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Introduction
A bill of lading serves as evidence for a contract of
affreightment . This usually arises when a ship owner, or other
person authorized to act on his behalf employs his vessel as a
general ship by advertising that he is willing to accept cargo
from people for a particular voyage.
However, it
must be observed that all countries do not follow the same form of
legislation globally. The broad categories may be stated as
follows:
i. The Hague Rules.
ii. The Hague/Visby amendments.
iii. The Hamburg Code.
iv. Hybrid systems based on the Hague/Visby and Hamburg regimes.
Functions
Of The Bill Of Lading
A
brief overview
The importance of the bill of lading can be understood by
considering the following chain of events of a transaction.
An individual wishing to ship a consignment of goods overseas
approaches a shipping line by reserving space on the vessel. This
may be done directly or through an agent. The carrier then
instructs the place and time of delivery of the goods and the
individual is then issued with a receipt indicating the type and
quantity of the goods and the condition in which the carrier’s
agent received them. Then, the carrier is responsible for the
goods.
The shipper ,
meanwhile, gets a copy of the carrier’s bill of lading form. He
will enter details regarding the type, quantity of goods shipped
together with any relevant marks, the port of destination and the
name of the consignee. The carrier’s agent will check the cargo
details against the tallies at eh time of loading and will
acknowledge them. The freight will be calculated and then the bill
will be signed and will be given to the shipper. The shipper may
then directly dispatch the bill to the consignee or through a bank
in the case of international sales contract by documentary credit.
The consignee
may decide to sell the goods while in transit then he may indorse
the bill in favour of the purchaser. Eventually the consignee or
indorsee will surrender the bill at the port of discharge in
return for delivery of the goods.
1. Bill of
lading as a receipt.
When the bill of lading in the hands of the shipper, it becomes a
receipt for the quantity of goods received, the condition of goods
received and leading marks. However, the evidentiary value of the
bills in all these cases is not the same in all case and it
depends upon the circumstances of the case such as whether the
bill falls within the Carriage of Goods by Sea Act 1971 or not.
Bill
Of Lading Falling Within The Carriage Of Goods By Sea Act 1971
Under Article III (3) of this Act, the carrier has to include the
leading marks, the number of packages or pieces or the quantity or
weight of the goods and the apparent order and condition of the
goods on the bill of lading. The statements made on the bill of
lading are regarded as prima facie evidence of the receipt of the
goods as described under III(4).
Bill Of Lading
Not Falling Within The Carriage Of Goods By Sea Act 1971
Statements as to quantity:
According to Common Law, a statement specifying quantity received
is a prima facie evidence of the quantity shipped. The burden of
proof lies on the carrier to prove that the cargo as specified has
not been shipped. This burden is an absolute one.
In the case of
Smith v/s.
Bedouin Steam Navigation Co [1896],
the bill of lading stated that 1,000 bales of jute had been
shipped, whereas only 988 bales were delivered. It was held that
the carrier could successfully discharge the burden of proof only
if he could show that the goods were not shipped, not merely that
the goods may not possibly have been shipped.
There may be
endorsements on the bill of lading with statements such as weight
and quantity unknown and the courts recognize these, since
information on quantity entered on a bill of lading is based on
statements made by the shipper and which does the carrier not
normally verify. However, when the statements is contained as ‘
quantity unknown’
alongside the gross weight entered by the shippers for the
purposes of Section 4 the weight entered is not a representation
that the quantity was shipped.
Example: A
bill of lading which states that 11,000 tones of cargo were
shipped ‘ quantity unknown’ means that the quantity is unknown and
not that that amount of cargo was actually shipped, this would be
the meaning construed by the Courts.
According to the
Hague/Visby
Rules,
the shipper can demand the carrier issue a bill of lading showing
‘either the number of packages or pieces, or the quantity, weight
etc as furnished in writing by the shipper’. Accordingly, the
carrier may use any of these three methods of quantifying cargo.
However, he cannot acknowledge one kind and disclaim knowledge of
others.
In the case of
Oricon v/s
Integraan (1967),
the bills of lading acknowledged the receipt of 2,000 packages of
copra cake said to weigh gross 1,05,000 Kgs for the purposes of
calculating freight only. It was held that while each of the bills
of lading being Hague Rules of bills of lading, acknowledged the
number of packages shipped as a prima facie evidence.
