CHARTERER’S BILL

Charter parties and Charterer’s Bills

The ship will often be operating under a charter party. The question then arises
whether the bill of lading is a contract between the charterer and the shipper or
between the ship owner and the shipper. Although this is a complex issue under
English law, it is probably correct to say that in most instances a bill of lading
will represent a contract between the ship owner and the shipper (and, of
course, any other holder in due course of the bill of lading).

The exception to the rule is where the ship is operating under a demise or
bareboat charter party so that the master is the employee of the charterer and
not of the ship owner and any bill of lading signed by the master is done so by
him as the charterer’s agent.

More complex and unusual examples of a charterer’s bill may be where the
master has been given express authority by the ship-owner and charterer to sign
on the charterer’s behalf or where the charterer has signed the bill of lading in
his own name. The master will not necessarily be aware of all of these
arrangements.

The significance of the distinction between an owner’s bill and a charter’s bill is
of course that if the contract is between the charterer and the shipper (and
subsequent holders of the bill of lading) then any promises made in that bill of
lading (e.g. to carry to the destination, and to care for the goods) and any
representations made in the bill of lading (e.g. as to condition on quality of
cargo), are matters between the charterer and the cargo owner. The said, the
ship-owner may of course, continue to have duties of care because the cargo is
in its physical possession.

The ability of a charterer to bind a ship-owner to a bill of lading which has been
issued without authority being given to the charterer or his agent, is a complex
legal question and lot will depend upon unusual or unique factual situations.
However because the problem of charterers or their agents issuing bills of lading
without authority or not in accordance with mate’s receipts has been identified

Compiled by: Capt. Naveen C Tewari, ARI Saket, New Delhi, (1/16) 1
 CHARTERER’S BILL

as a problem area for ship owners, a brief summary of the guiding principles
may be useful.

In many charter party where the master is obliged to follow the orders of the
charterer as to the employment of the vessel then, unless there is an express
prohibition the charterer or its agent will have actual authority to issue and sign
bills of lading on the owner’s behalf.

If the charterer or its agent issues bills of lading in breach of charter party terms
they will still have ostensible authority to issue and sign and sign bills of lading
on the ship owner’s behalf unless the ship-owner has been able to advise cargo
interests of the lack of actual authority before the bills have been signed or
unless the bills contain extraordinary terms, or unless the cargo interests had
reasons to know of the lack of authority.

The master and ship-owner may be entitled to refuse to issue clean bills clean
bills of lading for unsound cargo and this will cause problems for the shipper and
charterer. But in practice, if the charterer or its agent decide that it will without
notifying the master abuse the authority identified at (a) and (b) above so as to
issue clean bills for unsound cargo itself, there is considerable likelihood that the
ship-owner will be found to be bound by these bills of lading. The ship owner’s
remedy is against the charterer or its agent.

Compiled by: Capt. Naveen C Tewari, ARI Saket, New Delhi, (1/16) 2