. 574, 1999 AMC 650 at p. 653 (9 Cir. 1998), Fitzgerald D.J. wrote: “We reject
appellant’s argument that privity of contract is required in order to benefit from a Himalaya Clause.”
98
Tashio Marine & Fire Ins. Co. v. The Vessel Gladiolus 762 F.2d 1364 at p. 1367, 1987 AMC 2047 at pp.
2049-2050 (9 Cir. 1985); Caterpillar Overseas S.A. v. Marine Transport Inc. 900 F.2d 714, 1991 AMC 75
(4 Cir. 1990); Tashio Marine and Fire Insurance Co. v. Maersk Line, Inc. 796 F.Supp 336 at p. 340, 1993
AMC 700 at pp. 710-711 (9 Cir. 1992); Mori Seiki USA, Inc. v. M.V. Alligator Triumph. 990 F.2d at 444 p.
450, 1993 AMC at 1521 at p. 1528 (9 Cir. 1993).
99
Caterpillar Overseas, S.A. v. Marine Transports, Inc. 900 F.2d 714 at p. 724, 1991 AMC 75 at pp. 92-93
(4 Cir. 1990); Herr-Voss Corporation v. Columbus Line 1994 AMC 77 at p. 81 (D. Md. 1992).
100
In Herd & Co. v. Krawill Machinery Corp 359 U.S. 297 at p. 305, 1959 AMC 879 at p. 885 (1959), the
U.S. Supreme Court held that: “… contracts purporting to grant immunity from, or limitation of, liability
must be strictly construed and limited to intended beneficiaries.” In B. Elliott v. J. T. Clark 542 F. Supp.
1367 at p. 1370, 1983 AMC 1392 at p. 1396 (D. Md. 1982), aff'd 704 F.2d 1305, 1983 AMC 1743 (4 Cir.
1983), the first part of the clause benefited those third parties sued as carriers or bailees and the second part
benefited those acting other than as carriers and bailees.
101
See Steel Coils, Inc. v. M/V Lake Marion 2002 AMC 1680 at p. 1699 (E.D. La. 2001), where the
shipowner’s managing agent was not entitled to the COGSA package limitation incorporated into a
charterparty, because none of the relevant shipping documents extended that limitation to it by any
Himalaya clause type of provision.
102
De Laval Turbine Co. v. West India Industries 502 F.2d 259, 1974 AMC 1156 (3 Cir. 1974); Rupp v.
I.T.O. Co. 479 F.2d 674, 1973 AMC 1093 (2 Cir. 1973), Cabot Corp. v. Mormacscan 441 F.2d 476, 1971
 23

Himalaya clause decisions.103 The description “independent contractors” was considered

sufficiently specific until the 1970s,104 but then began to be viewed as imprecise.105 The
courts in some cases required that the clause state independent contractors “employed by
the carrier”106 or “whose services the carrier may engage.”107 The general principle at
present is that parties may benefit when properly described, even when not specifically
listed in the clause, provided that they at least belong to a readily-identifiable class of
beneficiaries.108 Stevedores109 and terminal operators110 in particular are usually found to

AMC 1130 (2 Cir. 1971), cert. denied 404 U.s. 855, 1971 AMC 565 (1971); Royal Embassy v. Ioannis
Martinos 1986 AMC 790 at p.801 (E.D. N.C. 1984).
103
See Assicurazioni Generali v. D’Amico 766 F.2d 485, 1986 AMC 1051 (11 Cir. 1985). See also Barretto
Peat, Inc. v. Luis Ayala Colon Sucrs, Inc. 896 F.2d 656 at p. 660 (1 Cir. 1990); Fruit of the Loom v.
Arawak Caribbean Line Ltd. 126 F.Supp.2d 1337, 2000 AMC 387 (S.D. Fla. 1998); Thiti Lert Watana Co.,
Ltd. v. Minagratex Corp. 105 F. Supp.2d 1077 at p. 1081, 2001 AMC 80 at p. 85 (N.D. Cal. 2000).
104
See Tessler Bros. Ltd. v. Italpacific Line 494 F.2d 438, 1974 AMC 937 (9 Cir. 1974); Miehle Co. v.
Hapag Lloyd Aktiengesellschaft 1975 AMC 654 (S.D. Tex. 1974). See also the excellent article by Joanne
Zawitoski, “Limitation of Liability for Stevedores and Terminal Operators Under the Carrier’s Bill of
lading and COGSA”, 1985 JMLC 337.
105
Toyomenka Inc. v. Tosaharu Maru 523 F.2d 518, 1975 AMC 1820 (2 Cir. 1975); Schiess-Froriep Corp.
v. Finnsailor 574 F.2d 123 at p. 127, 1978 AMC 1101 at p. 1107 (2 Cir. 1975), where the Court held that
“all agents and independent contractors” was ambiguous, because this expression did not indicate whose
agents and independent contractors were meant. See also LaSalle Machine Tool v. Maker Terminals 611
F.2d 56 at p. 60, 1978 AMC 1374 at p. 1380 (4 Cir. 1979), where the phrase “any independent contractor
performing services including stevedoring in connection with the goods hereunder” was held “not a model
of clarity and … so broad as to be unreasonable.” See, however, Intsel Corp. v. Antonia Johnson 549 F.
Supp. 526 at p. 528 (W.D. Wash. 1982), where a Himalaya clause stating: “The expression servant, agent
or subcontractor in this clause shall include direct and indirect servants, agents or subcontractors or their
respective servants or agents” was found to be evidence of the parties’ intent to extend the “fullest
protection to the agents and sub-contractors of the carrier.” See Zawitoski, supra, note 104 at p. 384.
106
See, for example, Miller Yacht Inc. v. Vishava Shobha 494 F. Supp. 1005 at p. 1015, 1981 AMC 2479 at
p. 2489 (S.D. N.Y. 1980).
107
See, for example, Gebr. Bellmer KG v. Terminal Services Houston Inc. 523 F. Supp. 941 (S.D. Tex.
1981), aff'd 711 F.2d 622 (5 Cir. 1983). See also Thiti Lert Watana Co., Ltd. v. Minagratex Corp. 105 F.
Supp.2d 1077, 2001 AMC 80 (N. D. Cal. 2000) (“any person of whose services [the freight forwarder]
makes use for the performance of the contract”).
108
“When a party seeking protection under a Himalaya Clause is not specifically mentioned therein, the
party should, at a minimum, be included in a well-defined class of readily identifiable persons to which
COGSA benefits are extended under the terms of the clause” (Certain Underwriters at Lloyds’ v. Barber
Blue Sea Line 675 F.2d 266 at p. 270, 1982 AMC 2638 at p. 2642 (11 Cir. 1982); Colgate Palmolive Co. v.
M/V Atlantic Conveyor 1997 AMC 1478 at p. 1488 (S.D. N.Y. 1996); Akiyama Corporation of America v.
M.V. Hanjin Marseilles 162 F.3d 571 at p. 573, 1999 AMC 650 at p. 652 (9 Cir 1998); Thiti Lert Watana
Co., Ltd. v. Minagratex Corp. 105 F. Supp.2d 1077 at p. 1080, 2001 AMC 80 at p. 83 (N.D. Cal. 2000)).
See also M.C. Mack v. Maher 1998 AMC 2293 (N.J. Sup.Ct. 1998); Wemhoener Pressen v. Ceres Marine
Terminals, Inc. 5 F.3d 734 at pp. 742-743, 1993 AMC 2842 at p. 2855 (4 Cir. 1993).
109
In Brown & Root v. Peisander 648 F.2d 415 at p. 418, 1982 AMC 929 at p. 932 (5 Cir. 1981), the valid
Himalaya clause read: “All defences under this B/L shall inure to the benefit of the Carrier's agents,
servants and employees and of any independent contractor, including stevedores, performing any of the
Carrier's obligations under the contract of carriage or acting as bailee of the goods, whether sued in contract
or in tort.” In Croft & Scully Co. v. MIV Skulptor Vuchetich 508 F. Supp. 670 at p. 673, 1981 AMC 305 at
p. 308 (S.D. Tex. 1981) the clause deemed valid read: “The limitations of liability and other provisions
contained in this article shall inure not only to the benefit of the carrier, its agents, servants and employees,
but also to the benefit of any independent contractor performing services including stevedoring in
connection with the goods hereunder.” See also Certain Underwriters v. Barber Blue Sea 675 F.2d 266 at
p. 269, 1982 AMC 2638 at p. 2641 (11 Cir. 1982), which cited Secrest Mach. Corp. v. S.S. Tiber 450 F.2d
 24

