This point was brought to the notice of the Exchequer Chamber by Mr. Justice Blackburn, and in consequence it was held that this freight ought not to have been deducted to get at the value of the cargo as arrived at destination. In the words of Baron Channell's judgment: "They ought not to take into account the fact that if the goods are carried on in the original bottom, or by the original shipowners in a substituted bottom, they will have to pay the freight originally contracted to be paid, that being a charge to which the goods are liable when delivered, whether the perils of the seas affect them or not." On this principle the judgment proceeds to state that in case the original shipowner determines not to carry on the goods either in the original or in a substituted bottom, the cargo-owner, if he brings them on, is not entitled to take into account the whole of the amount he pays for forwarding, but only the amount by which that exceeds the original freight. The effect of this, put briefly, is that unless the extraordinary expenses incurred in consequence of perils of the sea or other perils insured against exceed the arrived gross value of the cargo delivered at destination (i.e. of course with freight paid) the assured is not entitled to abandon.

This result is quite different from that at which we arrived when we considered the action of the prudent uninsured owner. He would abandon the goods if their expected gross price did not exceed the freight plus the extraordinary expenses; while the law does not give the insured owner any right to tender abandonment to his underwriter unless the expected gross value does not exceed the extraordinary expenses alone, Lowndes (Law M I. p. 137) and M'Arthur (Contract M. I. p. 151, note) both regard this difference as the result of a mistake or fallacy into which the judges fell. So it certainly is, if it is correct to assume that the result in any question of policy or practice in the relations of assured and underwriter must accord exactly with the result of the course which would be adopted by a prudent uninsured owner.

But is this assumption justifiable? If A, while retaining certain of his own obligations with their corresponding

privileges and rights, delegates some to B and others to C, the result of the operation of each separate set of delegated obligations and rights does not of necessity coincide with that of the whole sum of A's original obligations and rights. This is really the principle underlying Baron Channell's judgment: he examined separately the relations of the cargo-owner to the shipowner and then to the cargo underwriter.

As to the shipowner, as long as the cargo is delivered in specie at destination the freight is due to him by the consignee in whatever state of damage the cargo is delivered, provided the damage has arisen from perils excepted in the bill of lading.

As to the cargo underwriter, it is possible that before the cargo can be offered for sale at destination for any sum worth mentioning, expenses have to be incurred in reconditioning the goods. This class of expenses was dealt with in Rossetto v. Gurney, 1851,1 and Reimer v. Ringrose, 1851.2 The judges intimated to the assured: "The obligation or risk transferred by you to your underwriters includes nothing but the consequences of the perils enumerated in the policy; liability to pay freight at destination is not one of these, so no consequence of that obligation can be transferred to your underwriter." It appears to have been on this ground that Mr. Justice Blackburn raised the question of freight in the Exchequer Court in Farnworth v. Hyde, 1866.3 The reasoning seems to be (at least) as little fallacious as the opposite doctrine that the position of an underwriter towards his assured is always to be determined commercially by the course which would have been adopted by a prudent uninsured merchant or shipowner. To put it in few words: the underwriter never guarantees that cargo will be worth its freight whether it arrives damaged or sound, why should a freight obligation be imported into his contract in certain cases of damage and loss when it is really a part of the merchant's obligations which the merchant retains at his own risk in case of arrival 26 Exch. 263.

1 II C.B. 176.

3 L. R. 2 C. P. 204.

of his goods at destination?