Regarding the evidentiary bill of lading is concerned; the Hague/Visby
Rules serve as prima facie evidence of the amount of cargo
shipped.
Statements as
to condition:
This is the second type of statement, in which the bill of lading
is a representation by the ship owner as to the condition in which
the goods were shipped.
In Common Law,
the statements as to the condition of the goods shipped are
regarded as prima facie evidence in the hands of the shipper, but
conclusive evidence in the hands of a bona fide purchaser.
In the case of
Compania Naviera Vascongada v/s Churchill (1906),
the timber became badly stained with petroleum while awaiting
shipment; the master nevertheless issued a bill of acknowledging
that the timber had been shipped in good order and condition. It
was held that the ship owners were estopped from denying the truth
of the statement against the assignee of the bill. In order to
make the statement in the bill of lading binding as an estoppel it
is necessary that the person so acting upon it would have done so
upon a prejudice, wherein in this case the defendants were
prejudiced since they accepted the bills of lading as a good
tender on the belief that the timber was in good condition.
The estoppel
will be effective only in respect of defects, which would be
apparent on a reasonable inspection by the carrier or his agents.
In the case of
Silver v/s
Ocean Steamship Co (1930),
the ship owners had issued clean bill of lading covering cargo of
Chinese eggs shipped in 42 - lbs square tins which were not
covered with any cloth or packing. When the goods arrived at their
destination in a damaged condition, the Court of Appeal held that
while the ship owners were estopped from contending either the
cargo was insufficiently packed or that the tins were gashed on
shipment, they were not estopped from alleging that pin - hole
perforations in the tins were present on shipment, since the
latter would not necessarily be apparent on reasonable inspection.
Statements as
to leading marks:
Where the carrier records leading marks on the bill of lading, he
will not be estopped at common law from denying the goods were
shipped under the marks as described in the bill. However, where
the marks are essential to the identification of description of
the cargo, the prima facie evidence rule is applied. The
distinction between a public and a private mark is an important
factor in establishing whether a mark is or is not material to the
identity of the goods.
Indemnity
agreements:
Indemnity agreements may be agreed to be entered into by the
shipper and the carrier to produce a clean bill of lading, that
is, a bill of lading with no reservations on it. It affects its
commercial value in number of ways:
i. The consignee normally relies on the bill of lading to
establish whether the goods as agreed in the contract of sale have
been shipped and where the bill of lading is claused he may refuse
payment.
ii. Should the consignee or the shipper want to sell the
cargo during transit, it is unlikely to be sold on the basis of a
claused bill of lading.
iii. As a document of title the bill of lading is often
used to raise money from banks and finance houses. These
institutions normally prefer to lend money against a clean of
lading.
2. Bill of
lading as evidence of contract of carriage.
In the hands of the shipper a bill of lading serves as evidence of
the contract of carriage though it contains the terms of carriage.
The contract with the shipper is likely to have been concluded
orally long before the issue of the bill of lading. The document
may vary some of the agreed terms or contains terms that have not
been agreed to by the parties.
In the case of
Crooks
v/s Allan (1879)
according to
Lush J, a bill of lading is not a contract, only evidence of the
contract. If a shipper of goods is not aware when he ships them or
is not informed in the course of the shipment, that the bill of
lading which will be tendered to him which will contain such a
clause, he has a right to suppose that his goods are received on
the usual terms.
In the case of
The
Ardennes (1951)
the ship’s agent assured the shipper that the vessel of a
consignment of oranges would sail directly to London and arrive
there before 1 December. The ship however, stopped at Antwerp on
her way to London and arrived at London on 4th December. When sued
for breach of contract by the shipper, the ship owner relied on
the bill of lading, which contained a clause giving the ship
liberty to deviate during the course of her voyage. It was held
that the oral evidence put forward by the shipper was admissible.
3.
Bill of lading as contract of carriage.
Upon endorsement to a third party, the bill of lading is a
contract of carriage, but so far as the holder of the bill is the
shipper, the bill of lading can be evidenced only as a carriage of
contract. Any oral or written agreement between the shipper and
the ship owner not expressed on the bill of lading will not affect
the third party on the grounds of lack of notice. In the case of
Leduc
v/s Ward (1888),
The endorsee of a bill of lading sued the ship owner for loss to
cargo due to deviation in the course. The ship owner contended
that they were not liable, since the shipper was aware at the time
of shipment that the ship would deviate. The court held that
anything that took place between the shipper and the ship owner
not embodied in the bill of lading could not affect the endorsee.
