A Comparative Study on Limitation period under Contracts of Carriage of Goods by Sea
Department of Maritime Law
Graduate School of Korea Maritime University
Most of jurisdictions have their own limitation period system. The reasons for this policy will be as follows: first, the defendants should be protected against claims being made on them after a long period, during which they may have lost the evidence available to them to rebut those claims secondly, that claimants should be encouraged not to go asleep on their rights, but to institute proceedings without unreasonable delay.
The limitation period related to the contracts of carriage of goods by sea under Korean Commercial Code(hereafter 'KCC') are to be construed as an 'exclusive period' so that the period, as a general rule, can not be extended or shortened by mutual agreement without any expressed allowing words in that law.
Regarding contracts of affreightment which are usually evidenced by bills of lading or seaway bills, Article 814 of KCC clearly provides for 1 year of limitation period and extension of the time by agreement but does not mention the shortening of the period. Thus the shortening of the period by agreement may be null and void. This position can be also enhanced by Article 799 of KCC which provides that any attempt to reduce or exempts any obligation or liability of carrier in breach of contract shall be null and void, like Article 3. 8 of Hague/Visby Rules.
In case of charterparties, KCC provides for 2 years of limitation period(actually 'exclusive period'). This period can be extended by agreement or shortened only if there is a clause in the contract allowing it.
As regards multimodal transport, KCC basically accepted so called 'network liability system', by which the carrier shall take liabilities in accordance with the law to be applied in the particular stage where the damage arose(Article 816 ①). Therefore if the damage arose during a land carriage, Article 147 and 121 will be applied, which provide 1 year of "extinctive prescription" from the day on which the consignee takes delivery of the goods from the carrier. For sea carriage, Article 814 will be applied accordingly. When 'extinctive prescription' is applied, running of time may be suspended or stopped by meeting with some requirements prescribed in the Korean Civil Act, such as demand, attachment, provisional attachment or disposition, acknowledgment and acts of God etc. From the view point that an "extinctive prescription" has been recognized as a kind a legal disadvantage for the non-exercise of rights, if someone who has a right exercises it before expiry of the time limit, the period will be suspended because he exercised his right and has no reason to take such a disadvantage any more.
In the above circumstances, there are several issue. One is related to the purpose of 1 or 2 years of exclusive period in contracts of sea carriage of goods. It is for the benefit of carriers by discharging them from all liabilities in a short period. Therefore it is necessary to consider to limit time extension by agreement to the parties. Though one of the reasons allowing the extension by agreement is to induce an amicable settlement between the parties without relying on legal steps, it may cause delay in handling the case and prevents early settlement of the case, contrary to the original purpose of the exclusive period and exposing carriers to unstable situations for a long time.
Another issue is unification of legal nature on those 2 limitation periods when Article 816 of KCC is applied. When the damage occurs during the land carriage, it inevitably causes carriers to be exposed to unstable conditions for longer period of time than when the damage occurs in sea carriage. Therefore, when multimodal transport is concerned, current 'extinctive period' to be applied to land carriage needs to be changed to an 'exclusive period' to avoid any confusion from presence of different legal nature of land and sea carriage in the article.
The other issue is concerned with limitation period under charterparties. A party to a charter has 2 year of exclusive period from redelivery (in case a demise charter, from delivery). It is quite different from English law, at which 6 year will be applied from the date on which the cause of action accrues. All terms and conditions of a charterparty are freely negotiated and fixed on a equal bargaining power between the parties. Thus, it is deemed as one of simple contracts under both English and Japanese law. Further, Shipownes and Charterers will not have any problem in collecting and keeping those evidences for many years. With the above facts in mind, Article 840, 846 and 851 under KCC which provide 2 year of 'exclusive period' in charterparties seem inappropriate. Therefore, it is necessary to follow a 5 year of extinctive period' as in Article 64 of KCC but running from at the time of breach of the contract.