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May 13, 2024

The Liability Of Freight Forwarder

INTRODUCTION

In maritime, air, and land transportation, parties involved in the carriage of goods, such as the buyer, seller, interested party, carrier, or consignor, may arrange for the transportation of their goods by entering into contracts with other individuals/agencies without directly engaging in the transportation process themselves. Entrusting the carriage to another third party, while advantageous in terms of time and cost, ensures that the transportation is handled by an expert in the field, thus safeguarding the commercial interests of the parties involved. Individuals appointed for the organization of transportation, undertaking the ‘carriage’ of goods, are referred to as freight forwarders (“Forwarder”). However, depending on the nature of the contract and the obligations assumed by the Forwarder under the contract, the carriage may also be performed by the Forwarder. In the event that the Forwarder personally undertakes the carriage process, they may be held responsible akin to a carrier under the rights and obligations arising from the carriage process.

This Article will address the legal status of the Freight Forwarder and their responsibilities towards the parties to the transportation contract, as well as the stakeholders and the parties to the carriage contract within the scope of this contract.

A. FREIGHT FORWARDING CONTRACT

The Carriage Forwarding Agreement is regulated in Articles 917 to 930 of the Turkish Commercial Code No. 6102 (“TCC”) under the heading ‘Carriage of Goods’ Pursuant to Article 917 of the TCC, through the carriage forwarding agreement, the Forwarder undertakes to arrange for the carriage of goods, while the consignor assumes the obligation to pay the agreed fee specified in the contract. As can be inferred from the wording of the law, the primary obligation of the Forwarder in the contract is to organize the carriage of goods. In this context, although the Forwarder is not under the obligation to physically transport the goods, they are obligated to ensure the delivery of the goods within the specified period in the contract. In the carriage forwarding agreement, the Forwarder acts on behalf of and undertakes the carriage on behalf of the person for whom they assumed the carriage obligation under the contract. In this sense, it can be said that the Forwarder acts as an indirect representative.

The provision in the second paragraph of Article 917 of the TCC stating ‘Carriage forwarding is a commercial business activity,’ indicates that the Forwarder must be a person engaged in this profession, and consequently, they must continuously perform the brokerage activity subject to the contract. The provision in Article 808 of the former TCC No. 6762, regarding the possibility of the Forwarder being persons who have made this profession, has been incorporated into the new TCC era with this Article 917.

B. LIABILITY OF FREIGHT FORWARDER

In Article 918 of the TCC, titled ‘Carriage of Goods,’ the obligations of the Forwarder are regulated as follows:

“(1) The obligation to carry the goods encompasses the organization of the carriage operation, especially:

a) Determining the means of transport and the route of transportation,

b) Selecting the carrier or carriers who will actually perform the carriage, making the necessary contracts for carriage, storage, and forwarding services for the carriage of goods,

c) Providing necessary information and instructions to the carrier or carriers,

d) Securing the consignor’s compensation rights,”

In addition to the obligations outlined above, the scope of the Forwarder’s obligations also includes entering into contracts for actions such as insuring, packaging, and customs clearance of the goods agreed upon in relation to the carriage, while adhering to the consignor’s instructions and considering their interests during the fulfillment of these obligations. The Forwarder must personally perform the carriage task they have undertaken. The fulfillment of the obligation to transport the cargo through a proxy agent by the Forwarder will only occur if the consignor explicitly consents to it in the contract.

Under the first paragraph of Article 928 of the TCC, the Forwarder is liable in cases of loss or damage to the cargo. This article regulates the liability of the Forwarder for the loss or damage of the cargo, making reference to other modes of transportation. Among the fundamental conditions for the liability of the Forwarder are the loss or damage of the goods while under the custody of the Forwarder. To fulfill this liability, firstly, there must be a valid carriage forwarding agreement, and the goods must be under the custody of the Forwarder. The Forwarder holds the goods on behalf of and at the request of the consignor. Therefore, the consignor is considered an indirect custodian. However, it is necessary for the Forwarder to diligently protect the goods for their delivery. In this regard, it is possible to speak of the Forwarder’s liability based on fault and the duty of care

The liability of the Forwarder for damages other than the loss or damage of the goods is regulated in the second paragraph of Article 928 of the TCC. Accordingly, the Forwarder will only be liable if they breach their obligations arising from the contract. If the Forwarder has taken necessary precautions but the damage is unavoidable, they may be exempted from liability. If there is a specific fault on the part of the consignor or the goods in the occurrence of the damage, the amount and scope of compensation will be determined taking into account the impact of these factors

While there is no specific provision in the relevant section of the TCC regarding the liability of the Forwarder for damages arising from the delay of the goods, considering its contractual liability and duty of care, it is possible to assert that the Forwarder will be responsible for the delay of the goods to the extent of their fault. Additionally, the Forwarder will be liable for the acts or omissions of the auxiliary persons they employ in carriage operations under Article 929 of the TCC.

It is curcial to state that the Forwarder undertakes the obligation of carrying the goods in the contract. If the activities of the Forwarder related to the transportation of the goods are more aimed at assuming the carriage of the goods rather than acting as an intermediary, then the scope of the Forwarder’s liability arising from the transportation of the cargo will vary accordingly.

