Professional Documents
Culture Documents
Bill of Lading
Bill of Lading
Introduction 01
Bill Of Lading 02
Nature of Bill of Lading 02
Bill of lading as a Receipt 03
Bill of lading as evidence of the contract of carriage 06
Bill of lading as a document of title 06
Conclusion 17
References 18
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INTRODUCTION
Bill of lading is used in international transaction but is not defined anywhere. Both
Bill of Lading Act1 and Carriage of goods by Sea Act 2 of India and England do not
define what a bill of lading is. However Article III (3) of the Hague Rules says that
a bill of lading is prima facie evidence of the receipt by the carrier of the goods
described therein. The Hamburg Rules define a bill of lading under Article 1 (7)
as follows: -
1
The Indian Bills of Lading Act, 1856
2
Indian Carriage of Goods by Sea Act, 1925
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provision in the document that the goods are to be delivered to the order of a
named person, or to order, or to bearer, constitutes such an undertaking.”
Thus, we can see that no precise definition of bill of lading is possible. Only
functional definition is given that too in some statutes only.
One of the principal purposes of the bill of lading is to enable the owner of the
goods, to which it relates, to dispose of them rapidly, although the goods are not
in his hands but are in the custody of a carrier. When the goods are on the high
seas in transit from San Francisco to Singapore and the bill of lading has been
airmailed to the buyer in Singapore and the buyer has thus become the owner of
the goods, the bill of lading representing the goods enables the buyer to pledge
the goods with his bank in Singapore or to resell them to a purchaser in New
Delhi. The bill of lading is a creation of mercantile custom, a typical institution of
international trade. It came into use in the sixteenth century. A book on
mercantile law, published in 1686, stated that “bills of lading are commonly to be
had in print in all places and several languages”. 3 the character of the bill of
lading as a document of title was first recognized by the courts in 1794 in
Lickbarrow v. Mason4. From a legal point of view, a bill of lading is:-
33
Malynes, Lex Merchantoria, 3rd edn. 1686, p.97
44
(1794)5 TR 683
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(c) A document of title to the goods enabling the consignee to dispose of the
goods by endorsement and delivery of the bill of lading.
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The statement does not constitute a promise or undertaking by the ship
owner, but is merely a statement of fact, an affirmation that certain facts are
correct. The ship owner who gives a clen bill does not promise to deliver
goods ‘in apparent good order and condition’ to the consignee, and may
prove that the goods were damaged subsequent to the issue of the bill by an
excepted peril e.g. insufficient packing existed prior to the issue of the clean
bill.8 This estoppel operates only in favour of a consignee who relies on the
statement in the bill that goods were in apparent good order and condition.
Some forms of bill of lading have the following or similar words imprinted in
their content: ‘ Measurement , weight, quantity, brand, contents, condition,
quality and value as declared by shipper but unknown to the carrier .’
Where the carrier states the number of packages, and add a qualifying clause
in respect of other particulars e.g. ‘weight and quality unknown’, the qualifying
clause affords him protection in respect of the latter particulars. 9Where the
quantity expressed to be unknown, the bill of lading is not prima facie
evidence of the quantity shipped. 10 however, the unknown clause does not
provide absolute protection. A ship owner who acknowledges having received
goods in apparent good order and condition cannot nullify this admission by
adding ‘condition unknown’, as was held in one case where the cargo
consisted of timber which was loaded in a deteriorated condition. The master
recorded in his log that the timber was ‘very black, wet and partly musty’ but
issued a clean bill of lading qualified only by the words ‘condition unknown’.
Langton J. held that the clause was insufficient to convey to the consignee
that the timber was damaged.
Another question is whether the ship owner can escape the effect of the
estopped creation by a clean bill of lading by pleading that under the terms of
the contract of sale the consignee was found to accept the defective goods in
any event. Keir J.12 rejected this contention because the consequences of the
88
The Nogar Main [1998]1 Lloyd’s Rep. 412
99
Rederiaktiebolaget Gustav W. Erikson v. Dr. Fawzi Ahmed Abbu Ismail [1986] 2 Lloyd’s Rep. 281
1010
Noble resources v. Cavalier shipping Corp. [1996] 1 Lloyd’s Rep. 642
1212
Cremer v. General Carriers SA [1974] 1 WLR 341
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issue of a clean bill of lading arise from the contract of carriage, and a party
thereto cannot avail himself of a defence which originates in quite different
contract, namely the contract of sale.
The shipper is deemed to have guaranteed to the carrier the accuracy of the
marks, number, quantity, and weight as furnished by him, and the shipper has
to indemnify the carrier against loss or damage arising from inaccuracies in
such particulars. The right of the carrier to be indemnified by the shipper in
these circumstances cannot be pleaded by the carrier in defense against a
consignee who tries to hold him responsible. Where the ship owner is hesitant
to issue a clean bill, the shipper sometimes gives him an express indemnity in
order to induce him to issue a clean bill, but such indemnity might be illegal
and in that case do not protect the carrier. Bills of lading sometimes contain
clauses providing that in case of incorrect or insufficient declaration of the
cargo the shipper shall be obliged to pay double freight by way of liquidated
damages.
