NZ Shipping Co Ltd v A M Satterthwaite & Co Ltd
| The Eurymedon | |
|---|---|
 | |
| Court | Privy Council |
| Citation(s) | [1974] UKPC 1, [1975] AC 154 |
| Case opinions | |
| Lord Reid | |
| 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.
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 advised that the services provided by the shipper in unloading the drill was consideration for a unilateral contract agreeing to protect those who are doing the unloading. Typically an agreement to do something that a third party is already obligated to do is not valid consideration unless the promisee obtains some benefit from an enforceable agreement. However, the doctrine of agency was used to construct a unilateral contract between plaintiffs (owners of goods) and defendants (stevedores) where at first sight the only contract appeared to be between the carriers and the stevedores.
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 [the stevedoring company], 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. | ” |
As the judge found that all 4 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, ruled that the stevedores were fully protected under the damage exclusion clause.