be protected by the clause. Even a railway used in the transhipment of a container can be
protected, provided that explicit terms such as “inland carriers” are used in the
provision.111 Ambiguity in drafting, however, can be fatal to the aspirations of inland
carriers, as to other would-be beneficiaries, under the clause.112

(iii) The clause should be specific as to what benefit is being granted.113 Nevertheless, in
practice, general definitions of the benefit have been permitted.114 The benefits granted to
the third party by the Himalaya clause include the one year delay for suit,115 the package

285 at p. 286, 1972 AMC 815 at p. 816 (5 Cir. 1971) and held valid the clause which extended all of the
carrier's available defenses to “the Carrier's agents, servants and employees and ... any independent
contractor performing any of the Carrier's obligations under the contract of carriage”; Watkins v. M/V
London Senator 112 F. Supp.2d 511 at p. 517, 2000 AMC 2740 at p. 2747 (E.D. Va. 2000) (terms such as
"agents" and "subcontractors" held sufficient to include any party engaged by the carrier to perform any
part of the carrier's duties under the contract of carriage, e.g. stevedores); accord: Acciai Speciali Terni
USA, Inc. v. M/V Berane 181 F.Supp.2d 458 at p. 464, 2002 AMC 528 at p. 533 (D. Md. 2002).
110
B. Elliott v. J. T. Clark 542 F. Supp. 1367, 1983 AMC 1392 (D. Md. 1982), aff 'd 704 F.2d. 1305, 1983
AMC 1743 (4 Cir. 1983), the clause protected “all terminal operators, stevedores, watchmen and other
independent contractors whatsoever ...”. In Moonwalk Intl. v. Seatrain Italy 1985 AMC 1270 at p. 1275
(S.D. N.Y. 1984), the COGSA limitation was held to extend to “all stevedores and terminal operators
engaged by the carrier.” See also EM Chemicals v. Sloman Najade 1987 AMC 1689 (S.D. N.Y. 1987);
Indemnity Ins. Co. of North America v. Schneider Freight USA, Inc. 2001 AMC 2153 at p. 2162 (C.D. Cal.
2001) (stevedore and terminal operator held sufficiently identified as parties performing “any part of the
carriage”).
111
Lucky-Goldstar v. S.S. California Mercury 750 F.Supp 141 at p. 145, 1991 AMC 1018 at p. 1023 (S.D.
N.Y. 1991). See also Classic Fashions, Inc. v. Narrieras N.P.R., Inc. 68 F.Supp.2d. 1312 (S.D. Fla. 1999),
where both a railway and a trucker in a combined transport situation where allowed to benefit from a
Himalaya Clause contained in an ocean carrier’s bill of lading; Fruit of the Loom v. Arawak Caribbean
Line Ltd. 126 F.Supp.2d 1337 at p. 1342, 2000 AMC 387 at p. 393 (S.D. Fla. 1998), where the words “all
parties performing services for or on behalf of the Vessel or Carrier as employees, servants, agents or
contractors of Carrier” were held adequate to cover an inland trucker hired by ocean carrier.
112
See Sun-Bar Materials International, Inc. v. American Presidential Lines, Ltd. 1993 AMC 2639 (N.D.
Cal. 1993), where the bill of lading “evidence[d] an intent to distinguish between water or vessel carriers…
and all other non-vessel carriers… referred to [in the bill of lading] as ‘Joint service Connecting
Carrier[s].’” the use of the generic “agent” and the absence of any explicit reference to this latter type of
carrier in the Himalaya Clause barred a railway from taking benefit from the Clause. The fact that there was
a direct contractual relationship between the ocean carrier and the railway was held to be insufficient to
grant the railway the benefit of COGSA limitations.
113
Croft & Scully v. M/V Skulptor 508 F. Supp. 670 at p. 673, 1981 AMC 305 at p. 308 (S.D. Tex. 1981).
114
Ibid.; B. Elliott v. J. T. Clark, supra; Brown & Root v. Peisander, supra; Tessler Bros. Ltd. v. Italpacific
Line, supra. See also Bigge Equipment Co. v. Maxpeed Int’l Transport Co., Ltd. 2002 AMC 1404 at p.
1416 (N.D. Cal. 2001), granting “the benefit of all provisions herein for the benefit of the Carrier as if the
provision were expressly for their benefit.” See also Fruit of the Loom v. Arawak Caribbean Line Ltd. 126
F. Supp.2d 1337, 2000 AMC 387 (S.D. Fla. 1998), where the Himalaya clause provided: “All exceptions,
exemptions, defenses, immunities, limitations of liability, privileges and conditions granted or provided by
this Bill of Lading, applicable tariff, or by COGSA or by any applicable statute for the benefit of the
Vessels or Carrier shall also apply to and for the benefit of . . . all parties performing services for or on
behalf of the Vessel or Carrier as employees, servants, agents or contractors of Carrier. .. .”
115
When COGSA applies by its own force, a specific provision in the Himalaya clause or in the bill of
lading stipulating the one-year delay for suit defence is not necessary to confer the benefit of such a
defence on the stevedore or terminal operator: Grace Line v. Todd Shipyards Corp. 500 F.2d 361 at p. 375,
1974 AMC 1136 at p. 1155 (9 Cir. 1974); U.S. v. Panama City Port Authority 361 F. Supp. 466 at p. 467,
1973 AMC 734 at p. 736 (N.D. Fla 1972). If, however, COGSA has been merely incorporated into the bill
of lading by reference, the one-year delay for suit defence may not be available, unless there is a specific
 25

limitation116 and a “forum selection clause”117 but the shipper/consignee must

nevertheless be given a fair chance to contract for a higher limit.118

(iv) The clause may not exclude liability for fraud or conversion and must be construed
narrowly so as to cover only the intended beneficiaries.119

c) Period of responsibility clause

The stevedore's and terminal operator's liability usually arises from acts or
omissions occurring outside the “tackle-to-tackle” period where COGSA applies by its
own force.120 A clause is therefore necessary to extend the application of COGSA before
loading and after discharge, so that the stevedore and terminal operator may benefit from
the COGSA defences granted by the Himalaya clause.121 This period of responsibility
clause is often integrated into the paramount clause and may read as follows:122

