Restaurant Supply Co. was an importer of various lines of cutlery, utensils and tableware that it sold in quantity to hotels and restaurants. Approximately 50% of its sales consisted of hotel grade dishes, and the remaining 50% consisted of cutlery and cooking utensils.

Restaurant Supply Co. used the services of Commercial Transport Ltd. to deliver its goods to customers who were located in various parts of the country. All goods were shipped in cartons, but those containing dishes were normally packed in a straw-like material to provide protection in the event of impact or careless handling, and were marked 'Fragile'. This reduced breakage of the shipped dishware to a minimum acceptable level. Only occasionally would a customer report breakage, and this usually consisted of only one or two dishes in a shipment of perhaps many hundreds of pieces.

Restaurant Supply Co. recently tested a new type of foam packing material, and decided that its use would permit the contents of a case to withstand a reasonable amount of impact if the case should accidentally be dropped. Management then decided to use the new packing material in cartons that were not marked with a "fragile" label in order to obtain a lower shipping rate. The company informed Commercial Transport Ltd. of the removal of the "fragile" notice on the containers and requested a lower shipping rate, Commercial Transport Ltd. agreed to handle the goods at a lower rate.

The next month the company shipped a very large quantity of dishes to a distant hotel customer in 40 of the new containers. When it was received by the hotel, almost one third of the dishes were found to be either cracked, chipped or broken. An investigation by the carrier revealed that road vibration during the long trip had caused the packing material in the cartons to shift, allowing the pieces to come in contact with each other, and to crack or break if the carton received any impact or rough handling.

Restaurant Supply Co. took legal action against Commercial Transport Ltd. for damages equal to the loss. Commercial Transport Ltd. denied liability for the damage to the goods.

A:Is Commercial Transport Ltd liable for the damage to the goods?

B.Explain the legal arguments thateach partycould raise in this case.

C. Render a decision