Upgrad LLM

Damage in ocean transit

This query is : Resolved 

Online (Querist)
07 December 2019

My clients are manufacturers of chemical process equipment. Some time back they received a large order for the export of equipment to Spain. The order was given by an Indian company with Head Quarters in Mumbai. They were suppliers to the Spanish company. Under the terms of the order my clients had to manufacture, pack the equipment in marine worthy packing and deliver them at Mumbai port. Several pieces of equipment were manufactured packed and delivered at the port. After the consignments reached the customer’s premises in Spain, they were opened. One of the equipment was found damaged. The damage would have happened in transit. The Spanish customer is asking the Indian suppliers to replace the equipment free of cost. The Indian suppliers are in turn asking my clients to replace them. My clients are asking my advice. (I am an engineer and not a legal adviser). My observation is as follows. The responsibility of my clients ceases once the consignment is delivered at Mumbai port. The Indian suppliers would have / should have taken transit insurance for the consignment. Hence they should prefer claim with the insurance company. The insurance company may or may not accept the claim. They cannot accept payment from the insurance company and ask my clients to manufacture them again free of cost. There is a possibility that the equipment can be repaired and restored. If so the Indian supplier should pay my clients for the work. If the Indian supplier had not taken insurance it is their fault. In any case the responsibility of my clients is only up to Mumbai port. What are the laws that cover such cases?

H.M.PatnaikOnline (Expert)
08 December 2019

The supply made byyour client is covered under the Sale of Goods act . Your argument as regards Transit insurance is absolutely right. However, since this is a business transaction involving an overseas buyer, a host of documents,papers and correspondence would be available. Pl. get them examined by a local prudent lawyer handling commercial /export matters in the interest of the client. As such this seems to me to be a FOB contract for the Indian Supplier and nothing more than that.

MPS RAMANI Online (Querist)
08 December 2019

I shall wait for more views.

Sb Karma (Expert)
09 December 2019

It depends on contract between your client and suppliers.....need agreement details clause

And in general shipping cargo is always comes with insurance,so full amount comes under those insurance....try to get insurance amount and make equipment again....but if in contract all burden puts to your client then it may hard to fight,

so please appoint local prudent lawyer to your client they will go through contract in details and recover your client from that situation

Raj Kumar MakkadOnline (Expert)
10 December 2019

Your clients are manufacturers........so this is either a commercial or academic query which is against the aim and object of this site. This free of cost service is meant only for needy poor litigants. Beeter to personally talk with either of the experts.

MPS RAMANI Online (Querist)
11 December 2019

This is a real situation not academic. All the parties here have regular continuing friendly business relations which parties want to continue forever. Hence we do not go to court at the drop of a hat. Also as I said I am not a legal person and nor a legal adviser. I am a technical adviser and it occurred to me that this was a matter between the ultimate user, the supplier and the insurer, if any. I just wanted to tell my client where he stands in the whole episode. I thought that my client was not involved until and unless my client was told to manufacture again or repair the item on payment basis. For reasons stated I am not going to advise my client to engage a lawyer and enter into litigation. This is a highly competitive business and we cannot afford to go to court.

H.M.PatnaikOnline (Expert)
16 December 2019

Understood. Listen, business of this order and friendship does not go hand in hand for longer duration.
So, if the business is to be continued, then it is to be on a commercial basis with all the nitty gritty that goes with it.
As I said in my earlier response, all correspondences, documents and prevailing market scenario will have bearing on a overseas transaction either on P to P basis or otherwise.
For your convenience, the experts have suggested a hassle free way ,i.e. to get in touch with a local experienced lawyer dealing in commercial& export matters. So, pl. act accordingly.

MPS RAMANI Online (Querist)
16 December 2019

Thank you for your advice. I wanted only to know the legal position. We shall do whatever that will advance our business now as well as in future.

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