“The provisions stated in said Act [i.e. COGSA] ... shall govern before the
goods are loaded on and after they are discharged from the ship and
throughout the entire time the goods are in the custody of the carrier.”

provision granting it in the bill of lading: Allstate Ins. Co. v. Int'l Shipping Corp. 703 F.2d 497at p. 499,
1985 AMC 760 at p. 763 (11 Cir. 1983). See Zawitoski, supra, note 104 at p. 360.
116
Brown & Root v. Peisander 648 F.2d 415 at p. 425, 1982 AMC 929 at p. 944 (5 Cir. 1981). In Miller
Yacht Sales, Inc. v. Vishva Shobha 494 F. Supp. 1005 at p. 1017, 1981 AMC 2479 at p. 2492 (S.D. N.Y.
1980), the £100 sterling per package limitation of the Indian Carriage of Goods by Sea Act was considered
reasonable even under the Harter Act.
117
Street, Sound Around Electronics, Inc. et al. v. M/V Royal Container, at al. 1999 AMC 1805 (S.D. N.Y.
1999); Acciai Speciali Terni USA, Inc. v. M/V Berane 181 F.Supp.2d 458, 2002 AMC 528 (D. Md. 2002):
“The Himalaya clauses apply to all defenses that the carrier may raise, and the forum selection clause is as
valid a defense that the carriers may raise as any other. See Marinechance Shipping, Ltd. v. Sebastian 143
F.3d 216 at p. 221 1998 AMC 2819 at pp. 2826-2827, (5 Cir. 1998)”.
118
Tessler Bros. Ltd. v. Italpacific Line 494 F.2d 438, 1974 AMC 937 (9 Cir. 1974); Stephen Nemeth v.
General Steamship Co. 694 F.2d 609 (9 Cir. 1982); Komatsu Ltd. v. States Steamship Co. 674 F.2d 806,
1982 AMC 2152 (9 Cir. 1982); Wuerttembergische v. Stuttgart Express 711 F.2d 621 (5 Cir. 1983); Brown
& Root v. Peisander 648 F.2d 415 at pp. 423-425, 1982 AMC 929 at pp. 941-944 (5 Cir.1981); Carman
Tool & Abrasives, Inc. v. Evergreen Lines 871 F.2d 897 at p. 899, 1989 AMC 913 at p. 915 (9 Cir. 1989);
Mori Seiki USA, Inc. v. M.V. Alligator Triumph 990 F.2d 444 at p. 451, 1993 AMC 1521 at pp. 1525-1527
(9 Cir. 1993). For a more detailed analysis of how the different circuits treat this requirement, see
Zawitoski, supra, note 104 at pp. 355-360.
119
Tessler Bros. Ltd. v. Italpacific Line 494 F.2d 438 at p. 445, 1974 AMC 937 at pp. 944-945 (9 Cir.
1974); Agrico Chem. v. Atlantic Forest 459 F. Supp. 638 at p. 645, 1979 AMC 801 at p. 809 (E.D. La.
1978); Lucky-Goldstar Int’l v. S.S. California Mercury 750 F. Supp. 141 at p. 145, 1991 AMC 1018 at p.
1023 (S.D. N.Y. 1990); Thiti Lert Watana Co., Ltd. v. Minagratex Corp. 105 F. Supp.2d 1077 at p. 1081,
2001 AMC 80 at p. 85 (N.D. Cal. 2000): “Courts are reluctant to stretch the language of a Himalaya Clause
to include third parties who are not clearly part of the intended class of beneficiaries.”
120
Sect. 7 COGSA; 46 U.S. Code Appx. 1307.
121
Brown & Root Inc. v. Peisander 648 F.2d 415 at p. 420, 1982 AMC 929 at p. 935 (5 Cir. 1981);
Mediterranean Marine v. Clark 485 F. Supp. 1330 at p. 1334, 1980 AMC 1731 at p. 1736 (D. Md., 1980);
Seguruos Illimani S.A. v. M/V Popi P. 929 F.2d 89 at p. 94, 1991 AMC 1521 at p. 1527 (2 Cir. 1991);
Insurance Company of North America v. M/V Savannah 1999 AMC 1029 (S.D. N.Y. 1997).
122
Ibid.
 26

Such a clause has been thought sufficient to displace the applicable state law in
favour of COGSA.123 In Colgate Palmolive v. Dart Canada, however, the Second Circuit
held that when the application of COGSA is extended beyond tackle-to-tackle, “COGSA
does not apply of its own force, but merely as a contractual term.”124 Where state law
conflicted with the contractual limitation of liability based on COGSA, state law
prevailed.125 Accordingly, the terminal operator was not permitted to limit his liability to
$500 package under COGSA; instead, he was imposed with the liability of a
warehouseman for conversion, for which under the state law no limitation of liability was
effective.126 This analysis was followed in Moonwalk Intl. v. Seatrain Italy.127

Furthermore, the Harter Act applies to the periods before loading and after
discharge128 until proper delivery.129 Thus if cargo is lost or damaged after discharge but
prior to proper delivery, the Harter Act will supersede COGSA130 and govern the liability
of the stevedore and terminal operator.131 While these latter might rely on the Himalaya
clause to benefit from the package limitation in the bill of lading,132 they will not be
permitted under the Harter Act to relieve themselves from liability due to negligence.133

