Contract Exists Despite Breach of Terms

A recent decision of the House of Lords will be unwelcome to parcel carriers who have terms and conditions placing restrictions on package acceptance.

Datec Electronic Holdings sent a consignment of three computer processors from the UK to Amsterdam by delivery company DHL. Datec failed to disclose the value of the packages, which exceeded the company’s stated $50,000 maximum. Had DHL been aware of the value of the contents, it would have refused to accept the consignment.

When the consignment was lost in transit, Datec sought compensation for its losses from DHL, relying on the Convention on the Contract for the International Carriage of Goods by Road.

DHL argued, unsuccessfully, that because the terms of its contract were breached, no contract existed and therefore the Convention did not apply. Their Lordships held that although the terms were breached, DHL still accepted the packages and proceeded to transport them, which meant a contract did exist within the meaning of the Convention. Datec was therefore entitled to claim compensation for its losses.

Much of the argument concerned a framework agreement put in place by DHL to cover the frequent dealings between the two companies. DHL’s terms stated that if a shipper presented a package that did not conform to the carrier’s restrictions, the carrier could refuse to accept the package or, if carriage was in progress, to suspend carriage.

Neither of these options was taken by DHL and it was held by the trial judge, and upheld on appeal, that having failed to refuse or suspend the consignment, a contract did exist. This being the case, the Convention applied and any condition of the contract purporting to remove liability for loss, damage or delay was null and void.