Disposal or Salvage sale of goods

The liability arising from sale or any other disposal of goods is unlikely to be definitely covered within the policy intended to cover liability relating to the carriage of goods under a bill of lading or within the services provided by a freight-forwarder. During its operation an NVOCC and freight-forwarder may come across instances where they have to carry out sale or disposal of goods (including through an auction or tender) or in respect of damaged goods, through a salvage sale.

There are at least two aspects of liability: firstly, liability arising from an accident due to the negligence of the NVOCC/freight-forwarder where a third party has suffered bodily injury or property damage. Secondly, there could be a liability arising from the goods (or defects therein) already transferred to the possession of the buyer. Such liability arising from goods sold (a form of product liability) is most certainly excluded under a policy intended to cover carriage of goods or freight forwarding services.

Hence in handling the disposal, sale or salvage of goods, certain precautionary conditions may be necessary to lessen or eliminate any form of product liability. For a sale or auction/tender to occur the goods are likely to be in storage for quite a considerable time awaiting collection and for salvage sale the goods could have suffered some extent of damage.

In acknowledging that there is a liability attaching to the seller, the following conditions should be observed:

•  To conduct the sale/disposal of goods on the principal term of “as is where is” basis, wherein the following supporting terms would be necessary.

•  In no uncertainty, the goods should not carry any form of warranty whether intended to be implied or expressed. Any form of warranty will only add burden to the seller.

•  In addition there should be a disclaimer clause. This clause should allow the seller to exclude liability for any expected warranty or condition of fitness or merchantability of the goods whether for a particular purpose or general purpose. It should also exclude liability for any loss of revenue or other consequential loss of the buyer in connection with the sale/disposal of the goods.

•  Notwithstanding the above protective conditions, there may be a situation in which liability could indeed attach to the seller. Hence it is necessary to add another condition in the sale transaction to the effect that the maximum liability of the seller for all claims will not exceed the purchase price paid by the buyer (perhaps to add reasonable transport and incidental storage charges in the maximum quantum).

In the conduct of such sale/disposal it may be necessary to impose the requirement that all interested parties should carry out their own inspection of the goods, to determine the conditions (nature, quality, packaging etc) and suitability of the goods they wish to purchase or bid/tender. Seller will disclaim all liability for any failure on the part of the buyer to conduct such inspection.

Upon a successful sale, the transfer of possession should be properly recorded in addition to the sale document. It is important to ensure a proper transfer of the title to the goods apart from physical transfer of possession.

In reinforcing the above sale terms, seller should include in the transfer documents a disclaimer of liability upon such sale and documentation. It addition, it is pertinent to restate that no warranty is applicable and there will be no return of goods for refund of price paid.

Disclaimer: The above is a general note and is not intended to replace professional advice. Seller in conducting such sale/disposal should seek professional advice from legal practitioner or cargo surveyor or other appropriate practitioner.