123
Miller Export Corp. v. Hellenic Lines 534 F. Supp. 707 at pp. 710-711, 1982 AMC 1890 at pp. 1894-
1896. See Zawitoski, supra, note 104 at p. 350. Miller Export Corp. v. Hellenic Lines 534 F. Supp. 707 at
pp. 710-11, 1982 AMC 1890 at p. 1894-1896. See Zawitoski, supra, note 104 at p. 350.
124
724 F.2d 313 at p. 315, 1984 AMC 305 at p. 307 (2 Cir. 1983); Citrus Marketing Board of Israel v. J.
Lauritzen A/S 943 F.2d 220, 1991 AMC 2705 (2 Cir. 1991); Cincinnati Milacron-Heald Corp. v. Universal
Maritime Service Corp. 1996 AMC 412 (D. N.J. 1995). Contractual terms in a bill of lading that are
inconsistent with COGSA control when COGSA is applied only by contract see for example, Seguros
Commercial Americas v. American President Lines 910 F. Supp. 1235 at p. 1241, 1996 AMC 1441 at pp.
1445-1446 (S.D. Tex. 1995), Institute of London Underwriters v. Sea-Land Service, Inc. 881 F.2d 761 at p.
766, 1989 AMC 1516 at p. 2521 (9 Cir. 1989).
125
724 F.2d at pp. 315-316, 1984 AMC at p. 309. See however the strong dissent by Van Graafeiland, Ct.
J.; N.Y. Marine & General Insurance Co. et al. v. S/S Ming Prosperity 919 F.Supp 1234, 1996 AMC 1161
(S.D. N.Y. 1996). Rejected in Wemhoener Pressen v. Ceres Marine Terminals, Inc. 5 F.3d 734, 1993 AMC
2842 (4 Cir. 1993).
126
It should be noted that when state law applies, certain defences may nevertheless be available to the
stevedore or terminal operator: see Leather's Best, Inc. v. Tidewater Terminal, Inc. 346 F. Supp. 962 at p.
968, 1972 AMC 1672 a p. 1679 (E.D. N.Y. 1972); B. Elliott v. J. T. Clark 542 F. Supp. 1367 at p. 1374,
1983 AMC 1392 at p. 1403, (D. Md. 1982), aff'd 704 F.2d 1305, 1983 AMC 1742 (4 Cir. 1983). See also
the Uniform Commercial Code at sects. 7-204 and 7-309. See Zawitoski, supra, note 104 at p. 342.
127
1985 AMC 1270 at pp. 1275-76 (S.D. N.Y. 1984).
128
46 U.S. Code Appx. 190-196. See Allstate Ins. Co. v. International Shipping Corp. 703 F.2d 497 at p.
499, 1985 AMC 760 at pp. 763-764 (11 Cir. 1983); contra, North River Ins. Co. v. Fed. Sea/Fed. Pac. Line
647 F.2d 985 at p. 987, 1982 AMC 2963 at p. 2965 (9 Cir. 1981).
129
As to what constitutes “proper delivery”, see Allstate v. Imparca 646 F.2d 166 at p. 168, 1982 AMC 423
at p. 427 (5 Cir. 1981); Wemhoener Pressen v. Ceres Marine Terminals, Inc. 5 F.3d 734 at p. 742, 1993
AMC 2842 at p. 2853 (4 Cir. 1993); Hiram Walker & Sons, Inc. v. Kirk Line 30 F.3d 1370, 1995 AMC 879
(11 Cir. 1994); Standard Multiwall Bay Manufactring Co. v. Marine Terminals Corporation 961 F.Supp
2401, 1997 AMC 891 (D. Ore. 1996); Komori v. Howland Hook 1998 AMC 2894 (S.D. N.Y. 1998).
130
Sect. 12 of COGSA; 46 U.S. Code Appx.1311.
131
R.L. Pritchard & Co. v. S.S. Hellenic Laurel 342 F. Supp. 388 at p. 391, 1972 AMC 1534 at p. 1538
(S.D. N.Y. 1984).
132
Gold Medal v. Atlantic Overseas 580 F. Supp. 610 at p. 614, 1984 AMC 2052 at p.p. 2056-2057 (S.D.
N.Y. 1984).
133
46 U.S. Code Appx. 190.
 27

Finally, if the cargo is lost or damaged after the period where the Harter Act
applies, i.e. after proper delivery “to a fit and customary wharf,”134 the period of
responsibility clause might not be effective to permit the stevedore or terminal operator to
benefit from the COGSA defences.135 In such case, the stevedore and terminal operator's
liability may be governed by state law. Of course an inland trucker, who had no
contractual relationship with the carrier, may not benefit from the Himalaya clause.136

IV The Circular Indemnity Clause

Because of the problems with Himalaya clauses, carriers have found a new
expedient - the circular indemnity clause.137 By such a clause, the cargo owner promises
that no claim will be made against agents, servants, stevedores, terminal operators or
subcontractors of the carrier, and further provides that, if (contrary to his promise) such a
claim is made, then the cargo owner will indemnify the carrier against all the
consequences. In consequence, the cargo owner will eventually find himself having to
meet his own claim, hence the circular indemnity. A typical circular indemnity clause
reads as follows:138

“Sub-Contracting ... (2) The Merchant undertakes that no claim or

allegation shall be made against any servant, agent or subcontractor of the
Carrier which imposes or attempts to impose upon any of them or any
vessel owned by any of them any liability whatsoever in connection with
the Goods and, if any such claim or allegation should nevertheless be
made, to indemnify the Carrier against all consequences thereof.”

The circular indemnity clause must be read in conjunction with the definition
clause also found in the bill of lading:139

134
F.J. Walker, Ltd. v. Lemoncore 561 F.2d 1138 at p. 1144, 1978 AMC 300 at p. 307 (5 Cir. 1977);
Allstate v. Imparm 646 F.2d 166 at p. 168, 1982 AMC 423 at p. 427 (5 Cir. 1981).
135
Philipp Bros. v. Rio Iguazu 498 F. Supp. 645, 1980 AMC 519 (S.D. N.Y. 1979), in appeal 658 F.2d
30, 1981 AMC 2864 (2 Cir. 1981). See Zawitoski, supra, note 104 at p. 353.
136
Versatile Toft v. Hamburg Sud. 1987 AMC 1236 (D. N.J. 1987). But a trucker who sub-contracted with
a carrier and carried goods shipped under a “through bill of lading” can seek protection of a Himalaya
clause (Fruit of Loom v. Arawak Carribean Lline Ltd. 126 F.Supp.2d 1337, 2000 AMC 387 (S.D. Fla.
1998)). In relation to railways, see Tokio Marine & Fire Ins. Co. v. Nippon Yusen Kaisha 25 F. Supp.2d
1071, 1998 AMC 1558 (C.D. Cal. 1997); Canon USA, Inc. v. Norfolk Southern Railway Company 936 F.
Supp 968, 1997 AMC 1510 (N.D. Ga. 1996).
137
See also R. Newell, “Privity Fundamentalism” and the Circular Indemnity Clause, [1992] LMCLQ 97.
138
This was the circular indemnity clause in The Elbe Maru [1978] 1 Lloyd’s Rep. 206 at p. 207.
139
This was the definition clause in The Elbe Maru, ibid. A more modern circular indemnity clause adds a
second sentence which is in effect a Himalaya clause: “Without prejudice to the foregoing, every such
servant, agent and sub-contractor shall have the benefit of all provisions herein benefitting the Carrier as
if such provisions were expressly for their benefit; and, in entering into this contract, the Carrier, to the
extent of those provisions, does so not only on its own behalf but also as agent and trustee for such
servants, agents and sub-contractors.” See Godina v. Patrick Operations, [1984] 1 Lloyd's Rep. 333 at p.
334 (N.S.W. C.A.).
 28

Definitions ... “Merchant” includes the Shipper, Holder, Consignee, the

receiver of the Goods, any person owning or entitled to the possession of
the Goods or this Bill of Lading and anyone acting on behalf of any such
persons ...

