NZ Shipping Co Ltd v A M Satterthwaite & Co Ltd
| The Eurymedon | |
|---|---|
 | |
| Court | Privy Council |
| Citation(s) | [1974] UKPC 1, [1975] AC 154 |
| Transcript(s) | PC ruling |
| Case opinions | |
| Lord Reid | |
| Court membership | |
| Judge(s) sitting | Lord Wilberforce, Lord Hodson, Viscount Dilhorne, Lord Simon of Glaisdale, Lord Salmon |
| Keywords | |
| Privity, consideration, third parties | |
New Zealand Shipping Co. Ltd. v. A. M. Satterthwaite & Co. Ltd. [1974] UKPC 1, or The Eurymedon, is a leading case on contract law by the Judicial Committee of the Privy Council. The Council gave conditions of when a third party may seek protection of an exclusion clause in a contract between two parties.[1]
Facts
A drilling machine was to be shipped from Liverpool to Wellington, New Zealand. The bill of lading stipulated the limited liability of the carrier. It further stated that the clause would extend to servants, agents, and any independent contractors, which is often referred to as a "Himalaya clause". The carrier company was a subsidiary of the company that also owned the stevedore operation that unloaded the drill. Due to negligence the stevedores damaged the drill while unloading it. The stevedores claimed protection of the immunity clause in the contract between the carrier and Satterthwaite.
Advice
The Privy Council used the doctrine of agency to give effect to the exemption (Himalaya) clause (thus extending it from the carriers to the stevedores) using the carriers as the agent.
This unilateral contract (between A M Satterthwaite (shippers and original plaintiffs)) and the stevedores (NZ Shipping Co Ltd) was activated by performance (unloading of the drill) and relied on the pre-existing contractual obligation between the stevedores and the carrier to provide good consideration;[2] at the point of performance the unilateral contract become a mutual (synallagmatic) contract (see Harvela Investments Ltd v Royal Trust of Canada (CI) Ltd).
Lord Wilberforce stated:
| “ | the Bill of Lading brought into existence a bargain initially unilateral but capable of becoming mutual, between the shippers and the appellants (NZ Shipping Co Ltd), made through the carrier as agent. This became a full contract when the appellant performed services by discharging the goods. The performance of these services for the benefit of the shipper was the consideration for the agreement by the shipper that the appellant should have the benefit of the exemptions and limitations contained in the Bill of Lading. | ” |
He went on to say:
| “ | in their Lordships' opinion, consideration may quite well be provided by the appellant, as suggested, even though (or if) it was already under an obligation to discharge to the carrier... An agreement to do an act which the promisor is under an existing obligation to a third party to do, may quite well amount to valid consideration and does so in the present case: the promisee (sic) obtains the benefit of a direct obligation which he can enforce. This proposition is illustrated and supported by Scotson v Pegg (1861) 6 H & N 295 which their Lordship consider to be good law. | ” |
As the judge found that all four aspects of what is known as the “Lord Reid test” made in his Scruttons Ltd v Midland Silicones Ltd [1961] UKHL 4, [1962] AC 446 ruling had been met, he ruled that the stevedores were fully protected under the damage exclusion clause.