The Purpose of a Bill of Lading International Law Essay

“Bill of lading” is a multiple purpose document; it acts as contract of carriage of goods by sea, as a formal receipt for the goods shipped and as a document of title. The function attributed to Bill of lading is based on ancient customs and usages followed by merchants in trade known as lex_marcatria (law merchants). Following is the brief analysis of law relating to “Bill of lading” i.e. “Carriage of Goods by Sea Act 1992″, “Hague Visby Rules”, which has the force of law in UK by virtue of “s.1 ch.19 of Sales of Goods Act 1971″.

“Evidence of the contract of carriage of goods by sea”

Unlike charter party, the contract of carriage of goods by sea in liner trade is evidenced by “Bill of lading” which itself is not a contract of carriage of goods rather an evidence of an already concluded contract of carriage between shipper and carrier orally. The terms and conditions appearing on reverse side of every standard “Bill of lading” do not form a contract of carriage. Thus if the terms and conditions mentioned in standard bill of lading are inconsistent with the oral commitment, the parties are at liberty to adduce evidence in support of their oral contract. Leduc & Co v Wards (1888); where the “Bill of lading” contained a clause enabling the carrier to deviate from agreed route which caused the ship to be lost and delivery of goods was delayed. The lawful holder sued the carrier. The carrier took the plea that the shipper knew about the deviation clause in the “Bill of lading”. Therefore no breach of contract whatsoever has been created. However the court refused to accept the plea of carrier and held that

“Lawful holder who has no knowledge of any such commitment my not be made, bound to follow it”

Under “s.4 of the Carriage of Goods by Sea Act 1992″, the “Bill of lading” in the hands of lawful holder is the conclusive evidence of contract of carriage and the carrier is stopped by his words and conduct. It is to be noted that whatever orally was agreed between shipper and the carrier, do not bind the lawful holder who acts in good faith, as held in the above referred case.

“Bill of lading is said to be formal receipt by the ship owner of the goods”

The second function of “Bill of lading” is that it is a formal receipt for goods shipped. It is the classical function of bill of lading, when the goods are delivered to the carrier for shipment, the carrier issues “Bill of lading” which contains the detail information about quantity, packing and apparent good order and condition. “Article 3(3) of Hague Visby Rules” states that if the shipper demands, the carrier would issue “Bill of lading” containing above mentioned detail regarding the goods.

The carrier must write the accurate information regarding quantity, packaging (apparent good order and condition) and leading marks .it is important from legal as well as practical point of view, if an incorrect quantity or their detail regarding goods is given and in case of any claim for damages or short fall, the responsibility would lie on carrier.

As according to “s.4 of Carriage of Goods by Sea Act 1999″; as stated above with regard shipper and carrier “Bill of lading” is prima facie evidence whereas bill of lading in the hands of third party is conclusive evidence. “Article 3(5) of Hague Visby Rules”; there is a counter obligation on the shipper to provide correct information to the carrier regarding the goods.

“Bill of lading a document of title enabling the goods to be disposed of by endorsement and delivery of it”:

One of the characteristic of the “Bill of lading” is document of title. A “Bill of lading” in order to be a document of title must be negotiable, which simply means it should be transferable. A “Bill of lading” in order to be transferable must be drawn as delivered or assignee. A bill which is specifically drawn in the name of a particular receiver, would not fall within the category of negotiable instrument and would not be able to transfer title to goods in transit, such a bill is called is called “straight bill”, the traders prefer “order bill of lading” for the reason that it enables them to sell/transfer goods while they are at high sea.