C. INSTANCES WHERE THE CARRIER IS LIABLE AS THE FORWARDER

Article 926 of the TCC contains the following provision:

“The freight forwarder may undertake the carriage of goods personally. If they exercise this right, they shall be deemed as the carrier or consignor in terms of rights and obligations arising from the carriage. In this case, they may demand not only the fee for their own activities but also the usual carriage fee.”

In this regard, if the Freight Forwarder assumes the obligation of carriage rather than the mere arrangement of transportation, they will be considered as the carrier in terms of rights and obligations within the scope of the carriage. However, the terms ‘carrier’ and ‘consignor’ used here are general transportation terms, and there is no explicit provision in the law regarding whether the ‘carrier’ and ‘consignor’ in the specifically regulated modes of transportation are included in this context. However, the generally accepted view in doctrine and comparative law is that the provisions regarding carriage forwarding are also applicable to sea transportations of goods. This is because Article 902 of the TCC contains a provision to this effect:

“Provisions of the First and Second Parts of this Code shall apply to contracts of carriage by various means of transport where all of the following conditions are met:

a) If the carriage of goods is based on a comprehensive carriage contract.

b) If carriage is to be carried out by various means of transport within the framework of this contract.

c) If the parties would have entered into separate contracts for each type of vehicle, and at least two of these contracts would have been subject to different provisions.

d) Unless otherwise provided in the necessary international conventions.”

The provision foreseeing that the Freight Forwarder undertaking the carriage shall be deemed as the carrier and consignor in terms of rights and obligations arising from the carriage is mandatory. In cases where both relationships exist simultaneously, it will be necessary to determine which obligations are undertaken within the scope of freight forwarding activities and which ones fall within the scope of carrier activities. The Freight Forwarder undertaking the carriage will also be responsible for the performance of the carriage, and their liability during the carriage of goods will be determined not according to Article 928 of the TCC, but according to the specific provisions envisaged for the carrier.

For instance, in the decision of the 11th Civil Chamber of the Court of Cassation dated 04.02.2015, with the file number E. 2014/15805 K. 2015/1280, while the claimant’s attorney argued that the carrier was responsible for the damage, the defendant’s attorney claimed that the responsibility belonged to the subcontractor who performed the carriage, alleging that the damage was caused by the packaging of the goods, and therefore, the consignor was responsible for the existing damage. The 11th Civil Chamber of the Court of Cassation ruled that “… the defendant is responsible for the damage as the freight forwarder…” Here, the evaluation of the Court of Cassation indicates that the damage suffered by the goods falls within the scope of the liability of the Forwarder under the second paragraph of Article 918 of the TCC, and therefore, the Forwarder is responsible in their capacity as a freight forwarder.

Another example is found in the decision of the 11th Civil Chamber of the Court of Cassation dated 30.5.2018, with the file number E. 2016/10995 K. 2018/4114. In this case, the claimant, who was a freight forwarder, claimed that the invoice amounts issued and served in return for freight forwarding services were not paid. The defendant, on the other hand, argued that they were not liable to the claimant due to damage occurring to the goods during transportation. The Court of Cassation ruled that, despite the absence of a contrary agreement indicating that the claimant would personally perform the carriage, and despite the legal regulation mentioned above, which requires that the claimant, even if they had the goods carried by another carrier instead, should be considered as the carrier and thus liable for the damage, the lower court’s decision to accept that the claimant was a freight forwarder and rule accordingly was incorrect and required reversal.

On the other hand, in the present case, if the Freight Forwarder, exceeding its intermediary activities, performs a freight contract as a carrier and assumes a transportation activity beyond the carriage, regardless of the nature of the contract between the parties, the Freight Forwarder may be held liable as the carrier. In this sense, the consignees may also have the right to apply to the Freight Forwarder as the carrier under Article 926 of the TCC.

D. CONCLUSION

The Freight Forwarder undertakes the obligation of carriage forwarding in a carriage forwarding contract. While the Freight Forwarder possesses contractual liability for this obligation, the scope of liability may change if the Freight Forwarder goes beyond its intermediary activities and becomes involved in the carriage process. In other words, besides its primary duty of organizing carriage operations, the Freight Forwarder may also directly engage in the carriage process. The Freight Forwarder may incur liability for damages arising from carriage operations, and the scope of this liability is primarily determined between the parties to the contract. However, if the Freight Forwarder acts as a carrier by undertaking the carriage, their liability may be considered as that of the carrier. In this case, the Freight Forwarder may be held liable as a carrier for damages arising from carriage operations.

 In conclusion, when determining the scope of the Freight Forwarder’s liability, it is necessary to evaluate the nature of the obligations assumed by the Freight Forwarder in the specific case, regardless of the labels used by the parties. In this context, a Freight Forwarder acting like a carrier may be held liable akin to a carrier.

Authors

Duygu Doğan Şahiner

Duygu Doğan Şahiner

Partner

Şimal Taşkın

Şimal Taşkın

Legal Intern