Maritime Law Column: When Is a Contract Maritime and Why Is That Important?
"Whether a contract is maritime bears upon numerous substantive legal rights of the parties," writes Blank Rome's Keith Letourneau.
September 06, 2024 at 12:00 PM
7 minute read
Cargo and ShippingIn the Fifth Circuit, for the longest time, deciding whether a contract was maritime involved assessing a litany of factors derived from the court's Davis & Sons v. Gulf Oil Corporation case, specifically:
- "What does the specific work order in effect at the time of the injury provide?
- What work did the crew assigned under the work order actually do?
- Was the crew assigned to work aboard a vessel in navigable waters?
- To what extent did the work being done relate to the mission of that vessel?
- What was the principal work of the injured worker?
- What work was the injured worker actually doing at the time of injury?"
The above factors generally pertain to a personal-injury scenario, which hardly covers the gamut of potential maritime contracts. In 2004, the Supreme Court issued a landmark decision in Norfolk Southern Railway v. Kirby, which altered the conceptual framework of thinking about when a contract is maritime. There, a train derailment in Alabama damaged goods shipped pursuant to two through bills of lading (meaning bills of lading governing the transport of goods to destination) from Sydney, Australia to Huntsville, Alabama, specifically one issued by the ocean carrier and another issued by an Australian freight forwarding company, presumably a non-vessel operating common carrier (NVOCC) though the court did not refer to it as such. The court found that the rail carrier could limit its liability under the U.S. Carriage of Goods by Sea Act, which applied under both through bills of lading. In doing so, the court noted that "[w]hen a contract is a maritime one, and the dispute is not inherently local, federal law controls the contract interpretation." The court held that to decide whether a contract is maritime, it could not look to whether a vessel was involved in the dispute, as in a maritime-tort case, but rather to whether the contract refers to "maritime service or maritime transactions." The court found that the two bills of lading were maritime contracts because their primary objective was to transports goods from Australia to the U.S. East Coast. The principal objective of a maritime contract must be maritime commerce. The court noted that lower court decisions that rely upon geography to define the limits of a maritime contract are not consistent with this conceptual approach, except in a limited sense when the sea components of a contract are insubstantial, in which case the contract is not maritime.
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