4.
Bill of lading as document of title.
Until goods are physically delivered, the possession of the bill
of lading is deemed to be constructive possession of the goods.
Transfer of the bill of lading is deemed to be constructive
possession of the goods. Transfer of the bill of lading by the
seller to the buyer is deemed to be symbolic delivery of the goods
to the buyer and the buyer, on the ship’s arrival could demand
delivery of the goods.
In the case of
Sanders
v/s MacLean (1883),
the bill of lading by the law merchant is universally recognized
as its symbol and the endorsement and delivery of the bill of
lading operates as a symbolic delivery of the cargo.
The buyer can
sell the goods on while they are at sea to the third party by
simply endorsing the bill of lading and delivering it to the third
party. The third party, by becoming the holder, can demand
delivery of the goods on arrival.
Not all bills
of lading, however, are transferable. To impart transferability to
a bill of lading, it must be drafted as order bills . Upon
endorsement, the endorsee takes the place of the original party to
the bill of lading, and will be sue and be sued on all the terms,
express and implied int eh bill of lading despite privity of
contract. This is due to operation of Section 2 and 3 of the
Carriage of Goods by Sea Act, 1992.
A bill of
lading need not be equated with a bill of exchange, which is a
negotiable instrument in the strict legal sense.
In the case of
Gurney v/s
Behrend (1854)
it was observed that a bill of lading is not like a bill of
exchange or a promissory note, a negotiable instrument that passes
by mere delivery to a bona fide transferee for valuable
consideration, without regard to the title of the parties who make
the transfer.
Therefore,
bill of lading is a transferable document although in some
jurisdictions it is considered as a negotiable instrument.
Delivery of
documents.
The carrier is under an obligation to deliver the cargo only
against the original bill of lading if not, then he will be liable
in contract as well as in tort to the bill of lading holder. In
the absence of bill of lading, if a person wishes to take delivery
of the goods, then he has to prove that he is entitled to the
possession of the goods and there is a reasonable explanation for
such absence.
There are
‘notify
party’
clauses, which are used in which case, the carrier has to notify a
customs broker, banker, and warehouseman of the arrival of the
goods. In some cases, though not in all, the law of country or
custom itself may provide requires the production of a bill of
lading. Therefore, in this case, the carrier will not be liable in
non - production of the bill of lading.
According to
Clarke J, there is a difference between the law and custom and
such differentiation is as follows:
Law:
If it were a requirement of the law of the place of performance
that the cargo must be delivered to the agent of plaintiffs with
out the presentation of an original bill of lading, the defendants
would have performed their obligations under the contract of
carriage.
Custom:
Equally, if there were a custom of the port that cargo was always
delivered to the agent of the person entitled to possession
without the production of the original bill of lading, delivery to
the agent would probably amount to performance of the defendant’s
obligations under the contract of carriage.
Practice:
Practice must be distinguished from custom. A vessel may be
discharged by any methods, which is consistent with the practice
in the port. However, it would not be a good performance of the
defendant’s obligations under the contract if it were merely the
practice for vessels to deliver the goods without presentation of
a bill of lading.
Forgery.
Forgery is a common phenomenon is in international trade. There
was an issue regarding the position of the innocent carrier
delivering goods against the bill of lading.
In the case of
Motis
Exports Ltd v/s Dampskibsselskabet AF 1912 Aktieselskab
Akteiselskabet Dampskibsselskabet Svendborg (2000)
the cargo was under the Maersk Line Bills of lading which included
clause 5(3)(b) which stated the carrier shall have no liability
whatsoever for any loss or damage howsoever caused to the goods
while in its actual or constructive possession before loading or
after discharge over ship’s rail, or if applicable, on the ship’s
ramp. The carriers released the goods against forged bills of
lading. It was held that the delivery against an original bill of
lading is obligatory and hence, delivery against a forged bill of
lading will not be construed in favour of the carrier.
Conclusion
Hence, bills of lading play a very important part in international
trade. Depending upon the rules, which are followed, there are
different implications for different parties, which are involved.
This article gives a very brief description of the nature and
functions of the bill of lading. |
Bill of Lading
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The
author can be reached at: joglekar_pratima@legalserviceindia.com
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