Shipping Law is a specialized area of law and the laws applicable to this areas area are wide and distinct. In commercial transaction that involve transportation of goods by sea, there would be many issues that arise in the event there is a breach of the terms of the transaction. As goods transported by sea involves long interval between port of loading and port of destination, the parties are expose to all sort of risks; financial, physical and legal. Various remedies are available in the event of any breaches by a party to the transaction and that include ship arrest and the exercise of lien over the cargo.
To exercise the right over the cargo that has been shipped, the courts would look not only into the contractual rights and liabilities but also the possessory or proprietary right in the goods. Bill of Lading is a document issued by or on behalf of a carrier of goods by sea to the person with whom he has contracted for the carriage of goods. The said document is the indication that the goods listed therein have been received by the carrier and/or being transported by the said carrier. This is an essential document that transfers the contractual rights and for the imposition of liabilities arising under it on persons who were not the original parties to the contract. At times the terms of the charter party contract would conflict with the terms of the bill of lading. In such a case the courts would look into whether the said transaction was on F.O.B or C.I.F terms.
In a C.I.F. contract one agrees to sell goods at an inclusive price covering the cost of the goods, insurance and freight. In such a contract, the seller fulfils the contract by shipping the goods in accordance to the contract and tendering to the buyer the necessary shipping documents. Therefore, in the event of loss, the buyer must pay to the seller the price of tendering of the documents and the remedies available to the buyer would be against the carrier or against the underwriter. Conversely, in an F.O.B. contract, a seller is not, in the absence of contrary stipulations in the contract bound to find shipping space for the cargo or to insure it. Thus, the cost of carriage and insurance eventhough arranged by the seller is normally to be settled by the buyer.
Pursuant to section 47 of the Malaysia Sale of Goods Act 1957, notwithstanding that the property in goods may have passed to the buyer the unpaid seller of goods may have passed to the buyer the unpaid seller of goods under the law has lien on the goods or the right to retain he goods for the price while the seller is in possession of the said goods. For e.g. In the event the buyer becomes insolvent the seller has the right to stop the goods in transit after they have parted with the possession of them. The Act also allows for the resale of the said goods within the limitation of the Act. Section 48 of the said Act deals with the situation of part delivery i.e. the right of the seller to the remainder of undelivered goods and section 49 deals with termination of such lien.
It has to be noted that the freedom of contract or Lazier faire also means that a party may enter into transactions anywhere in the world which inevitably lead to conflicts of laws in some situations. Hence, at these times the Malaysian courts would have take into account international conventions etc to determine the rights, duties and remedies of the parties.