Northern Pacific Railway Co. v. American Trading Co.

Background

A trading company arranged with Fitch, acting as general eastern agent for the court-appointed managers running the Northern Pacific Railroad, to ship a large cargo of pig lead from New York to Yokohama. Fitch agreed to forward the cargo to Tacoma and put it on the Northern Pacific steamship leaving Tacoma October 30, 1894. After the goods shipped, the trading company received a bill of lading (a shipping receipt) with printed terms limiting liability and a clerk hypothecated it as bank collateral. The steamship later refused to carry the lead while it was on board because a deputy collector at Tacoma would not grant a clearance, the master unloaded the cargo and sailed, causing a delay and a drop in the lead's value.

Reasoning

The Court addressed whether a binding through-contract existed, whether Fitch had authority, whether the court had empowered the receivers, whether the later bill of lading changed the deal, and whether the collector's refusal excused failure to deliver. The Court found a clear special agreement to forward the lead on the steamer, concluded Fitch acted for the railroad managers and that the court had authorized such contracts. It held the bill of lading did not wipe out the prior agreement under these facts. The deputy collector’s mistaken refusal to give clearance was not treated as a lawful government act that excused the managers from the contract. The lower court’s award for the trading company was therefore affirmed.

Real world impact

Shippers can hold railroad operators or their court-appointed managers to clear through-contracts made by authorized agents. A bill of lading issued after shipment does not automatically cancel a prior special agreement. Wrongful acts by a subordinate customs official do not automatically excuse carriers from their contractual obligations, so shippers and carriers should document clear authority and contracts when arranging through-transport.