978-1305575080 Chapter 21 Solution Manual

subject Type Homework Help
subject Pages 9
subject Words 4967
subject Authors David P. Twomey, Marianne M. Jennings, Stephanie M Greene

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Chapter 21
LEGAL ASPECTS OF SUPPLY CHAIN MANAGEMENT
RESTATEMENT
A warehouser is a person or entity in the business of storing others’ goods for compensation. The rights and
duties of a warehouser are the same as the rights and duties of a bailee in a mutual benefit bailment. Article 7
of the UCC governs the rights and duties of warehousers. Warehousers have liens on the goods they store for
reasonable storage charges. The lien may be enforced by sale.
Warehousers issue warehouse receipts which are written acknowledgments of receipt of goods. Warehouse
receipts are memoranda of the contract between the issuer, the warehouser and the depositor. A warehouse
receipt is a document of title and can be bought and sold or used as security for a loan. A warehouse receipt can
be negotiable or non-negotiable. A negotiable warehouse receipt can be negotiated with due negotiation. Due
negotiation transfers both title to the document and the goods. Due negotiation gives the holder of the
warehouse receipt rights superior even to those of the depositor. Defenses to holders of a duly negotiated
warehouse receipt are that the goods in the warehouse are stolen goods. Warranties are made by transferors of
warehouse receipts.
Field warehousing is the use of the warehouse system for control of title through the placement of an agent in an
area where the warehouser has the goods. Field warehousing allows the owner of the goods to pledge the
goods as security with creditors’ reassurance through the agent’s presence.
Common carriers are public transporters of goods. Consignors or shippers deliver goods to the carrier and
consignees are the parties to whom the goods will be shipped.
Bills of lading are documents of title used to provide rights and control similar to those provided under warehouse
receipts. A bill of lading can be negotiable or non-negotiable. One of the few defenses to a claim under a
negotiable bill of lading is that the underlying goods were stolen.
Common carriers are absolutely liable for the goods from start of shipment until delivery with a few exceptions for
losses caused by acts of God, war, public authority, fraud by the shipper or the natural properties of the goods.
Carriers may limit their liability for reasonable amounts. A factor is a bailee who sells consigned goods. Title
remains with the consignor until a sale occurs.
Hotelkeepers have a bailee’s liability with respect to property entrusted to them by guests. Hotelkeeper liability
applies to operators of hotels, motels and tourist homes. Hotelkeepers, at common law, have a bailee ’s liability
for their guests’ property. However, most states have statutes that permit hotelkeepers to limit liability by
requiring guests to place their property in a safe. Hotelkeepers have liens on guests ’ property for payment for
accommodations.
STUDENT LEARNING OUTCOMES
LO.1: Identify and explain all of the features of a negotiable warehouse receipt.
LO.2: List and explain the differences between the three types of motor carriers of goods.
LO.3: Explain a common carrier's liability for loss or damage to goods.
LO.4: Identify and explain the role of each of the persons or business entities involved in the sale of goods on
consignment.
LO.5: Describe a hotelkeeper's liability for loss of a guest's property.
INSTRUCTORS INSIGHTS
Break the chapter down into four components – related Learning Outcomes are indicated in ( ):
1. What are the legal aspects of warehousing?
Give definitions of relevant terms
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Discuss the rights and duties of the parties in a warehouse arrangement
2. What are the legal responsibilities of common carriers?
Define “common carrier” (LO.2)
