10.3 Carriage of Goods Act 1979

The Consumer Law Reform has also considered the Carriage of Goods Act and how it relates to consumers. As discussed below, the Carriage of Goods Act sets out a number of trader obligations. The Act is primarily commercial legislation. Rather than complementing other consumer law, it effectively overrides the Consumer Guarantees Act. The implications of this for consumers are discussed. Comments are sought on whether there need to be additional consumer protections with respect to carriage of goods.

There has not been a full review undertaken of the Carriage of Goods Act, only how it affects consumers.

History of the Carriage of Goods Act

The Carriage of Goods Act applies to the carriage of goods by any means within New Zealand. The historic position with the carriage of goods was that the carrier was effectively the insurer of the goods being carried. Over time, carriers attempted to limit their liability by contract. Legislation in the United Kingdom and New Zealand since the nineteenth century has regulated the liability of carriers; restricting the ability of carriers to contract out of their liability, while also capping the amount of their liability.

The Carriage of Goods Act is consistent with this general approach. The default position is that carriers are liable for the loss or damage to goods while they are being carried regardless of causation in most cases, but the amount of the liability is limited to $1,500 for each unit of goods which is lost or damaged. The risk of any loss over that amount falls on the owner of the goods.

The Act provides various options for adjusting the risk between the carrier and the owner of the goods being carried, including shifting the risk to the owner. The protection for the owners of goods under the Act is that the terms on which the owner is responsible for any loss or damage must be set out in a written contract signed by the owner.

Carriage of Goods Act and the Consumer Guarantees Act

Section 6 of the Carriage of Goods Act excludes any liability of a carrier for the loss or damage of goods carried other than in accordance with the terms of a contract of carriage, or under the Act. The Carriage of Goods Act is primarily business legislation, and optimising the freedom of the parties to determine their own risk and insurance arrangements and pricing seems to be appropriate for commercial relationships. The Sale of Goods Act, which includes warranties on the sale of goods which may be contracted out of, operates under the same policy setting.

The principles of the Consumer Guarantees Act are different. The express guarantees and the rights and remedies attached to them under the Consumer Guarantees Act are for the benefit of consumers and cannot be contracted out of. They are in addition to any other rights or remedies under other legislation or general rules of law (section 4).

The effect of section 6 of the Carriage of Goods Act is to exclude the carriage of goods from the services covered by the Consumer Guarantees Act, so the carriage of goods is treated separately from any other services which are provided to consumers. The guarantees in the Consumer Guarantees Act which apply to services generally, but which do not apply to the carriage of goods, include the guarantees that services will be carried out with reasonable care and skill (section 28), that the services will be reasonably fit for their particular purpose (section 29), and will be completed within a reasonable time (section 30).

If the Consumer Guarantees Act applied to the carriage of goods, the service guarantees would be minimum obligations, and carriers could not contract out of these guarantees to consumers. However carriers do have the right under the Carriage of Goods Act to contract out of any responsibility or liability, as long as their customers agree⁶¹.

One of the differences between the Consumer Guarantees Act and the Carriage of Goods Act is that a consumer making a claim under one of the service guarantees in the Consumer Guarantees Act needs to be able to demonstrate that the supplier did not exercise reasonable care and skill, or did not provide services which were reasonably fit for a particular purpose. The liability of carriers under the Carriage of Goods Act is easier to establish because the starting point is that the carrier is responsible for the goods while they are being carried. Carriers can rely on defences such as inherent defects in the goods, or damage occurring through no fault of the carrier, but the owner of the goods does not have to prove that the carrier acted unreasonably in the particular case.

The fact that carriers’ liabilities are relatively strict under the Carriage of Goods Act is the reason for setting the default limit for the liability at $1,500 for each unit of goods carried, and for permitting carriers to contract out of their statutory liabilities. The obligations of carriers under the Carriage of Goods Act might seem to be more generous to their customers than the service guarantees under the Consumer Guarantees Act, but the crucial difference is that the Carriage of Goods Act rights will invariably be contracted away, and the Consumer Guarantees Act guarantees cannot be.

