The Right of Lien Over Cargo
Under customary law, the shipowner has a possessory lien over cargo, but not over unused freight space, prepaid freight, or freight payable after delivery of the goods.
This right applies to contributions to general average payable by the cargo owner and to amounts expended for the preservation and protection of the cargo.
Customary law grants the right of lien to two parties:
- The shipowner.
- The loading agent acts as a representative who arranges the carriage of goods on behalf of the shipper, namely an intermediary or broker.
The Shipowner’s Right of Lien Over Cargo
The shipowner may take any lawful action necessary to exercise these lien rights. It must be noted that these rights are possessory in nature, meaning that they may be exercised only where the shipowner has actual possession of the cargo or retains it pursuant to an order, for example, by placing it in lawful storage. The shipowner may, of course, waive this right at discretion.
The shipowner may exercise the right of lien over all goods shipped by a single consignor during the same voyage, even if the goods were shipped under separate bills of lading. However, this right cannot be extended to cargoes carried on other voyages under different contracts.
Furthermore, under customary law, the right of lien over freight is not excluded unless the contract provides otherwise. Where freight is payable upon delivery of the goods, the right of lien exists regardless of whether it is expressly stipulated in the contract. Conversely, where freight is payable at a time other than delivery, the right of lien does not arise unless it is expressly provided for in the contract.
The Right of Lien Over Cargo for the Loading Agent or Broker
Under customary law, a loading agent has a right of lien over cargo based on the bill of lading in respect of expenses incurred in arranging and facilitating the carriage of goods.
If the lien is enforced before the cargo reaches its destination, the agent may return the cargo to the port of origin in order to exercise the lien, without incurring liability.
On the other hand, if the intermediary has merely arranged the carriage under the bill of lading and the brokerage fee is contingent upon the performance of the charter party, no right of lien arises in favor of the intermediary. In such circumstances, the intermediary cannot take action under the charter party for non-payment of the brokerage fee, as the intermediary is not a party to that contract. This issue may be resolved by pursuing the shipowner through the charterer, who acts as trustee for the intermediary.
The Right of Lien Over Cargo by Express Agreement
In cases where customary law does not recognize a right of lien, such as liens for unused freight space, demurrage, or detention damages, or even for all categories of expenses, a right of lien may nevertheless be created by express contractual agreement.
With respect to the holder of a bill of lading obtained by endorsement, the term “expenses” does not include costs not expressly stated in the charter party. However, as far as the charterer is concerned, it appears permissible to grant the shipowner a contractual right of lien over cargo for freight, demurrage, and similar charges, as well as for expenses lawfully incurred for warehousing the cargo in order to prevent demurrage becoming payable by the charterer.
If a clause grants a lien in broad terms for all sums owed by the shipper or consignee to the carrier, such a lien does not take priority over the seller’s lien for the unpaid purchase price of the goods during transit.
Maritime Privileged Lien
Maritime privileged liens differ fundamentally from the liens discussed above and are exercised in a distinct manner.
One such maritime privilege is the right of priority to bring an action against a vessel, its cargo, or either of them, together with freight, arising from services rendered to them or damage caused by them.
A maritime privileged lien does not exist in respect of vessels owned by a foreign state or vessels requisitioned and employed by a sovereign state for public purposes. However, where a vessel owned by a foreign state is engaged in ordinary commercial activities, it does not enjoy such immunity.
A maritime privileged lien follows the property to which it attaches, regardless of changes in ownership. This right is entirely independent of possession or control.
Frequently Asked Questions About the Right of Lien Over Cargo
The right of lien over cargo is a legal right held by a shipowner or loading agent, arising under customary law or by contract, to retain possession of cargo as security for payment of freight, general average contributions, or expenses incurred for the protection of the goods.
Under customary law, the right of lien is granted to two parties: the shipowner and the loading agent or intermediary who arranges the carriage of goods on behalf of the shipper.
A shipowner may exercise a possessory lien over cargo that is in actual possession and may apply the lien to all cargo shipped by the same consignor during the same voyage, but not to cargoes from other voyages.
Yes. A loading agent may exercise a lien over cargo for expenses incurred in arranging carriage, provided the conditions under customary law or the bill of lading are satisfied.
Yes. Even where customary law does not recognize a lien, the parties may expressly create a contractual right of lien for freight, demurrage, detention, or related expenses.
A maritime privileged lien is a superior right that grants priority in bringing claims against a vessel or its cargo for services rendered or damage caused. This lien follows the vessel or cargo irrespective of ownership and does not depend on possession. What is the right of lien over cargo?
Who is entitled to a right of lien under customary law?
How may a shipowner exercise the right of lien?
Does a loading agent have a right of lien over cargo?
Can a right of lien be created by contract?
What is a maritime privileged lien?
If I repaired someone’s equipment, can I keep it until they pay me?
In some situations, the law may recognize a right to retain property until payment is made for services directly related to that property. Whether that right exists depends on the applicable law, the agreement between the parties, and the specific facts. A careful review is recommended before relying on this remedy.
Does the right of retention apply automatically, or does it have to be written into the contract?
The answer depends on the governing law. In some jurisdictions, the right may arise by operation of law if certain conditions are met, while in others, contractual terms play a significant role. The legal framework and the relationship between the parties should be considered before reaching a conclusion.
What if the owner threatens legal action because I’m refusing to return the goods?
A dispute over retained goods should be handled carefully. If the legal requirements for exercising a right of retention have not been satisfied, keeping the property could expose the holder to liability. Before taking or continuing such action, it’s wise to obtain legal advice based on the specific circumstances.
Can I keep the goods forever if the other person never pays?
Generally, the right of retention is intended to secure payment, not to transfer ownership of the property. What happens if payment is never made depends on the applicable law and the available legal remedies. Additional legal procedures may be required before the matter can be resolved.
Does this right only apply to businesses, or can individuals use it too?
It is not always limited to commercial businesses. Depending on the legal system and the nature of the transaction, individuals may also be able to rely on a right of retention if the legal requirements are satisfied. Each case should be evaluated on its own facts.
What if I accidentally damage the goods while I’m holding them?
Anyone retaining another person’s property should generally exercise reasonable care while it remains in their possession. Liability for any damage will depend on how it occurred, the applicable legal standards, and the specific circumstances involved.
Can I charge storage fees while I’m keeping the goods?
Whether storage costs can be recovered depends on the applicable law, the agreement between the parties, and the facts of the case. In some situations, reasonable expenses associated with holding the goods may be recoverable, but this is not automatic.
What if the debt has nothing to do with the goods I’m holding?
That can be a significant issue. In many legal systems, there must be a sufficient connection between the property being retained and the obligation that remains unpaid. If that connection does not exist, the right of retention may not be available.
If the customer pays part of what they owe, do I still have the right to keep the goods?
Partial payment does not necessarily resolve the issue. Whether the goods must be returned depends on the remaining obligation, the agreement between the parties, and the applicable law. The specific circumstances should be reviewed before making that determination.
Can someone lose their right of retention by waiting too long to use it?
Delays can sometimes affect legal rights, particularly if they create prejudice or are inconsistent with the applicable legal requirements. Whether a right of retention has been lost depends on the facts and the governing law. If timing may be an issue, obtaining legal guidance promptly is advisable.