3. What are factors? (LO.4)
4. What are the legal responsibilities of hotelkeepers?
Define hotelkeeper
CHAPTER OUTLINE
I. What are the Legal Aspects of Warehousing?
A. Definitions
B. Rights and duties of warehousers
1. For the most part, same as for mutual benefit bailment
2. Statutory regulation
3. Lien of warehouser
C. Warehouse receipts (See Figure 21-1 in text)
1. Written acknowledgment that warehouser (bailee) has received property from depositor (bailor)
2. Depositor and issuer (warehouser who prepares receipt)
3. Also a document of title
D. Rights of holders of warehouse receipts
1. Nonnegotiable warehouse receipts
2. Negotiable warehouse receipts
a. Goods delivered to “bearer” or “order of”
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i. Good faith
3. Warranties
a. Receipt is genuine
E. Field warehousing
F. Limitation of liability of warehouser
1. Liability by unit or weight is possible
II. What are the Legal Responsibilities of Common Carriers?
A. Definitions
1. Carrier – transportation of goods
2. Consignor/consignee – deliveror of goods; buyer is consignee
B. Bills of lading
CASE BRIEF: M. Fortunoff of Westbury Corp. v. Peerless Ins.
432 F. 3d 127 (2nd Cir. 2005)
FACTS: M. Fortunoff of Westbury operates a chain of department stores in New York and New Jersey.
In March of 1997, the company entered into a contract with Frederickson Motor Express,
whereby the carrier agreed “as contract carrier and independent contractor…to transfer
shipment…as authorized in Carrier’s contract carrier permit…issued by the ICC.” The contract
further provided: “Although carrier is unauthorized to operate…as a common carrier, each and
every shipment tendered to carrier by shipper…shall be deemed to be a tender to carrier as a
motor contract carrier…” Fortunoff’s goods were damaged in transit, prompting it to make a
claim against Frederickson. When the carrier went out of business, Fortunoff asserted the
same claim against the carrier’s insurer, Peerless Insurance Co. for $13,249.42 under the
BMC-32 endorsement (the mandatory attachment to all common carrier insurance policies),
which was part of Frederickson’s insurance policy. From a judgment for Fortunoff, on the
ground that the ICCTA mandated the extension of BMC-32 endorsements to all motor carriers,
Peerless appealed.
ISSUE: Did the BMC-32 endorsement apply to the shipping contract under common carrier law?
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REASONING: Historically, many trucking companies obtained both a common carrier certificate and contract
carrier permit, meaning they were authorized to operate as either type of carrier. If the carrier
agreed to transport a shipper’s goods according to standard terms and at a fixed rate (i.e.,
without an individually negotiated contract) on a nonrecurring basis, the transportation was
conducted under the carrier’s common carrier certificate. Accordingly, common carrier rules,
including the cargo liability insurance and the BMC-32 endorsement requirement, applied. If the
carrier and the shipper wished to negotiate a bilateral contract for an ongoing course of
shipping services, and carrier was required to operate under its contract carrier permit, and no
cargo insurance was necessary.
Requiring cargo liability insurance for common carriage but not contract carriage is not an
arbitrary distinction. Instead, it makes economic sense because of the different types of
services performed and the customers served by common carriage. Although the ICCTA
abolished licensing distinction between common and contract carriers, it did so in large part
because most carriers had a common carrier certificate and a distinction between the two types
of carriage survives and is still highly relevant to deciding which motor carriers must have cargo
liability insurance. The administrative agency’s decision to require BMC-32 cargo insurance
only when performing common carriage service is consistent with the ICCTA.
DISCUSSION POINTS: Have the students discuss the distinctions between "common" and "contract" carriers
using the M. Fortunoff of Westbury Corp. v. Peerless Ins. case.
3. Contents of Bill of Lading
a. Interstate Commerce Commission regulations
4. Negotiation
a. Negotiable: bearer or order
CASE BRIEF: Banque de Depots v. Bozel
569 So. 2d 40 (La. App. 1990)
FACTS: Banque de Depots, a Swiss bank, sued Bozel, a Brazilian corporation, for money owed the
bank. Banque obtained a writ of attachment from the court against goods being shipped by
Bozel from Rio de Janeiro through the Port of New Orleans for transit to purchasers located in
three states. Bozel claimed that the writ of attachment must be dissolved because the cargo
was shipped under negotiable bearer bills of lading and the bills of lading had been sent to
American banks for collection from the purchasers.
