Pacific Carriers v BNP Paribas

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Citation: (2004) 218 CLR 451

This information can be found in the Casebook: Paterson, Robertson & Duke, Contract: Cases and Materials (Lawbook Co, 11th ed, 2009), pp. 377-79 [13.10]

Contents

Background facts

  • Plaintiff [Pacific] was transporting a cargo (on its ship) from Australia to India.
  • The cargo were transported on behalf of NEAT, a food company.
  • NEAT gave the Plaintiff a letter of indemnity for losses suffered in certain circumstances.
  • The Defendant [BNP, NEAT's bankers] also signed the letter, but disclaimed itself liability. It signed only to confirm NEAT's signature.
  • The Plaintiff rejected the letter because of the disclaimer. The Plaintiff demanded the representative of the Defendant [Ms Dhiri] to sign the letter without the disclaimer.
  • The representative did so.
    • However, the representative did not have the authority to do so.
    • Also, the fact that the representative did not have such authority was not known to the Plaintiff.
  • The circumstances mentioned did eventuate, and the Plaintiff sued in order to enforce the Defendant to indemnify it for the damages (NEAT having gone bankrupt by then).

Argument

  • The representation of the estimated speed of the boat was a condition or warranty of the contract, or that it was a collateral warranty to the contract for the sale of the boat.

Legal issues

Judgment

  • Construction of terms is done objectively - what would a reasonable person in this circumstance think.
    • "What is important is not Ms Dhiri's subjective intention, or even what she might have conveyed...to NEAT...The letters of indemnity were, and were intended by NEAT and BNP to be, furnished to Pacific [Plaintiff][1]."
    • "The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean[2]."
  • In this case, "Pacific informed NEAT, and NEAT informed BNP, that Pacific would not agree to take that risk unless NEAT's bank also signed the document[3]."
    • "The terms of the document, understood in the light of the surrounding circumstances and the purpose and object of the transaction... meant that BNP was undertaking an obligation of indemnity[4]."
    • "There was nothing in the terms of the document to indicate that BNP was merely authenticating the execution by NEAT, and there was nothing in the surrounding circumstances to suggest that Pacific would accept such authentication only. A reasonable reader in the position of Pacific would have understood the document as a bank endorsed indemnity, and would have understood that the bank was undertaking liability as an indemnifying party to support the liability undertaken by NEAT[5]."

References

  1. (2004) 218 CLR 451, 461
  2. (2004) 218 CLR 451, 462
  3. (2004) 218 CLR 451, 462-3
  4. (2004) 218 CLR 451, 463
  5. (2004) 218 CLR 451, 463
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