Considerations of a similar kind arise again and again in the treatment of cargo claims; but this instance seems to make it clear that the prudentuninsured-owner theory is not adequate to the solution of several important problems in marine insurance. Constructive Total Loss: when determinable ?—It was said above (p. 147) that if the assured instead of tendering abandonment awaits an examination of his property with a view to repairs, he has to abide by the result of such examination and take his indemnity in accordance therewith. But what constitutes indemnity in such a case? Is the liability of the underwriters determined by the state of matters as they existed at the time when abandonment was tendered by the assured, or when action was instituted against the underwriter? In the case of The Sailing Ship Blairmore Company v. Macredie,1 it has been decided that to determine whether a loss is constructively total or merely partial, account must be taken of such expenses as the underwriters may incur between the dates of proper tender of abandonment and of action brought, in rescuing the property and taking it to a place of safety. Lord Herschell stated the general rule of English law to be that if, in the interval between the notice of abandonment and the time when legal proceedings are commenced, there has been a change of circumstances reducing the loss from a total to a partial one, the assured can only recover for a partial loss. But he added that this rule had never been applied to a change brought about by the underwriter. considered that to extend it to such a case would be unreasonable and would not give due effect to the contract between the parties. Lord Watson in his judgment remarked, "I have been unable to arrive at the conclusion that, in the circumstances which occur in this case, the consideration of what would be the action of a prudent owner uninsured affords the true test of the liability of the underwriters as for a total constructive loss. In my opinion that test is excluded by the contractual relations which exist between the insured and his insurers."

1 House of Lords, 1898, A. C. 593.

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CHAPTER X

TOTAL LOSS OF FREIGHT

THE third great maritime interest, freight, remains to be dealt with. The word "freight" does not appear in the text of the policy as it existed before May 1749. It is not easy to see how it came to have its present signification, namely, hire for carrying goods. Etymologically it should mean simply load or cargo, and it is still used in the United States in this sense (e.g. freight train, fast freight train, the equivalent of the English goods train and express goods train). But it has lost that meaning altogether in England, and now stands simply for hire for carrying goods, and on the United States' sea-board the word is used in nautical affairs in that sense.1

In regard to this interest there is a most important and, in fact, an essential difference between the law of England and that of most other ocean-carrying nations; and this difference has important consequences on the relations of assured and underwriter on freight. English law takes the contract under bill of lading between shipowner and merchant to be that if the freight is payable at destination, then no part of it is earned by a partial performance of the contract, that is, by delivery of the cargo at any port short of destination. If an English ship takes

1 In German there is a somewhat similar confusion between Fracht and Frachtgeld, in Dutch between Vracht and Vrachtpenning; in Italian the words nolo and noleggio are those ordinarily used to mean freight, while in French the word fret is pushing out nolis, and in Spanish flete is the only form now in common use.

in cargo at Liverpool for delivery at Calcutta in return for so much freight, delivery of the cargo at Colombo or Madras will not entitle the shipowner to any freight. Almost all the maritime countries except England have adopted a custom entirely contrary to this: they regard the freight as a liability from the cargo accruing as it were mile by mile as the vessel proceeds and culminating at its full bill of lading amount at port of destination on safe delivery. If a German vessel undertook the voyage from Hamburg,1 and tendered the cargo at Colombo, being herself unable to proceed farther on the voyage, the owner would be entitled, under the law of his flag, to claim the same proportion of the full freight as the distance from Hamburg to Colombo bears to that from Hamburg to Calcutta. This is called distance freight or freight pro rata itineris peracti. In this country it has been considered contrary to public policy to permit any such partial and proportionate discharge of a freight contract: it has been thought that such permission might tend to encourage masters and crews to look for reasons to close the freight contract elsewhere than at the intended destination of the adventure. There is certainly good reason for thinking that many condemnations of foreign vessels at intermediate ports of their voyages would never occur were it not for the distance freight.

In consequence of the view of freight adopted in English law, payments made towards freight hold a curious position in English maritime commerce. If the full freight as per bill of lading is, in consequence of some cause or other preventing the ship's arrival at destination, never earned, what becomes of amounts which the cargo-owner may have prepaid? are they recoverable by the cargo-owner or do they remain the property of the shipowner? That depends entirely on the intention of the parties; if the intention is to provide an amount on account of freight as it may ultimately be found to be due, then the prepayment is simply a loan; if, on the other hand, it is meant to be a payment of part of the 1 See Industrie, Shipping Gazette, 30th Nov. 1893.

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