ISSUE: Was it permissible to seize goods under a negotiable bill of lading?
REASONING: The writ of attachment must be dissolved. Goods shipped pursuant to a negotiable bill of lading
cannot be seized unless the bill of lading is surrendered to the carrier or impounded by a court.
On the day of the seizure of the cargo under the writ, the negotiable bills of lading were
outstanding. The bills of lading were not in the hands of the carrier, and their negotiation had
not been enjoined by the court. The law protects holders of duly negotiated bills of lading from
purchasing such bills and then finding out that the goods have been seized by judicial process.
The holder of a duly negotiated bill of lading acquires title to the document and title to the
goods described therein.
5. Warranties in transferring
a. Genuine
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C. Rights of common carrier
1. Set rates and rules (subject to regulation)
D. Duties of common carrier
1. Receive and carry proper and lawful goods
2. Furnish facilities that are adequate for transportation
E. Liabilities of common carrier
1. Absolute liability, with a few exceptions
a. Acts of God
b. Act of public enemy
CASE BRIEF: Temple Steel Corp. v. Landstar Inway, Inc.
211 F. 3d 1029 (2000)
FACTS: Temple Steel Corp. shipped a large machine press from Minster, Ohio to Monterrey, Mexico by
Landstar Inway, Inc., a common carrier. Landstar issued Temple a thorough bill of lading for this
service. It then hauled the press to the U.S. border where it hired a customs broker, who
utilized a local carrier, Teresa de Jesus Ortiz Obregon, to move the cargo through U.S. and
Mexican customs to interchange with a Mexican carrier. Obregon failed to secure the press
properly and drove too fast causing $300,000 damage to the press. Temple sued Landstar to
recover for this damage.
ISSUE: Is Landstar liable for the damage?
REASONING: Landstar submitted a competitive bid to transport goods from Ohio through to Mexico and
having issued a through bill of lading. Temple is thus entitled to hold Landstar liable for the
damage, and Landstar then bears the responsibility for seeking compensation from the carrier
actually responsible for the loss. While Landstar had every legal right to issue a bill of lading
that stopped at the U.S. border, it did not do so. Landstar must accept the legal consequences
of the issuance of the through bill of lading without limitation of liability for losses.
2. Carrier’s liability for delay
a. Carrier: liable for losses from unreasonable delay
3. Limitation of liability of carrier (Carmack Amendment)
a. Cannot exempt for own negligence
CASE BRIEF: Tronosjet Maintenance, Inc. v. Con-way Freight, Inc.
2011 WL 3322800 (S.D. Tex. Aug. 2, 2011)
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FACTS: Tronosjet sued Con-way Freight, Inc., to recover monetary damages for the in-transit
damage to its cargo of aircraft loading gear carried over the road from New Brunswick,
Canada, to Fort Worth, Texas, in March of 2009. The damage to the cargo was $165,000 and
Tronosjet contended that the claims for damages are subject to U.S. law, i.e., the Carmack
Amendment. Con-way contends that the Bill of Lading (BOL) and Tariff limited its liability to
$819.71.
ISSUE: Were Tronosjet’s claims subject to the limitation of liability?
REASONING: Con-way presented undisputed evidence that it satisfied the elements necessary to limit its
liability under the Carmack Amendment. The straight BOL was a written agreement entered into
by the parties that authorized Con-way to limit its liability.
4. Notice of claim – generally within nine months
5. C.O.D. shipment
CASE BRIEF: Imports, Ltd. v. ABF Freight Systems, Inc.
162 F. 3d 528 (8th Cir. 1998)
FACTS: ABF accepted a certified check for a C.O.D. fee owed for 511 cartons of shoes. The bank
certification was a forgery. The bill of lading included the specification that there be a “C.O.D.
Cashier’s Check” before delivery. Imports sued ABF for the $53,180.90 C.O.D. payment.
Imports was awarded that amount plus interest. ABF appealed.
