This appeal arises from a claim for damage to a yacht carried on deck of the SS American Flyer in May 1953. In unloading the yacht, it sustained damage through the carrier's fault. The carrier conceded responsibility but maintained that its liability was limited to USD 500 in total by the terms of the contract of carriage. The District Court held it was not so limited, and granted recovery on the basis of USD 500 per 'customary freight unit' pursuant to s 4(5) of the Carriage of Goods by Sea Act (COGSA).

Held: Decree modified to limit recovery to a total of USD 500.

The yacht was mentioned on the bill of lading as being carried on deck. COGSA was incorporated by reference and was thus merely a term of the contract. The parties have defined what 'package' means in the bill of lading. There was no reason why this specific definition should not prevail over the general term 'package' contained in COGSA. It was true that if COGSA applied of its own force, the yacht, like the tractor in the Gulf Italia, could not be deemed a 'package', and the parties by so describing it could not reduce the carrier's liability: see Gulf Italia Co v American Export Lines Inc 263 F 2d 135 (2d Cir 1959). This appeal differs from Gulf Italia, however, in that here the yacht was carried on deck. Consequently, s 4(5) of COGSA does not apply of its own force: see 46 USC s 1301(c). However, the bill of lading refers to COGSA, and the question for decision is what is the legal effect of such reference. It is worth noting that the bill of lading provided that in respect to goods carried on deck certain risks shall be on the shipper, 'but in all other respects the custody and carriage of such goods shall be governed by the terms of this bill of lading and the carrier shall have the benefit [italics added by the Court] of all and the same rights, immunities, exceptions and limitations contained in said Carriage of Goods by Sea Act, notwithstanding Sec. 1(c) thereof'. The fourth para of cl 23 reads: 'It is understood that the meaning of the word "package" includes pieces and articles of any description except goods shipped in bulk'.

The District Court was wrong in holding that, because the contractual definition of 'package' would be void when applied to shipments covered by COGSA, it should likewise be ineffective to reduce liability where COGSA is not operative as a matter of law. Since the shipper could have declared the value of the yacht and had full protection against damage by paying a higher freight rate, it cannot be regarded that the USD 500 limitation was in the nature of a 'trap'.

Moore Cir J, concurring: The terms of the bill of lading clarifying and giving a more specific meaning to the word 'package' are not repugnant to COGSA. The word 'package' in COGSA is neither self-defining nor a word of art. The clauses of the bill of lading and of the sections of COGSA can be read together, and the true intent of the parties as to their understanding of the 'package' can thereby be obtained. The phrase 'customary freight unit' as used in COGSA would have applied in this case to the yacht as a whole, rather than to the units of measure used in calculating the freight charged. Since COGSA provides a USD 500 limit of liability 'per package … or in case of goods not shipped in packages, per customary freight unit', the result is the same whether COGSA or the specific contratual definition of 'package' is applied. If Congress had intended to extend this limitation only to the unit used in calculating freight rate charges, it would have been very simple to have phrased the statute in that manner.