The nature of bill of lading as a document of title best seen in the light of following judgment of Sanders Bros. v Maclean (1883);

“The law as to endorsement of bill of lading is as clear as in my opinion the practice of all European merchants is thoroughly understood cargo at sea while in the hands of carrier s necessarily incapable of physical delivery. During this period of transit and voyage, the bill of lading by the law merchant as universally recognized as its symbol, and the endorsement and delivery of the bill of lading operates as a symbolical delivery of the cargo. Property in the goods passes by such indorsement and delivery of bill of lading, whether its is intention of the parties that the property should pass, just as under similar circumstances the property would pass by an actual delivery of the goods”

Another reason for order “Bill of lading” is, for issuance of documentary credit the banks requires order bill lading. The order bill of lading passes through many hands before the goods are actually delivered and for that purpose it should be negotiable i.e. transferable by endorsement.

“Received ….in apparent good order and condition”:

When the goods are delivered and received by the carrier for shipment he issues a receipt with writing “received for shipment in apparent good order and condition”, which is called “received bill of lading” and when goods are shipped on board a vessel, a “shipped bill of lading” is issued. Thus the difference between received “Bill of lading” and “shipped bill of lading” is that in case of “received bill of lading”; goods are in custody of carrier, however, they have yet not been shipped on board a vessel, whereas in case of “shipped bill of lading”, goods have actually been shipped on board a vessel.

“Art.3, r.3, cl.c of Hague Visby Rules”; the carrier is obliged to issue a “Bill of lading” on demand of the shipper and mention about the “apparent good order and condition of the goods”. The word “apparent good order and condition” refers to “external condition or appearance of goods” such as packaging etc. if the apparent condition of the goods is not satisfactory i.e. if the packaging is damaged or there is any other apparent damage the carrier must note down this damage in bill of lading. “Peter der Grosse 18751 P.D 414″; where a cargo was shipped from Russia to London. After arrival it had a bad smell although the contract was carrying a clean “Bill of lading”, to avoid liability in respect of clean “Bill of lading”, the carrier argued that “weight, content and value unknown in the bill of lading” meant that they could not be bound by the declaration that the goods were in good order in condition.

The court rejected the carrier’s defense on the basis that “stain would have been obvious to their agent and if as they alleged the damage was there pre shipment, they should have issued a clause bill of lading. They had not successfully rebutted the prima facie presumption indicated by their declaration that the goods were received and shipped in good order and condition. The court then went on to clarify the meaning of “good order and condition”. According to the Sir Roger Phillimore, J,

“Apparent good order and condition must be taken as “that apparently, and so far as met the eye, and externally, the goods were placed in good order on board [the] ship.”

In case of omission or negligence the carrier would be responsible and he would have no chance to deny the fact that he did not receive the goods in “apparent good order and condition” though he would be able to produce evidence of any damage to goods after shipment due to any accepted peril. “Bill of lading” as between the shipper and carrier is prima facie evidence, however in the hands of indorse eth bill of lading is conclusive evidence. Therefore the endorsee is entitled to receive the goods in the condition mentioned in the “Bill of lading”.

If the carrier has mentioned in “Bill of lading” that goods are received in apparent good order and condition, the receiver is entitled to receive goods in good order and condition and the carrier is stopped by his words (s.4 Carriages of Goods by Sea Act 1992). When the carrier issues a “Bill of lading” with notation regarding the goods, the bill of lading is called a “clause bill of lading”.

“Deliver to order or assigns [Notify party]”

A “Bill of lading” in order to be a document of title must be negotiable which simply means it should be transferable. And in order to be transferable it must draw as delivered or assignee. A bill which is specifically drawn in the name of a particular receiver, would not fall within the category of negotiable instrument and would not be able to transfer title to goods in transit, such a bill is called is called “straight bill”, the traders prefer “order bill of lading “for the reason that it enables them to sell/transfer goods while they are at high sea. Order bill of lading is also important for another reason which is issuance of documentary credit for which banks requires order bill of lading. The order “Bill of lading” passes through many hands before the goods are actually delivered and for that purpose it should be negotiable i.e. transferable by endorsement.