ISSUE: Did ABF break its contract with Imports by accepting a bank certified check rather than a
cashier’s check for the C.O.D. payment?
REASONING: A bank certified check and a cashier’s check are not the same thing. The critical difference, that
affected the outcome in this case, is that a certified check can be forged quite easily whereas a
cashier’s check would require creation of bank paperwork.
6. Rejected shipments
a. Carrier-turned-warehouser when goods rejected
7. Complexities in intercontinental domestic shipping
a. Multiple changing of hands
CASE BRIEF: Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp.
130 S. Ct. 2433 (2010)
FACTS: Regal-Beloit Corp. and other cargo owners delivered goods to Kawasaki Kisen Kaisha Ltd. (“K”
Line) for shipping from China to inland United States destinations. “K” Line issued through bills
of lading covering both the ocean and inland ports of transport. The bills of lading contained a
“Himalaya Clause,” which extends the bills’ defenses and liability limitations to subcontractors;
permitted “K” Line to subcontract to complete the journey; provided that the entire journey
through to inland destinations is governed by the Carriage of Goods by Sea Act (COGSA), and
contained a forum selection clause that designated a Tokyo, Japan, court as the venue for
litigating any dispute. “K” Line subcontracted with Union Pacific Railroad for rail shipment to
inland destinations. Upon arrival at the Port of Long Beach, the containers were loaded onto a
Union Pacific train, which derailed in Tyrone, Oklahoma, destroying the cargo. The Carmack
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Amendment to the ICC Act governs the terms of bills of lading issued by domestic rail carriers
and limits the parties ability to choose the venue of their lawsuit. The cargo owners assert that
the Tokyo forum-selection clause is thus inapplicable, and that they can bring suit against the
Union Pacific in the United States under the Carmack Amendment. The district court dismissed
the case, ruling that the forum-selection clause was binding. The Court of Appeals reversed,
and “K” Line and Union Pacific appealed to the U.S. Supreme Court.
ISSUE: Does the Carmack Amendment to the ICC Act, limiting the parties ability to choose the venue of
a lawsuit, apply to a shipment originating overseas through a single bill of lading?
REASONING: Judgment for “K” Line and Union Pacific. The Carmack Amendment does not apply to a
shipment originating overseas through a single bill of lading. Applying Carmack to international
import shipping transport would undermine COGSA’s purpose “to facilitate efficient contracting
in contracts for carriage by sea.” If two different bills of lading regimes applied to the same
through shipments, it would seem to require rail carriers to open containers to check if damage
had been done at sea, undermining international container-based transport.
III. What are Factors?
A. Definitions
1. A bailee who sells the goods
B. Factor who sells goods in good faith is protected from liability from third parties
IV. What are the Legal Responsibilities of Hotelkeepers?
A. Definitions
1. Hotelkeeper – operator of a hotel, motel or tourist home
B. Duration of guest relationship
1. Terminates when guest leaves
C. Hotelkeeper’s liability for guest’s property
1. At common law – hotel was strictly liable
CASE BRIEF: Ippolito v. Hospitality Management Associates
575 S.E. 2d 562 (S.C. App. 2003)
FACTS: Hotel guests brought a tort action against the innkeeper under the state’s innkeeper
statute for lost jewelry and cash. After a jury trial, the trial court entered a judgment in favor of
the guests, and the innkeeper appealed.
ISSUE: Did the innkeeper post a notice in the guests room, in a conspicuous manner, of the
availability of safety deposit boxes for valuables?
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REASONING: While there was conflicting testimony on whether the innkeeper had posted a notice in a
conspicuous manner in the Ippolitos’ room, the jury believed the Ippolitos version of the facts.
Without such notice the innkeeper’s liability was not limited by the state statute; and it was thus
liable for negligence; offset by the Ippolitos comparative negligence.
