Abstract

The shipowner’s right to limit liability is a statutory right under Article 769 of Korean Commercial Act. Regarding such statutory rights, there arise questions of whether such statutory rights can be contracted out and whether certain clause can be interpreted as contracting out of statutory rights. The Korean Supreme Court ruled in 2013Da61343 case that, the parties can contract out of Article 769 as it is a non-mandatory provision, and considering types of damages the carrier agreed to bear under the contract at hand, the phrase in the contract could be interpreted as contracting out of the statutory right to limit liability. A similar case was presented to the Judicial Committee of the Privy Council of the United Kingdom. The Privy Council ruled that the limitation of liability is a shipowner’s right under 1976 Convention on Limitation of Liability for Maritime Claims, and parties can contract out of it as there is no prohibiting provision within the Convention. However, if such waiver is not clear from contract clauses, one should find the meaning that the words of the contract would convey to a reasonable person having the background knowledge which would reasonably have been available to the parties when the contract was made. Furthermore, statutory rights would be considered to apply by the contracting parties, and thus clear express words must be used in order to rebut such consideration. The Privy Council concluded that phrases like “all and any damages” and “harmless” could not be considered as clear express words to waiver the shipowner’s right to limit liability. There are many interpretation methods of contract, such as natural interpretation, normative interpretation and complementary interpretation, for cases where phrases are not sufficient enough to understand contracting parties’ intention. Furthermore, there are many standards and views on each method, and thus, the result of interpretation could be different from one court to another. However, there is great need to analyze different results to understand a standard for reasonable interpretation to determine whether statutory right is contracted out, because the shipowner’s right to limit liability has been a right under maritime law for a long time, and it is the last resort for the shipowner in maritime casualty.

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