The $1,500 liability cap is also arbitrary (and possibly out of date since it was last reset in 1986), and bears no relation to the value of the goods which may have been lost or damaged. The full value of goods lost or damaged, and consequential losses, due to a breach of the statutory guarantees under the Consumer Guarantees Act would be recoverable by a consumer under that Act.

Even if no other change is made to the Carriage of Goods Act, there is clearly a case for inflation-adjusting the $1,500 liability cap, and perhaps providing for it to be adjusted in the future in line with inflation through regulations.

Contractual issue

The person who has the contract with a carrier will generally be the person who sent (or “consigned”) the goods being carried. This raises issues as the receiver (or “consignee”) of the goods does not have a contract with the carrier. Any remedy for non-delivered or damaged goods requires the sender to take action under the contract.

On receipt of a delivered good, the receiver may discover that the item has been damaged in some fashion. The good may need to be repaired or replaced. In such instances the receiver may seek redress from the carrier. The difficulty the receiver faces is that the contract for the carriage of the goods in question is between the carrier and the owner of the goods being carried. The end receiver has few rights because he or she was not a party to the contract of carriage.

The sender itself may have a difficulty establishing a contractual link with the party who actually caused goods to be damaged or lost, because it is common for the party which contracts to carry goods to in fact subcontract the actual carrier service to another carrier. The sender itself will only have a remedy against the “contract carrier”, and may have no remedy against the actual carrier⁶².

These are the types of issues addressed in the Carriage of Goods Act. Section 20 allows the consignee to have rights against the carrier (as if they were the sender and the property in the goods has passed to the consignee). The problem with section 20 is that it is able to be contracted out of under section 7 of the Carriage of Goods Act. When section 20 is contracted out of, the consignee or receiver of the goods has no redress against the carrier. Presumably many contracts take advantage of this opportunity provided for carriers to limit their responsibilities under the Act.

The receiver is able to complain to the person who sent the goods who may then choose to take up the matter with the carrier. This works well when the sender is a commercial entity. It is in their interest to have happy customers so they will ensure their product ends up safely with the receiver, so commercial entities will probably take up the issue of non-delivery or damage with the carrier on behalf of their customers.

This situation is not so easy where a consumer to consumer carriage of goods occurs. For example, if a person has sold an item via an auction website and then sends it to a consumer who they do not know, there is no incentive or onus for the seller to seek redress with the carrier. Family members sending packages to each other are more likely to take the issue up with the carrier, but this is a relatively limited example.

The Consumer Guarantees Act is significant in relation to this issue because the definition of a “supplier” of services in section 2 of that Act includes suppliers of services to an individual consumer or group of consumers “whether or not the consumer is a party, or the group of consumers are parties, to a contract with the person”.

This means that if the Consumer Guarantees Act applied to the carriage of goods, carriers would be suppliers of a service to consumers receiving goods from carriers, even if the consumers are not parties to the contract of carriage. The Consumer Guarantees Act would therefore overcome the problem section 20 of the Carriage of Goods Act is designed to address and, unlike section 20, the Consumer Guarantees Act cannot be contracted out of.
Covering carriers providing services to consumers under the Consumer Guarantees Act would be a significant change to longstanding practices in the carrier industry, because it would potentially rebalance the risk of goods being lost or damaged in transit in favour of consumers. The definition of who is a consumer under the Consumer Guarantees Act would be important to the carrier industry (and consumers), especially if the definition is extended to include small businesses.

Questions

Footnotes

61 The customer of a carrier will often be the supplier of goods being shipped, rather than the receiver of the goods (who will often be a consumer). The supplier can therefore effectively contract away its own customer’s rights against the carrier.

62 This is mitigated in the Carriage of Goods Act by providing the contracting party does have rights against the actual carrier if the contract carrier is insolvent, or cannot be found (section 11).