Standard Varnish Works v. Steamship "Bris"

Background

A company shipped varnish from New York to Gothenburg, Sweden, and paid the freight in advance. The shipowner issued a bill of lading with clauses saying prepaid freight would be considered earned and could be retained if the voyage was interrupted. After shipment a presidential proclamation required U.S. export licenses for varnish to Gothenburg. The shipper had a British license, but the U.S. Exports Administrative Board denied the U.S. license. The carrier held the ship while the shipper applied, then unloaded and returned the cargo when the U.S. license was refused. The shipper demanded its prepaid freight back, and the carrier refused.

Reasoning

The Court addressed whether the bill of lading allowed the carrier to keep the prepaid freight when government action prevented delivery. It looked to the contract language: one clause said prepaid freight was "earned on shipment" and to be retained even if the voyage was interrupted; another let the master wait, unload at a depot, or return cargo if prevented by war or hostile acts; a separate clause protected the carrier from arrest or restraint by rulers. The Court concluded that these terms clearly gave the carrier the right to retain the advance. It said the lack of the single word "irrevocable" did not change the contract's clear meaning, and therefore the carrier could lawfully refuse to refund the prepaid freight.

Real world impact

The decision means that when a shipping contract contains similar clauses, carriers may keep prepaid freight if government action stops a voyage. Shippers face the risk of losing prepaid payments unless contracts or laws say otherwise, so exporters should watch license rules and contract wording closely.