Such a clause was upheld by Ackner, J. in The Elbe Maru,140 who ruled that the
clause would give the carrier an indemnity against costs properly incurred by him in
dealing with any claim against a third party by the cargo owner. Furthermore, the Court
stated that the carrier could apply to court, under sect. 41 of the Judicature Act, 1925,141
for a stay of proceedings to prevent the cargo owner from pursuing his claim against the
subcontractor. Ackner J. noted that proof of a fundamental breach on the part of the
carrier or of his servant, agent or sub-contractor might, however, overcome the circular
indemnity clause.142

The circular indemnity clause has also been upheld twice by Yeldham J., in the
Supreme Court of New South Wales. In B.H.P. v. Hapag-Lloyd Aktiengesellschaft,143 the
carrier sought a permanent stay of the cargo owner's claim against the carrier's
subcontractor, asserting that the cargo owner had breached its undertaking in the circular
indemnity clause not to make any claim against the subcontractor. The carrier argued that
this was a case where a court of chancery would have intervened to restrain the breach of
negative contractual stipulation, especially where the breach consisted of the taking of
proceedings which the party had agreed not to undertake.144 According to Yeldham J. the
rates of carriage and other commercial considerations between the carrier and its
sub-contractors were influenced by the latter's knowledge of the presence in the bill of
lading of a clause which purported to protect sub-contractors from liability to the cargo
purported to protect the sub owners. Because of these commercial considerations, the
cargo owner's contractual undertaking not to make a claim, should be enforced.145
Yeldhamj. also noted that another reason for compelling the cargo owner to adhere to its
contractual promise was that it would relieve the carrier, who was the beneficiary of the
cargo owner's promise, from the risk of further protracted and expensive litigation.146

Yeldham J. had an opportunity to reaffirm his decision seven months later in

Sidney Cooke Ltd. v. Hapag-Lloyd Aktiengesellschaft.147 In particular the Court held that
in the circumstances of this case the circular indemnity clause did not contravene art. 3(8)
of the Hague Rules because the carrier to whom had been contracted the sea-leg of a
combined transport operation, was not a party to the contract -of carriage covered by the

140
Ibid., at p. 210. See also Chapman Marine Pty. Limited v. Wilhelmsen Lines A/S 1999 AMC 1221 (Fed.
C. Aust.).
141
Supreme Court of Judicature (Consolidation) Act, 1925, 15 & 16 Geo. 5, c. 49.
142
Supra, note 138 at p. 211.
143
[1980] 2 N.S.W.L.R. 572.
144
Ibid., at p. 578.
145
Ibid., at p. 583.
146
Ibid., at p. 584.
147
[1980] 2 N.S.W.L.R. 587.
 29

bill of lading and therefore not a “carrier” for the purposes of art. 3(8).148 At least one
other decision has since upheld the circular indemnity clause.149

Is the circular indemnity clause valid? It seems to suffer the same defect as the
Himalaya clause - it grants a negative right to a third party. Furthermore, if a claim under
the clause related to the period when the Hague or Hague/Visby Rules applied, the clause
would be contrary to art. 3(8) of the Rules just as the “both to blame clause” has been
held invalid in the United States for attempting to deprive the cargo owner of full
recovery from the non-carrying ship by means of a stipulation in a bill of lading.150

If the circular indemnity clause is to be valid, it should be much more specific

than the clause in The Elbe Maru and should refer specifically to “stevedores” and
“terminal operators.” These latter should also have entered into a contract with the carrier
obligating the carrier to so protect them.

It is the author's view that if the circular indemnity clause is valid, this is one
more reason for adopting the Hamburg Rules, 1978, under which the carrier is
responsible for loss or damage to cargo after discharge but has the advantage of the
package or kilo limitation.

V. Civil Law

1) The basic rule

Under the civil law as under the common law, it is a basic rule that only the
parties to a contract are affected by it.151 There are exceptions, however, to this basic
rule.152

2) The contract of porte-fort

In the obligation of porte-fort,153 one of the parties to a contract (the stipulator)

promises that a third party will undertake to perform an obligation. The stipulator is
responsible in damages to the other contracting party if the third party does not undertake

148
Ibid., at p. 595. For a contrary view, see W. Tetley, Marine Cargo Claims, Les Éditions Yvon Blais,
Inc., Montreal, 3 Ed., 1988, Chap. 10: “Whom to sue”.
149
Godina v. Patrick Operations [1984] 1 Lloyd’s Rep. 333 (N.S.W. C.A.).
150
Esso Belgium (U.S.A. v. Atlantic Mutual) 343 U.S. 236, 1952 AMC 659, [1952] 1 Lloyd's Rep. 520
(1952).
151
Art. 1440 c.c. (Québec 1994); art. 1165 c.c. (France); art. 1165 c.c. (Belgium); arts. 1983 and 1985 c.c.
(Louisiana); art. 1372 c.c. (Italy); art. 1257 c.c. (Spain). Note that Québec in 1994 put into force an
excellent new civil code, enacted by S.Q. 1991, c. 64, which inter alia provides for the stipulation pour
autrui (stipulation for another).
152
Arts. 1444-1452 c.c. (Québec 1994); arts. 1119-1122 c.c. (France); arts. 1119-1122 c.c. (Belgium); arts.
1985 and 1978-1982 c.c. (Louisiana); art. 1411-1413 c.c. (Italy); art. 1257 c.c. (Spain); art. 328 BGB
(Germany).
153
Art. 1443 c.c. (Québec 1994); art.1120 c.c. (France); art. 1120 c.c. (Belgium); art. 1977 c.c. (Louisiana);
art. 1381 c.c. (Italy).
 30

to perform the obligation as promised.154 Carriers, however, do not want to be held

responsible for the fault of the stevedore and, therefore, rely not on the exception of
porte-fort, but rather on stipulation for another.

3) Stipulation for another

a) Introduction

The civil law allows stipulation for another (stipulation pour autrui).155 For such a
stipulation to be successful, however, the law requires that four conditions be complied
with. First, at its base, must lie a valid contract.156 Second, the stipulator must have a
valid interest, pecuniary or otherwise, in having an obligation performed for the benefit
of a third party.157 Third, the third party who benefits from the stipulation must be
determinable and must exist when the promisor is obliged to perform his obligation

