Page 18: of Marine News Magazine (December 2010)

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18 MN December 2010

LEGAL PERSPECTIVES

The Bisso Doctrine takes its name from the 1955 U.S. Supreme Court case,

Bisso v. Inland Waterways Corp., in which it was established in a majority opinion of the Court that exculpatory clauses in towing contracts are invalid as a matter of public policy. That deci- sion has had serious impact on the

United States towing industry, and has affected decisions on whether to make U.S. choice of law and forum appli- cable to towing contracts where there were other options.

It nonetheless remains the law of the land. What follows is a general description of the Bisso Doctrine and some highlights showing how the towing industry and the courts of the United States have adapted to it over the last fifty-five years.

The Bisso case arose because a tug towing an unmanned barge caused the barge to collide with a bridge pier. The towing contract included provisions making the tug crew “borrowed servants” of the tow, and stating that the tow- ing services were to be performed at the sole risk of the tow. This, in effect, exculpated the tug owner from the consequences of its own negligence and that of its crew.

The holding of the Bisso Court was that it was against the public policy of the United States to include in a towage contract a clause exculpating the tug owner from liability for tug negligence. The Supreme Court believed this was necessary in order “(1) to discourage negligence by mak- ing wrongdoers pay damages, and (2) to protect those in need of goods or services from being overreached by oth- ers who have power to drive hard bargains.”

The impact of this decision on freedom of contract was immediately obvious, and that was strongly argued in the dissenting opinion of one of the justices on the Bisso

Court. Although the decision is arguably in line with the common law principle that a person may not contract against his own negligence, freedom of contract is also a long-standing common law principle. In fact, towing con- tracts subject to the law of England, the mother country of the common law, routinely incorporate the United

Kingdom Towing Conditions which include even stronger exculpatory language than that in the Bisso contract. Also, the BIMCO contract forms for towage are subject to

English law and they contain “knock for knock” provi- sions that have the same effect by making each party to the contract liable for its own equipment and personnel irrespective of fault. It is not surprising, therefore, that affected parties, particularly those who provided towing services, began looking for ways to avoid running afoul of the Bisso Doctrine.

In 1959, in Southwestern Sugar & Molasses Co., Inc. v.

River Terminals Corp., the Supreme Court distinguished

Bisso from a situation where the provisions of the towage contract were subject to regulation by the Interstate

Commerce Commission (ICC), noting that the Bisso

Doctrine might not be appropriate where there are partic- ular hazards involved in the towage. In 1962, the Fifth

Circuit Court of Appeals seized upon this distinction and held that where peculiar hazards were involved in the tow and there was equal bargaining strength between the par- ties and no overreaching to drive a hard bargain, it was permissible for the tow owner to agree to indemnify the tug owner against third-party claims based upon tug neg- ligence and to afford the tug owner the benefit of the tow owner’s liability insurance. That case reached the Supreme

Court as Dixilyn Drilling Corp. v. Crescent Towing and

Service Corp., and the Supreme Court found that holding to be “squarely in conflict” with the decision in Bisso. It

At least one commentator has suggested that it appears from the foregoing analysis of Bisso and its progeny, which includes a number of additional cases, that the law is moving away from Bisso without dis- crediting it. That is important, because the Bisso

Doctrine remains “good law.” It is also important to note that not every effort to avoid running afoul of the Bisso

Doctrine, either by trying to carve out an exception to it or by creating a provision that is arguably not covered by it but affords a similar result, has succeeded.

The Bisso Doctrine

By Jim Shirley