International Paper Co. v. the Schooner "Gracie D. Chambers"

Background

The dispute arose after the International Paper Company paid $5,845 to ship about 120 tons of print paper from New York to Bordeaux on the schooner Grade D. Chambers. In late September 1917 the Treasury Department ordered the Port of New York to withhold clearance for vessels that might enter a danger zone, and clearance was refused beginning September 29. The schooner awaited clearance, the master’s clearance application was denied in early October, the cargo was later discharged, and the vessel owners refused to return the prepaid freight. The bill of lading included a clause excepting “Restraints of Princes and Rulers” and a clause saying prepaid freight would be retained whether ship or cargo were lost.

Reasoning

The central question was whether those bill-of-lading clauses let the carrier keep prepaid freight when government action prevented the voyage. The Court relied on earlier decisions saying a bill of lading states the parties’ contract and allocates the risks they accepted. The opinion explained the rule did not depend on whether the vessel had actually begun sailing and concluded the clauses were a sufficient defense to the shipper’s claim. The Supreme Court therefore affirmed the appeals court’s reversal of the district court judgment for the shipper.

Real world impact

Shippers who prepay freight face the risk that carriers may keep the money if government action stops a voyage and the bill of lading contains similar language. Exporters, freight forwarders, and carriers are affected because contract terms will determine who bears losses from embargoes or other government restraints. This ruling follows established, contract-based allocations of risk in shipping law.