154
Most doctrinal authorities agree that the obligation undertaken by the promisor in an obligation of porte-
fort is only to procure the ratification of the contract by the third party. See Juris-Classeur Civil, art. 1120,
sect. 47 et seq.; J.L. Baudouin & P.-G. Jobin, Les Obligations, 5 Ed., Les Éditions Yvon Blais, Montreal,
1998, p. 385 at para. 473. According to these authorities, once the third party ratifies the contract so as to be
bound by it, the promisor’s obligation has been fulfilled and he cannot be held liable if subsequently the
third party refuses to carry out his obligations under the contract or performs them negligently. See Juris-
Classeur Civil, art. 1120, sect. 74; Baudouin & Jobin, ibid. Applying their analysis to the context of
carriage, the carrier would promise that the stevedore would agree to be bound by obligations under the
contract. Once the stevedore would ratify the contract (by actually beginning to perform the work), the
carrier would have fulfilled his promise and could not be made responsible for the stevedore’s negligent
performance. This analysis reflects the mechanism of porte-fort. See generally P. Malaurie & L. Aynès,
Cour de droit civil, tome VI (Les Obligations), vol. II (Contrats; Quasi-Contrats), 11 Ed., Éditions Cujas,
Paris, 2001, ppp. 259-260 at para. 424.
As an alternative to porte-fort, the relationship between the shipper, the carrier and the stevedore could be
construed as a suretyship arrangement: art. 2333 c.c. et seq. (Québec 1994); art. 2011 c.c. et seq. (France);
art. 2011 et seq. (Belgium); art. 3035 c.c. et seq. (Louisiana); art. 1936 c.c. et seq. (Italy); art. 7:850 c.c. et
seq. (Netherlands 1991); art. 1822 c.c. et seq. (Spain). Whereas the promisor in a porte-fort situation does
not guarantee that the third party will properly perform the obligations which the latter has ratified, the
promisor in a suretyship arrangement makes himself liable as guarantor of the proper performance by the
third party of his obligations. See Baudouin & Jobin, ibid., p. 385 at para. 471. There must be some
evidence, however, that the carrier really intends to act as surety and that he agrees to be held liable should
the stevedore fail to perform properly. Evidence of such an intention on the part of the carrier would,
however, be difficult to adduce from the Himalaya clause or from the bill of lading itself.
155
Art. 1444 c.c. (Québec 1994); art. 1121 c.c. (France); art. 1121 c.c. (Belgium); art. 1978 c.c.
(Louisiana); art. 1411 c.c. (Italy); art. 1257 c.c. (Spain); art. 328 BGB (Germany); art. 6:253-256 c.c.
(Netherlands 1991).
156
J.L. Baudouin & P.-G. Jobin, Les Obligations, 5 Ed., 1998, p. 388 at para. 478. H., L. & J. Mazeaud &
F. Chabas, Leçons de Droit Civil, 9 Ed., Montchrestien, Paris, 1998, t. 2, vol. 1, p. 897 at para. 775, state
that under French civil law stipulation for another must, in first instance, be a valid juridical act; but, in
their eyes, this requirement is not particular to the stipulation for another. See also P. Malaurie & L. Aynès,
supra, note 154, p. 254 at para. 416. See also Prof. Arthur S. Hartkamp & Marianne M.M. Tillema,
Contract Law in the Netherlands, Kluwer, The Hague, London & Boston, 1995 at pp. 101-102, para. 129.
157
J.L. Baudouin & P.-G. Jobin, Les Obligations, 5 Ed., 1998, p. 389 at para. 479. While art. 1121 c.c. in
France requires a valid stipulation for another to be accessory to another operation which involves the
stipulator, French courts have interpreted this requirement as entailing nothing more than that the stipulator
have a moral interest in the stipulation (H., L. & J. Mazeaud & F. Chabas, Leçons de Droit Civil, 9 Ed.,
1998, t. 2, vol. 1, p. 899-900 at paras. 779-780). See also P. Malaurie & L. Aynès, supra, note 154, p. 258
at para. 423. See also art. 1411 c.c. (Italy).
 31

towards him.158 Fourth, the third party beneficiary must accept the stipulation and notice
of the acceptance must be brought to the attention of either the stipulator or the
promisor.159

It is submitted that the Himalaya clause does not fall within the terms of the
civilian stipulation for another, for three main reasons:

First, a Himalaya clause does not confer a benefit, but rather, a negative right -
the right not to be held liable, the right not to be sued. It is one party stipulating that a
third party shall not be sued.

Second, at least two conditions for a stipulation for another are not normally
fulfilled in a Himalaya clause: the third party is neither determined nor determinable, and
the third party does not signify his assent.

Third, a stipulation for another is an exception and must be interpreted

restrictively.

b) May stipulation for another confer a negative benefit?

(i) A Himalaya clause does not confer a positive right

The term “right” comes up again and again in any discussion of stipulation for
another. The beneficiary himself has a right in the contract: he becomes a creditor of an
obligation owed by the promisor, and as such, can enforce the execution of that
obligation by a direct action. All these terms, and the concepts they represent (right,
obligation, creditor), are foreign to the mechanism of exemption clauses. An exemption
clause operates to prevent the enforcement of obligations. Thus, from the outset, the
Himalaya clause and stipulation for another160 are both conceptually and terminologically
incompatible.

(ii) Stipulation to create rights, not destroy them

While stipulation for another has been used to serve purposes other than those
contemplated at the time of codification, any new uses attributed to it have always
158
Art, 1445 c.c. (Québec 1994). In France, see H., L. & J. Mazeaud & F. Chabas, Leçons de Droit Civil, 9
Ed., 1998, t. 2, vol. 1, p. 900-901 at paras. 784-786.
159
Art. 1446 c.c. (Québec 1994); art. 1121 c.c. (France); art. 1121 c.c. (Belgium); art. 1979 c.c.
(Louisiana); art. 1411 c.c. (Italy); art. 1257 c.c. (Spain). While the third party becomes a creditor to the
promisor’s debt from the moment the contract for the stipulation for another is formed (J.L. Baudouin & P.-
G. Jobin, Les Obligations, 5 Ed., 1998, p. 390 at para. 481; H., L. & J. Mazeaud & F. Chabas, Leçons de
Droit Civil, 9 Ed., 1998, t. 2, vol. 1, p. 908 at para. 791), the stipulator has the power to cancel the
stipulation as long as the third party has not given its acceptance (J.L. Baudouin & P.-G. Jobin, Les
Obligations, 5 Ed., 1998, 390 at para. 481; H., L. & J. Mazeaud & F. Chabas, Leçons de Droit Civil, 9 Ed.,
1998, t. 2, vol. 1, p. 911 at para. 795). See also P. Malaurie & L. Aynès, supra, note 154, p. 255 at para.
418.
160
Art. 1444 c.c. (Québec); art. 1121 c.c. (France); art. 1121 c.c. (Belgium); art. 1978 c.c. (Louisiana); art.
1411 c.c. (Italy); art. 1257 c.c. (Spain); art. 328 BGB (Germany); Art. 6:253-256 c.c. (Netherlands).
 32

followed the path of creating a direct right of action for the benefit of a third party who is
outside the contract.

It has been relied on quite extensively in the realm of both automobile and life
insurance, to support a contractual claim by a party who was not privy to the contractual
agreement. Stipulation for another has been the basis for upholding omnibus clauses,161
and for explaining the procedure of nominating a beneficiary in a life insurance policy.162

In all the above cases, positive rights were created to benefit a third party. In a
Himalaya clause, however, a negative right is granted, providing the third party with a
defence to a cargo claim which he could not otherwise invoke, while also depriving the
cargo claimant of a cause of action against the third party which he could otherwise
assert.

(iii) Stipulation for another operates as a “sword”

The benefit arising from a stipulation for another is directly enforceable by the
third party. This is not the case with a Himalaya clause. In the case of stipulation for
another, initiative rests with the beneficiary; it is he who opts to assert his right to the
benefit stipulated in his favour by commencing suit. In a Himalaya clause, however, the
beneficiary does not take the initiative - he can only assert his entitlement to the benefit
stipulated on his behalf by defending himself in an action taken against him.

