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Quote of the Day - Rose-colored glasses are never made in bifocals. Nobody wants to read the small print in dreams. - Ann Landers

The Big Print Giveth and the Small Print Taketh Away

People never cease to amaze me. Let's say you're a computer manufacturer in China, and you agree to sell, oh, say $2 million in computer parts to a computer company in the United States. Logistically, you've got one big problem on your hands. How do you get all of those parts from China to the US?

They're too heavy for a plane and trucks don't float, so you choose a boat. Well, actually a freighter. You know, those great big boats with lots of containers to hold your computer parts.

So here's the deal. The manufacturer signs a contract with a shipping company, and then sets off to make the parts. A year later, the parts are finished and loaded on the boat. Er, freighter.

The shipping company, however, doesn't work with contracts, they work with Bills of Lading. So, the shipping company issues two bills of lading, one for each container. Those Bills of Lading, however, contain a limitation that prevents the manufacturer from suing them more than a year after the parts are delivered. That limitation was not in the original contract that the manufacturer and shipper signed.

Well, as things sometimes happen, the deal went awry. The original contract said that the shipper was not to release the parts to the US computer company without the manufacturer's permission.

As you have guessed, the shipper released the $2 million of computer parts to the US computer company without the manufacturer's permission. Unfortunately for the manufacturer, the US computer company filed for bankruptcy shortly after receiving the parts from the shipper, and never paid the manufacturer the $2 million.

How this next part happened eludes me, but the manufacturer DIDN'T NOTICE that it hadn't been paid the $2 million FOR MORE THAN A YEAR. Must be nice to have that much money that you don't miss $2 million for a year. Wow.

When the manufacturer finally woke up realized that the money was missing and the computer company had filed bankruptcy, it called the shipper and told the shipper to return the computer parts since it had never given permission to the shipper to release the parts to the computer company.

The shipper fessed up and admitted that it had improperly released the computer parts without permission, but relying on the one-year limitation in its Bills of Lading, refused to pay the manufacturer. Not surprisingly, the manufacturer sued the shipper.

Guess who wins here?

That's right....the shipper. The manufacturer tried to rely solely on the original contract, but the court said that the Bills of Lading constituted a subsequent and valid contract, and the one-year limitation against suit was enforced.

Just goes to show you. Read the small print on the back. That's where the one-year limitation was printed.

Here's the actual court opinion.

Posted by J. Craig Williams on 4/26/2013 at 15:42 Comments (0)


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