The Photographer Who Sued FedEx In Small Claims Court (And Won)
About three weeks before Christmas, a photographer in New York purchased a digital camera from Fingerhut for $332.
The purchase was "a Christmas gift to himself." So, key to his decision to make the purchase was Fingerhut's estimated delivery date of December 20th, which would have put the camera in his hands by Christmas morning.
Following the purchase, Fingerhut contracted with FedEx to deliver the camera to the buyer by the estimated delivery date, via the "Fedex Ground" service.
On December 20th, FedEx provided Fingerhut with a filled-out "proof of delivery" form, intended to show that FedEx had performed the FedEx Ground service and that, as a result, Fingerhut had delivered the purchased camera to the buyer.
The problem, though, was that the proof of delivery form was not signed by the buyer: it bore someone else's name; and the buyer soon reported that he never received the camera.
Who is responsible if a package is not delivered?
Ultimately, the buyer paid the seller (Fingerhut, in this case), and the seller became thereby obligated to provide the purchased product to the buyer (we'll refer to that deal as the "purchase contract").
So, when the buyer's camera never made it to him, Fingerhut was legally on the hook for it, under the theory that Fingerhut breached the contract. Because the buyer was party to that "purchase contract," Fingerhut's breach gave the buyer a cause of action against Fingerhut for breach of contract.
In addition, and, perhaps, less obvious, though...Fingerhut paid FedEx to deliver the camera to the buyer, for both the benefit of Fingerhut and the buyer (we'll refer to that as the "shipping contract"). The fact that the camera-buyer was the intended third-party beneficiary of the shipping contract is the part of this that may be less obvious--but it turns out that it's a key fact in this case.
...because, since FedEx apparently failed to perform its obligation to Fingerhut under the shipping contract, and because the buyer was thereby damaged, FedEx's breach of contract (re: the shipping contract) gave the buyer a cause of action against FedEx for breach of contract, to the detriment of a third-party beneficiary. (See a more in-depth discussion of the third-party beneficiary doctrine, applied to a different case, here.)
So, the answer here was that both the seller (Fingerhut) and the shipper (FedEx) were responsible when the package was not delivered to the buyer.
Can you sue a company for not delivering the product you purchased?
Accordingly, the camera-buyer had cause to sue both Fingerhut and FedEx.
Having worked out a pre-litigation settlement with Fingerhut, the buyer opted to sue FedEx in small claims court. At trial, the camera-buyer sought to recover the full $332 of damages he had suffered as a result of FedEx's...failure to deliver 🥁.
The camera-buyer won at trial, which exemplifies the answers to these two commonly asked questions:
- Whether you can sue when a product is not delivered. Yes, you can.
- Whether you can sue the seller or the carrier (FedEx, in this case). Both, in this case.
But the camera-buyer's small claims lawsuit against FedEx was also instructive for a third reason: it demonstrated the role of "carrier limits of liability" arising from the terms of the shipping contract.
Declared value and limits of liability under FedEx's terms and conditions
In the US, FedEx reportedly did business for more than one hundred million customers in 2020. How many of those customers, do you suppose, have read all twenty-five pages of FedEx's standard terms and conditions? Probably not many.
So, many people may not be aware of the difference between FedEx's carrier liability (for packages not delivered, for example) and cargo (or "freight") insurance. I won't delve into the latter, but I will briefly point out here that the two are not the same, and that, perhaps most importantly, the extent of coverage a FedEx customer should expect to get from FedEx's built-in carrier liability terms pales in comparison to cargo insurance coverage you could obtain separately. To illustrate one side of that comparison, then, let's look at how Fedex's built-in carrier liability is structured in it standard terms and conditions.
The first layer of FedEx's built-in carrier liability terms is that customers get an upper-limit of $100 of FedEx liability without having to "declare" the value of the item being shipped (or, depending on the weight of the item, possibly $9.07 times the item's weight in pounds).
The second layer is that customer may elect to saddle FedEx with a higher liability limit by "declaring the value" of the item being shipped; the catch, though, is that customers who elect to do so must pay extra for that declaration, in proportion to the value being declared. FedEx's website explains this as follows:
The amount you pay to declare a value is based on the item or items you’re shipping (total value) and the type of shipping you choose (FedEx Express®, FedEx Ground®, or FedEx Freight® service).
Declared value rates are incremental and depend on the amount you declare. The first $100 of value in your shipment is included in your shipping rate at no extra charge as part of our standard $100 limit of liability. Your declared value fees reflect any amount that exceeds that $100.
Payment for declared value is due at the same time you create your shipment and pay your shipping costs.
In this case, Fingerhut must have determined that the increased cost of declaring the camera's value as $332 (the price the buyer paid) did not justify the added benefit of higher liability coverage in the event of loss by FedEx. So, Fingerhut made no declarations. As such, FedEx's maximum liability under the terms of the shipping contract was $100. (See Golden Hawk Metallurgical, Inc. v. Fed. Express Corp.)
Plaintiff wins small claims lawsuit against FedEx, but learns a costly lesson
At trial, the court found in favor of the camera-buyer against FedEx.
This was based on the court's finding that the camera-buyer had standing to sue as a third-party beneficiary to the shipping contract; that there was a valid and binding shipping contract between Fingerhut and FedEx; that the shipping was intended for the benefit of the camera-buyer; and that "the benefit to them is sufficiently immediate to . . . indicate the assumption by the contracting parties of a duty to compensate them if the benefit is lost." See Mandarin Trading Ltd. v Wildenstein. The camera-buyer was pleased with that part of the court's finding, obviously. 🙌
However, the court also ruled that Fedex's liability to the camera-buyer was limited to $100, explaining that...
Under New York law, a third party beneficiary is entitled only to those rights which the original parties to the contract intended the third party to have. Accordingly, as a third party beneficiary, the plaintiff has no rights beyond those stated in the contract.
See Williams v. Fedex. In other words, the camera-buyer had no more rights under the shipping contract than did Fingerhut; and because Fingerhut was subject to the $100 limit on FedEx's liability, so was the camera-buyer.
That lesson appears to have been learned at a cost of $222, plus the costs the plaintiff incurred to file the lawsuit against FedEx.