In effect, a stipulation for another is to be used as a sword as a basis upon which

to commence suit. A Himalaya clause, on the other hand, serves merely as a shield - as a
defence.

c) Conditions of a stipulation for another

It is a condition of a stipulation for another that the third party should be

determined or determinable at the time when the stipulation produces effects in his
favour.163

Assuming that the third party need only be determinable, does the Himalaya
clause adequately define the third party beneficiary? Are the words “servant or agent of
the Carrier (including every independent contractor from time to time employed by the

161
Canadian Indemnity Ins. Co. v. Wawanesa Mutual [1973] C.A. 196 at p. 200 (Qué. C.A.); Hallé v. The
Canadian Indemnity Co. [1937] S.C.R. 368 at pp. 376-377.
162
Venner v. Sun Life (1889) 17 S.C.R. 394 at p. 403. See also Allain-Robitaille v. Assurance-Vie
Desjardins [1976] C.A. 617 (Qué. C.A.); Laroche v. Great West Life Assurance Co. [1975] C.S. 4 (Qué
Supr. Ct.); Canada Life Assurance Co. v. Giroux [1973] C.S. 897 (Qué. Supr. Ct.); Pelletier v. Société des
Artisans [1971] C.S. 7 (Qué. Supr. Ct.); Morrissette v. Pinard & Metropolitan Life [1971] C.S. 200 (Qué.
Supr. Ct.); Marchand v. Mutual Life [1968] C.S. 215 (Qué. Supr. Ct.).
163
Art. 1445 c.c. (Québec 1994). See J.L. Baudouin & P.-G. Jobin, Les Obligations, 5 Ed., p. 389 at para.
480.
 33

Carrier)” sufficient to allow the consignee or shipper to determine in whose favour it has
waived its rights?164 Is this sufficient notice?

In stipulation for another, the third party beneficiary must signify his assent.165
The carrier and the stevedore and terminal operator make contracts at the beginning of
the year and various bills of lading are issued thereafter, benefiting the stevedore or
terminal operator. These latter do not signify their assent to each bill among a multitude
of different bills of ladings issued by a variety of carriers. Is there signification of assent
at all? It might be argued, however, that assent is tacitly given when the beneficiary takes
the benefit stipulated in his favour, in other words, when the stevedore begins to perform
his tasks.

d) Restrictive interpretation

If a Himalaya clause is valid as a stipulation for a third party, the courts

nevertheless must interpret it restrictively. The clause must clearly identify the particular
rights accorded to very specific persons.

VI. France

France has solved the problems related to the Himalaya clause by enacting
exemplary legislation166 governing the liability of stevedores.

The Law of June 18, 1966, at arts. 50 and 51, provides an open-ended description
of the tasks that may be undertaken by cargo handlers.167 Art. 52 stipulates that the
stevedore is only liable to the person who contracts for his services.168 Thus, a consignee

164
See The Federal Schelde [1978] 1 Lloyd’s Rep. 285 (Qué Supr. Ct.)
165
Art. 1446 c.c. (Québec 1994). Doctrine and the case law have taken the position, however, that the
assent can be either express or tacit. See J.L. Baudouin & P.-G. Jobin, Les Obligations, 5 Ed., 1998, p. 390
at para. 481.
166
Law No. 66-420 of June 18, 1966 (J.O. June 24, 1966, p. 5206) as amended by Law No. 86-1292 of
December 23, 1986 (J.O., December 24, 1986, p. 15, 542). See, however, the remarks by E. du Pontavice,
“Rapport de synthèse de la commission 'Dommages réciproques” DMF 1987, 478 at p. 481 et seq. See also
R. Achard, “Le trentenaire de notre législation en matière d’affrètement et de transport maritimes”, DMF
1997, 343 at p. 351 et seq.. See also P. Godin, “Les limitations de responsabilité de l’entrepreneur de
manutention” DMF 1998, 1107; Y. Tassel, “Les auxiliaires du transport maritme” DMF 1999, 264 at pp.
265-266, paras. 5-6 (about manutention) and pp. 271-274 at paras. 23-34 (about acconiers); P. Bonassies,
DMF Hors série no. 3, 1999, no. 76 at pp. 58-59.
167
These two articles retain the distinction between the stevedore per se operating in the Atlantic and
Channel ports, and the acconier operating in the Mediterranean ports. See R. Rodière, Traité Général de
Droit Maritime, Affrètements & Transports, tome 3, Dalloz, Paris, 1970, paras. 820 and 851; M. Rèmond-
Gouilloud, Droit Maritime, 2 Ed., Éditions A. Pedone, Paris, 1993, at para. 733(2). Art. 50 describes the
operations undertaken by the stevedore per se, while art. 51 describes those undertaken by the acconier.
See art. 80 of Decree No. 66-1078 of December 31, 1966. See also Cour de Cassation, July 5, 1994, DMF
1994, 648, with note by Y. Tassel and commentary in P. Bonassies, DMF 1995, 98.
168
Cour d’Appel de Paris, May 15, 1985, DMF 1986, 222. See also Cour d’Appel d’Aix, May 17, 1972,
DMF 1973, 206 and Cour d’Appel de Paris, November 24, 1972, DMF 1973, 522, where the two different
Courts of Appeal held that under art. 52 of the Law, the stevedore operates only for the person who
 34

who had not contracted with the stevedores cannot take action under this law.169 Since
art. 38 of the Decree of December 31, 1966 states that the carrier must properly and
carefully load, handle, stow, care for and discharge the goods, it is the carrier who will
usually have contracted with the stevedore.170 If the carrier has been mandated by
someone else to contract for stevedoring services,171 he is required by art. 81 of the
Decree to give notice of such to the stevedore.172

Art. 53 of the Law of June 18, 1966 establishes the basis of the stevedore's
liability,173 while providing five exceptions which may nevertheless be overcome if the

contracts for his services and consequently can only be sued by that person in contract. The Law of June
18, 1966 does not, however, preclude actions in delict (tort) taken by genuine third parties. See Cour
d’Appel d’Aix, December 13, 1972, DMF 1973, 530 and 535; Cour d’Appel d’Aix, July 12, 1983, DMF
1985, 335. See also Rodière, supra, note 167, para. 869. Furthermore, “Pour contourner les dispositions de
l’article 52… il ne suffit pas d’invoquer la responsabilité quasi délictuelle de l’acconier, mais il est
nécessaire de démontrer la qualité de victime d’une faute délictuelle ou quasi délictuelle, par hypothèse
distincte d’un manquement à un engagement contractuel (un vol, un abus de confiance, etc).” Cour d’Appel
d’Aix, September 10, 1992, DMF 1994, 53. On the issue of when, if ever, a delictual action is available
under art. 52, see Cour d’Appel de Rouen, June 16, 1994, DMF 1995, 445 and 459; commentary by P.
Bonassies, DMF 1996, 127 at nos. 43-44. See also M. Rèmond-Gouilloud, “Rupture d’élingue” DMF 1992,
106; P. Bonassies, DMF 1995, 99 at no. 40; Y. Tassel, “Les auxiliaires du transport maritime” DMF 1999,
264 at pp. 273-274, no. 33. But a carrier can take action under this law when sued by the consignee for
damages done by a stevedore when he calls the stevedore in guarantee (see P. Bonassies “Le droit positif
français en 1990”, DMF 1991, 87 at no. 41).
169
Cour d’Appel de Montpellier, July 26, 1984, DMF 1985, 40, affirmed in Cour de Cassation, April 7,
1987, DMF 1987, 640; see commentary in P. Bonassies, DMF 1988, 93 at no. 37; Cour d’Appel d’Aix,
November 10, 1988, Bulletin des Transports 1989, 624, with comment in P. Bonassies, DMF 1990, 71 at
para. 45; Cour d’Appel de Rouen, September 22, 1988, DMF 1991, 115; Cour d’Appel d’Aix, November
10, 1988, DMF 1991, 249; Cour de Cassation, May 14, 1991, DMF 1991, 436, with comment by P.
Bonassies, DMF 1992, 93 at no. 38, where the Court allowed a consignee to sue a stevedore under the Law
because the former had actually contracted for the latter’s services. See also Cour de Cassation, May 6,
1996, DMF 1996, 1010, note Y. Tassel; Cour d’Appel d’Aix, April 4, 2001, DMF 2002, 325, note A.
Royer-Fleury & F.-X. Pierronnet.
170
Rodière, supra, note 167, paras. 816 and 840. In the course of performing the discharging and related
terminal operations, the stevedore, at some indefinite point in time, will be no longer working for the
carrier's account but rather for the consignee's account. The legal problems inherent in such a transition
could be cleared up by providing that the carrier is responsible for the goods from the time he is “in charge
of the goods” at the port of loading until he has “delivered the goods” at the port of discharge: see Hamburg
Rules, art. 4.
171
See Cour de Cassation, May 28, 1974, DMF 1974, 717, affirming Cour d’Appel d'Aix, June 13, 1972,
DMF 1973, 212, where the shipper had given the carrier the implied mandate to contract for stevedoring
services, while stipulating that the beneficiary of these services would be the consignee. In other words, the
shipper was the stipulator and mandator, the carrier was the mandatary, the stevedore the promisor, and the
consignee the third party beneficiary. This kind of contractual arrangement is also to be found in Cour
d’Appel de Bordeaux,November 22, 1966, DMF 1968, 408.
172
Ibid. The Cour d'Appel d’Aix, affirmed by the Cour de Cassation, rejected a strict interpretation of art.
52 of the Law of June 18 and of art. 81 of the Decree of December 31, 1966 requiring that the carrier
clearly notify the stevedore that the stevedoring operations are for another's account. Proof that the
stevedore knows for whose account he is carrying out his tasks can be made by any method, including by
presumptions. See the interesting note by P. Bonassies, at DMF 1974, pp. 718-725. See also Cour d’Appel
d’Aix, December 1, 1981, DMF1982, 686.
173
Here again the distinction between the stevedore per se and the acconier is maintained. Regarding the
acconier's liability, see Cour d’Appel de Paris, May 15,1985, DMF 1986, 222; Cour de Cassation, May 6,
1996, DMF 1996, 1010, with note by Y. Tassel. See also P. Bonassies, DMF 1995, 100-102 at no. 41.
 35