“Exemptions and immunities of all servants and agents of the carrier”

Under “Art.4 (2) Hague Visby Rules” the defenses and immunities available to carrier are also available to his servants and agents in case an action for damage to goods is brought against them. Exemption and immunity clause is usually provided in bill of lading. This clause is also known as “Himalaya clause”.

In modern time contract of carriage either of goods or passengers carries this clause. This practice began after famous case of “Adler v Dickson”; the claimant in this case is a lady who suffered serious injuries due to collapse of gangway of the ship, she was on board. The passenger ticket carried exemption from any such liability in favour of ship owner. This is why the claimant initiated proceeding against captain of the ship, who had no such immunity. The decided in favour of claimant and awarded her damages. The court observed that captain of the ship could also escape the liability had he been exempted in the ticket in the same manner as the ship owner was. Since passing of this judgment the contract of transportation such as bill of lading etc carry this clause whereby not only carrier himself but his agents, servants are also provided immunities from any damage or loss.

Electronic Bill of lading; (Provisions of Carriage of Goods by Sea Act 1992);

Ninety percent of international trade is carried out by sea routes, and mostly the shipping documents are prepared manually. The volume of international trade is increasing enormously and every day tens and thousands of ship sales across the high sea carrying goods, which involve a lot of paper work and manual labour to draw shipping document such as “Bill of lading” etc which is time consuming and lengthy process. Not only the manual preparation of shipping document is at problem but there in time dispatch is also a cause of concern.

Some time it happens that goods arrive prior to arrival of complete and error free documents which cause delay in delivery of goods for the reason that goods can not be delivered unless proper document i.e. “Bill of lading” to the carrier for the release of goods. For this reason it is desirable that there must be some fastest way of transfer of document and transmission of relevant information. This purpose can be achieved through electronic “Bill of lading”.

Electronic “Bill of lading” is based on computer and electronic device, whereby the shipping information is transferred to the concerned parties. The present legislative in UK governing bill of lading is “Carriage of Goods by Sea Act 1992″ which preceded “Bill of Lading 1855″. Basically the “Carriage of Goods by Sea Act 1992″ introduced to remove the difficulties caused by its predecessors i.e. “Bill of Lading Act 1955″. “Carriage of Goods by Sea Act 1992″, transfers the contractual rights and obligations in favour of lawful holder/transferee of “Bill of lading”.

It is true that 1992 Act doesn’t contain any express provision on electronic “Bill of lading”. The only section which can be found in 1992 Act is s.1(5) which provides that, secretary of the state may make provision for the application of this act to the cases where a telecommunication system or any information technology is used for effecting transactions regarding “Bill of lading” or other shipping documents covered under 1992 Act. However no such provision has so far been introduced. Thus the 1992 Act does not contain any clear provision regarding electronic “Bill of lading”.

Internationally at present “CMI rules and BOLERO” (bill of lading electronic registration organization) system are being used for electronic bill of lading. Though these systems are not perfect, however they are really step forward. The defects of electronic “Bill of lading” is the element of fraud as the information may be altered or happened to come in unauthorized hands.

Secondly, since the “Bill of lading” is a document is a document of title and for transfer of title, there must be some document in physical form. The question is whether the information held in a system or computer can be regarded as a document or not? Though, the court has held that such information which is printable does satisfy the requirement of document. However, still negotiability issue is to be resolved.

Conclusion;

“Bill of lading” is an important shipping document and performs valuable functions in international trade, each of them itself is vital. It is desirable that “Bill of lading” must be drawn in careful manners, details regarding parties, goods be entered correctly in order to avoid any complicity later. Efforts are being made at international level to make provisions regarding electronic “Bill of lading”, which is and will be beneficial for international trade and commerce. The “Contract of Carriage of Goods by Sea Act 1992″, UK law needs modification in order to deal with issues of electronic “Bill of lading” of lading or endorse international rules made to deal with “Bill of lading”. INCOTERMS also recognize the electronic “Bill of lading” and other international rule making efforts are also on record however comprehensive codified legal provisions have yet not been made.