is the cost of reconditioning, then follow the expenses of reshipping and the freight. If the expected value of the goods at destination does not amount to the sum of these items, it is evidently commercially unreasonable to expect the merchant to bring on the goods, it is evidently better to sell them as they lie for any price they will fetch.

Suppose that the same merchant were insured, under what circumstances should he be entitled to claim a constructive total loss from his underwriter? There would seem

to be no doubt that such a claim can be justified in case the value of the goods taken as arrived at destination with all charges paid is nothing, or, in other words, when the price obtained for goods if sold at destination after payment of all charges does not exceed the amount of the charges. The question arises whether the freight per bill of lading is one of the charges that should be taken into the calculation.

The case of Farnworth v. Hyde, 1866,1 was one against the underwriters of a policy on a cargo of timber from Quebec to Liverpool. It was proved that the ship was frozen up in the St. Lawrence at the beginning of winter, and in the spring she was, under the advice of competent surveyors, sold, as it was considered that the expense of repairing and forwarding would be greater than the value when repaired. No notice of abandonment was given: the news of the disaster and of the sale arrived at the same time. The jury in the Court of first instance found the sale justifiable, and a verdict was entered for the assured as for a total loss. The Court of Common Pleas, on a rule to enter non-suit, held (Mr. Justice Byles dissenting) that there was evidence to show that the probable loss during the operation of saving and forwarding would have absorbed the surplus profit, and that the verdict for a total loss ought to stand even without abandonment. In estimating what would have been the value of the cargo had it arrived at Liverpool, the original bill of lading freight £1556 was deducted; had not this been done, there would have been a margin of profit of £1700.

1 L. R. 2 C.P. 204.

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 2 6 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.

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.