plaintiff proves that the loss or damage was due to the fault of the stevedore or of his
employees.174 The stevedore (except, of course, if there is a fundamental breach175) may
not be held liable for an amount greater than the limit of liability benefiting the carrier,176
unless he has been made aware of a declaration of value.177 The stevedore is not bound
by bill of lading clauses in a contract of carriage of a container to which he is a
stranger.178 The stevedore cannot lessen his liability by attempting to reverse the burden
of proof nor by means of a benefit of insurance clause: art. 55(b) and (d).179 Actions
against the stevedore are prescribed by one year: art. 56,180 read with arts. 32 and 46.

Eventual conflicts of laws are contemplated and resolved by art. 57, which
stipulates that, in international carriage, stevedoring and terminal operations are governed
by the law of the port where those operations were carried out.181

Finally, while the carrier is normally responsible until delivery (livraison) is

made, this responsibility is curtailed when the stevedores in a particular port are
monopolies, usually of the local government182 Under such circumstances, the carrier’s
responsibility is terminated at the moment when the cargo is handed over to the
monopoly. The monopoly is taken to be a mandatary of the consignee (destinataire).183

VII. The Hamburg Rules

174
Also, Cour d’Appel d’Aix, May 5, 1987, barred stevedores from taking advantage of a limitation of
liability as their fault was “dolosive”. See commentary by P. Bonassies, DMF 1988, pp. 95-96 at no. 41.
175
Rodière, supra, note 167, para. 835. See also art. 28 of the Law of June 18, 1966, as amended by Law
No. 86-1292 of December 23, 1986.
176
Art. 54 of the Law of June 18, 1966. As to the stevedore’s liability before the 1966 reform, see Cour
d’Appel d’Aix, February 21, 1956, DMF 1957, 342.
177
Rodière, supra, note 167, para. 838. See also Tribunal de Commerce de Marseille, September 10, 1993,
Bulletin des Transports 1993, 649, with commentary in P. Bonassies, DMF 1994, 97-98 at no. 46; P.
Bonassies, DMF 1993, 87 at no. 46; Cour de Cassation, June 9, 1998, DMF 1998, 810 and commentary in
P. Bonassies, DMF Hors série no. 3, 1999, no. 81 at pp. 61-63; P. Bonassies, DMF Hors série no. 2, 1998,
no. 86 at pp. 59-60.
178
Cour d’Appel de Paris, October 18, 1995, DMF 1996, 1002.
179
When the stevedore has been hired by the carrier, the stevedore may be contractually bound to
indemnify the carrier for the total sums paid by the carrier to the shipper due to damage suffered by the
goods in the course of stevedoring operations: Cour d’Appel de Rouen, December 9, 1982, DMF 1983, 545.
See also Cour d’Appel d’Aix, November 20, 1980, DMF 1981, 407.
180
The prescription period applies to any action against a stevedore whether the damage was done to a ship
or to cargo: Cour d’Appel de Rouen, January 22, 1998, DMF 1998, 364 with note by J.-F. Tantin and
commentary in P. Bonassies, DMF Hors série no. 3, 1999, no. 82 at pp. 63-64.
181
Cour de Cassation, February 28, 1984, DMF 1985, 149, with note by A. Vialard. See P. Bonassies, Le
Droit positif français en 1985, DMF 1986, 2 at p. 69. See also Cour de Cassation, June 21, 1982, Rev. crit.
de droit intern. pr. 1983, 77 with note by H. Batiffol; Cour de Cassation, January 24, 1984, Rev. crit. de
droit intern. pr. 1985, 89, with note by P. Lagarde.
182
Rèmond-Gouilloud, Droit Maritime, 2 Ed., 1993, p. 443 at para. 735.
183
For example, Cour d’Appel de Paris, July 7, 1992, DMF 1993, 311; Cour d’Appel d’Aix, May 7, 1997,
DMF 1998, 29, with note by P.-Y. Nicolas. See also P. Bonassies, DMF Hors série no. 1, 1997, nos. 68-69
at pp. 53-54; P. Bonassies, DMF Hors série no. 1, 1997, no. 103 at pp. 74-75.
 36

The Hamburg Rules solve the problem of the Himalaya clause at art. 4 which
extends the responsibility of the carrier from port to port, while art. 10 holds the carrier
responsible for the acts of the actual carrier, who by the definition in art. 1(2), would
include the stevedore and the terminal agent.

VIII. Conclusion

The civil law has never had trouble with the concept of two parties benefiting a
third party, because of the ancient principles found in the stipulation for another, although
the stipulation for another may not exactly fit the Himalaya clause. The common law, in
the last century, has experimented with various theories to benefit third parties, but the
most effective method has been legislation, as found in the Hamburg Rules at arts. 1(2), 4
and 10, and by such statutes as the U.K.’s Contracts (Rights of Third Parties) Act 1999.

Prof. William Tetley, Q.C.

Faculty of Law
McGill University
Montreal, Quebec, Canada

E-mail: [email protected]
Website: http://tetley.law.mcgill.ca/