It is not uncommon for a contracting party, following damage to goods in transit, to deduct the amount of its claim from the carrier’s freight charges. Carriers do not always agree to such a settlement and may bring legal proceedings against their contracting party to recover the full amount of the freight.

In such proceedings, however, a carrier seeking payment of the full freight amount may risk losing the case if the defendant successfully raises a set-off defence. At the same time, there are circumstances in which the contracting party cannot effectively rely on a set-off defence because of the restrictions imposed by the current provisions of the Polish Code of Civil Procedure.

Carrier’s liability for transport damage

A carrier’s liability is governed by the Polish Transport Law Act in the case of domestic transport and by the CMR Convention in the case of international transport.

Both legal regimes establish, in broadly similar terms, that a carrier is liable for loss of or damage to goods occurring between the time the goods are taken over and the time they are delivered. The carrier may also be liable for delay in delivery.

Carrier liability is not, however, absolute. It may be excluded where one of the statutory grounds applies. These may include force majeure, the fault of the person entitled to the goods—for example, the shipper—defective packaging, or improper loading which resulted in damage to the cargo.

In international transport governed by the CMR Convention, liability for loss of or damage to goods is generally limited to 8.33 SDR per kilogram of gross weight. Liability for delay is generally limited to the amount of the freight. These limitations may not apply where the damage resulted from wilful misconduct or conduct equivalent to wilful misconduct under the applicable law.

For domestic transport, the Polish Transport Law Act provides for compensation corresponding to the actual value of the goods. In the case of partial loss or damage, compensation corresponds to the reduction in the value of the goods. In the case of delay in delivery, compensation may generally be limited to twice the amount of the freight.

A carrier may also be liable to the person entitled to the claim on other grounds. These may include liability for the loss of documents or obligations arising directly from the contract concluded with the contracting party and subject to contractual penalties.

In practice, contractual penalties are often provided for matters such as the late arrival of a vehicle at the loading point, failure to provide transport documents within the agreed deadline, unauthorised subcontracting, or unauthorised transshipment.

Naturally, a carrier does not always accept a claim submitted against it. The central issue in many disputes is whether the carrier was responsible for the event that caused the damage. Other issues may include determining the value of the goods or establishing whether the contracting party is entitled to pursue the claim—for example, where the contracting party has not yet settled the relevant claim with the party actually entitled to compensation.

Where a legal dispute arises and the carrier or its insurer refuses to pay the claimed compensation, the contracting party will often seek to recover the amount by deducting it from the carrier’s freight charges.

What can be included in a transport damage claim?

Under the applicable legislation, a claim relating to damage to or loss of goods may include, in particular:

• Compensation for total or partial loss of the goods or total damage to the shipment, determined by reference to the value of the goods at the place and time when they were accepted for carriage. In the case of partial damage, compensation is generally based on the amount by which the value of the goods has decreased.
• Freight charges, generally understood as the cost of the transport service during which the damage occurred. In certain circumstances, this may also include the cost of transporting the goods to another location, such as the original loading point.
• Customs duties and other expenses incurred in connection with the carriage, such as the costs of disposing of damaged goods or obtaining an expert assessment.

When can a contracting party deduct compensation from freight charges?

Under Article 498 of the Polish Civil Code, where two parties are simultaneously creditors and debtors of each other, either party may set off its claim against the claim of the other party, provided that:

• both claims involve money or fungible goods of the same type;
• both claims are due and payable; and
• both claims can be pursued before a court or another state authority.

As a result of the set-off, the two claims are extinguished up to the amount of the lower claim.

This provision establishes the rules for what is commonly referred to as a statutory or substantive-law set-off. It is important to remember that a set-off is not merely an accounting document. It is, first and foremost, a legal act subject to the formal requirements set out in the Civil Code.

In particular:

• both claims must generally be due and payable;
• the claims must concern money or fungible goods of the same type;
• the claims must be legally enforceable before a court or another state authority;
• the declaration of set-off must be made by a duly authorised person. If an employee acts on behalf of a company, that employee must have appropriate authority, such as a specific or general power of attorney;
• the set-off document should be properly executed. A company stamp alone is not sufficient; the document should bear the authorised person’s signature;
• the date on which the declaration of set-off was made should be specified; and
• delivery of the declaration should be properly documented. In practice, sending it by registered mail is advisable.

Can an unexpired or time-barred claim be set off?

Although a literal interpretation of the relevant provision might suggest that a set-off is possible only when both claims are due and payable, legal scholarship generally accepts that it is sufficient for the claim of the party making the set-off to be due. This is based on the possibility of the other party’s obligation being performed before its due date.

A time-barred claim may also be subject to set-off if, at the time when the conditions for the set-off arose, the claim had not yet become time-barred.

In practical terms, this means that even after a claim has become time-barred, it may still be possible to set it off against another claim that has not become time-barred, provided that the conditions for set-off existed before the limitation period expired.

Can a set-off defence be raised in court?

It is important to distinguish between two separate legal mechanisms:

• a substantive-law declaration of set-off made under Article 498 of the Polish Civil Code; and
• a procedural defence of set-off raised in civil proceedings, which is currently governed by Article 203¹ of the Polish Code of Civil Procedure.

Amendments to the Code of Civil Procedure introduced first in November 2019 and subsequently in July 2023 significantly changed civil procedure, including the rules governing a defendant’s ability to raise a set-off defence.

Under the current wording of Article 203¹, a set-off defence may be based only on a claim:

• belonging to the defendant and arising from the same legal relationship as the claim pursued by the claimant, unless the defendant’s claim is undisputed, established by a final court judgment or an arbitration award, confirmed by a settlement concluded before a court or arbitral tribunal, confirmed by a court-approved settlement reached through mediation, or made plausible by a document confirming that the claimant has acknowledged the claim; or
• for reimbursement of a performance already made, where the claim belongs to one jointly and severally liable debtor against the other co-debtors.

The legislation also imposes procedural deadlines. A defendant must raise the set-off defence no later than when entering into a dispute as to the substance of the case or within two weeks from the date on which the defendant’s claim became due and payable.

How does this apply to transport disputes?

In transport disputes, the defendant’s set-off claim will most commonly relate to a disputed claim arising from damage to goods or another form of improper performance by the carrier.

Under the above rules, a contracting party should generally have no difficulty raising a set-off defence where it deducted the disputed claim from freight payable to the carrier under the same transport contract in connection with which the damage occurred.

The situation becomes more complicated where the contracting party seeks to set off the claim against freight relating to other transport services, or where the set-off is subsequently extended to such amounts.

In such circumstances, the defendant may need to produce a document demonstrating that the carrier has acknowledged the claim. This could, for example, take the form of a preliminary acknowledgement of the claim, including one made during an electronically recorded conversation. However, Polish case law on this issue is not entirely consistent, and the evidential value of such material may depend on the specific circumstances.

Conclusion – how to carry out a transport claim set-off correctly

Proper handling of transport claims requires careful preparation and the implementation of appropriate preventive measures. Companies should ensure that their contracts, claims procedures and documentation are structured in a way that allows potential claims to be properly substantiated and, where appropriate, set off against freight charges.

At the same time, where a carrier considers a claim to be unjustified, it should be prepared to protect its interests using the legal and insurance remedies available to it.

Careful management of these issues can help transport companies minimise legal and financial risks and deal effectively with disputes arising from damaged or lost goods.

Author: Ewa Sławińska-Ziaja, Attorney-at-Law, Trans Lawyers

www.translawyers.eu