9. "Privity or Knowledge."—
Limitation of liability can not be had against any loss or obligation unless incurred without the privity or knowledge of the shipowner. These words, by judicial construction, still remain as a condition or qualification of the law and it is unfortunate that no plain definition of their meaning has been yet supplied. The words have been discussed in many cases and there are many decisions in particular instances granting or denying the benefit of the law, but the expression is still undefined and perhaps is incapable of accurate legal definition. Some judges have held that "privity or knowledge" means the shipowner's own willful or negligent acts as distinguished from those of his agents or employees. This gives the broad and liberal construction of the law which the Supreme Court directed in its earlier decisions on the subject. On the other hand, judges of equal learning have been inclined to treat the matter by the standards of the common law and held that the acts or faults of agents or servants are those of the principal and that he must be as personally liable as if he had done them himself. These would limit the protection of the law to the acts of the master of the ship when beyond control of the owner and give it a close construction against the shipowner. This has been the tendency of the later decisions of the Courts of Appeals and the Supreme Court has so far acquiesced in them. There has also been a development of a doctrine to the effect that there can be no limitation against the enforcement of the shipowner's personal contracts, and engagements made by various employees and managing owners have been held to be within this class. This rule depends on the theory of privity or knowledge, as, of course, there can be no such thing as a contract relation without privity or knowledge of its subject-matter. Thus in the recent case of Luckenbach v. McCahan Sugar Ref. Co., 248 U. S. 139, decided December 9, 1918:
But the liability of the owners sought to be enforced here is one resting upon their personal contract; and to such liabilities the limitation acts do not apply.
Similarly in another recent case, Pendleton v. Benner Line, 246 U. S. 353:
The contract was between human beings, and the petitioner, by his own act, knowingly made himself a party to an express undertaking for the seaworthiness of the ship. That the statute does not limit liability for the personal acts of the owners, done with knowledge, is established by Richardson v. Harmon, 222 U. S. 96. It was said in that case, p. 106, that § 18 leaves the owner "liable for his own fault, neglect, and contracts."
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It is said that the owners did their best to make the vessel seaworthy, and that if it was not so the failure was wholly without the privity or knowledge of the petitioner. But that is not the material question in the case of a warranty. Unless the petitioner can be discharged from his contract altogether he must answer for the breach, whether he was to blame for it or not.
In the case of corporate shipowners it is said that the privity or knowledge must be that of the managing officers, but there is no definition of who the managing officers are and the term is not capable of accurate definition. The law of limitation of liability of shipowners in the United States is not now plain or simple nor is it in harmony with the general maritime law or that of other commercial countries. Where the owner can prove that the loss occurred without his privity or knowledge he will obtain protection, but just what facts or ignorance of facts he must prove to reach this result can not be stated at the present time.