D. Hotelkeeper’s lien
1. Lien on luggage for value of reasonable accommodations
E. Boarders or lodgers – nontransient guests; the hotel owes only the duty of an ordinary mutual benefit
bailee
ANSWERS TO QUESTIONS AND CASE PROBLEMS
1. Social forces and the law. The common carrier is absolutely liable for the loss of freight unless it can prove
The social force advanced by this rule of law is the protection of property in that the rule gives to the
shipper’s property a greater protection than would exist if the shipper had the burden of proving the cause of
The rule oppresses the carriers because they are often liable when no one knows what happened or when
2. Ethics [Chapter 3]; liability of common carrier; bill of lading. It would appear to be a violation of the ethical
principle of promise keeping for the carrier to consciously let vaccine sit for days in an unheated trailer while
it promised delivery within two days. Also, it accepted the obligation of preventing the DPT from freezing. Its
A bill of lading is both a receipt for the goods and a memorandum of a contract stating the terms of carriage.
The court decided that Cyanamid was bound by the release value clause in the bill of lading, which was
3. Nature of the liens of warehousers, hotels, carriers. The liens of all three are specific in that they do not
extend to other property of the debtor. There is a slight difference between the liens: the liens of the
4. Limitation of liability of warehousers; liability of hotels. Both warehousers and hotels may limit liability with
respect to goods. In the case of the warehouser, the limitation results from the customer and the
5. Negotiability of warehouse receipts; negotiability of bills of lading. Both warehouse receipts and bills of lading
may be in negotiable form, and when either is duly negotiated the purchaser ordinarily acquires rights
superior to those of the person who delivered the goods to the warehouse or the common carrier. The two
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Certain exceptions are also imposed by which title under a warehouse receipt or a bill of lading is defeated
(UCC §§ 7-205, 7-503).
6. Common carrier definition. The court held that Harms was not a “common carrier” entitled to a common
carrier permit where he dedicated his equipment first to serve his own needs which is in contravention of
7. Complexities in international and domestic shipping; reasonable opportunity for excess liability coverage. Under
the Norfolk Southern Ry. v. Kirby decision of the U.S. Supreme Court, “when it comes to liability limitations for
negligence resulting in damage, an intermediary can negotiate reliable and enforceable agreements with the
8. Limitation of liability of warehouser. Judgment for the plaintiffs. Exemption from all liability for fire damage,
including loss attributable to negligence, is not expressly stated in the disclaimer. UCC § 1 -102(3) states that
the obligations of good faith, diligence, and reasonableness in care cannot be disclaimed by agreement.
9. Limitation of common carriers liability. Judgment for Strotokowsky for $500. As a common carrier, IPS is
liable for the nondelivery of the violin. Because plaintiff assigned the shipment a value of $500, this
10. Liability of common carriers. Judgment for Smith. Watson, a common carrier, was liable for damages to the
consigned property for any cause whatsoever (unless the damages were caused by one of the excepted
11. Duration of guest relationship, liability for guest’s property. After Garrett checked out of the hotel and went on
his trip, he was no longer a guest. The hotel’s innkeeper-guest relationship and duty to protect was
terminated at that time. There was no bailment of his vehicle because upon appellant’s return, he was at
12. Limitation of liability of common carrier. Judgment for Emery. A shipper that brings a negligence action
against a common carrier may not recover in excess of the amount specified in the bill of lading or airbill.
13. Hotelkeepers liability. Judgment was for the hotel. De Lema was a guest when the jewels were stolen,
because he made reservations, gave his suitcases to an employee in the garage, and was in the process of
14. Liability of common carriers. Judgment for Frosty Land Foods. The beef was in good condition when given to
Refrigerated Transport. It was damaged when delivered by Refrigerated Transport. Refrigerated Transport
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15. Warehouser’s lien. Judgment for Tate. At the time Tate demanded the release of his property, he did not owe
Action anything for storage. Action therefore had no right to retain possession (a lien) and had no right to
LAWFLIX
Nine to Five (1980) (PG)
At the heart of the twists and turns in this boss/secretary caper are the warehouse receipts an executive is using
management system for classroom use.

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