It has long been accepted that the terms set out on the reverse of the bill of
lading are only evidence of the contract of carriage between shipper and
carrier, since the contract is agreed before the bill is issued. 13 It is equally
accepted that as between the carrier and a bonafide transferee, the bill of
lading terms of the contract of carriage are conclusive and the carrier is
estopped from adding external advice to the contrary. 14 In S.S.Ardennes
(cargo owner) v. S.S.Ardennes (ship owner)15, the ship owners had given a
verbal undertaking to the shippers that they would ensure that the vessel
proceeded to London directly. The bill of lading however contained a clause
enabling the ship owner to call at transit ports and break the journey. The ship
1313
Choyang shipping Co. ltd. V. Coral (U.K.) Ltd. [1997] 2 Lloyd’s Rep. 641
1414
Leduce v. Ward [1888] 20 QBD 457
1515
[1951] 1 KB 55
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made a call at Antwerp before arriving at London. The delay resulted in the
shippers having to pay more duty. The carriers in defence alleged that the
oral undertaking could not vary the terms of the bill of lading. The court
disagreed with the carriers and held that the bill of lading was not in itself the
contract between the shipper and carrier, only an excellent evidence of it.
This meant that the parties could vary it as they did through an oral
undertaking.
It has been seen that a principal purpose of the bill of lading is to enable the
person entitled to the goods represented by the bill to dispose of the goods
while they are in transit. By mercantile custom, possession of the bill is in
many ways equivalent to possession of the goods and the transfer of the bill
of lading has normally the same effect as the delivery of the goods
themselves.
The bill of lading is thus a symbol of, or a key to the goods themselves. 16 this
is why it is referred to as a document of title. Two points should be noted in
this connection, first, the transfer of the bill of lading is merely deemed to
operate as a symbolic transfer of the possession of the goods, but not
necessarily as a transfer of the property in them. The transfer to the bill
passes such rights in the goods as the parties intend to pass. Where the
consignee or endorsee of the bill is the agent of the shipper at the port of
destination, it is evident that the parties, by transferring the bill of lading,
intend only to pass the right to claim the delivery of the goods from the carrier
upon arrival of the goods, but not the property in them.
Secondly, only a person holding a bill of lading is entitled to claim delivery of
the goods from the carrier. The carrier is protected if he delivers the goods to
the holders of the first original bill presented to him even if it is only one in a
set and need not inquire into the title of the holder of the bill or the where
1616
British India Steam Navigation Co. Ltd. V. Shanmugam Villas Cashew Industries (1993) 3 SCC 481
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abouts of the other parts of the bill. The bill of lading retains its character of
document of title until the contract of carriage by sea is discharged by delivery
of the the goods against the bill 17 and the carrier is not responsible for the
wrongful delivery of the goods against the bill unless he knows of the defect
of the title of the holder. If the carrier(or his agent) delivers the goods to a
person who is not the holder of the bill of lading, he does so at his peril.
If that person is not the true owner, the carrier is liable to the latter for
conversion of the goods. In practice, carriers normally rigourously insist on
the production of the bill of the lading but where the bill is produced and the
identity of the consignee is in doubt or in other exceptional cases, they
sometimes deliver the goods against letters of indemnity which in some
cases, have to be provided by a bank.
In the Honda18, the court held that where a bill of lading has been lost, the
person calling for delivery should ensure that in addition to an indemnity, a
court declarartion is obtained providing that on his presentment of a good
indemnity to the carrier the of bill of lading is not to be set up as a defence.
A difficult situation develops if the carrier feels compelled to refuse the issue of a
clear bill of lading. Where payment is arranged under a letter of credit, the
impoter will be unable to obtain finance from the bank if he presents a claused,
instead of a clean bill. On the other hand, the carrier who issues a clear bill
although he knows that the goods are not in apparent good order and condition
when shipped or received for shipment, is estopped from denying as against the
bonafide consignee or assignee that he received the goods in such condition and
might be liable to him.
1717
Barclays Bank ltd. V. Commissioners of Customs and Excise [1963] 1 Lloyd’s Rep. 81
1818
[1994] 2 Lloyd’s Rep. 541
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The obvious way out of this difficulty is for the exporter to offer the carrier an
indemnity, under which the exporter will recompense him for any loss sustained
as the result of the issue of a clean bill of lading. If both the parties, the exporter
and the carrier, know that the clean bill for which the indemnity is given should
never have been issued in view of the condition of the cargo, they have
conspired to defraud the bonafide consignee or endorsee, who will take up the
bill and part with his money, thinking that the goods did not show any defect
when shipped or received for shipment.
In Brown Jankison and Co. Ltd. V. Percy Dalton (London) Ltd.19 The court of
appeal held that an indemnity was invalid which was given by the exporters (the
defendants) to the plaintiffs, who were loading brokers for the ship owners. The
cargo consisted of 100 barrels of orage juice and the tally clerk had described the
casks on his tally card as ‘old and frail’ and recorded some leaking but the
plaintiffs, on the request of the defendants, had issued clear bill of lading against
the defendant’s indemnity.
An indemnity given to the carrier in order to induce him to deliver the goods to
the consignee without production of the bill of lading, although in some instances
equally responsible, is valid and enforceable by the carrier. In Sze Hai Tanj Bank
v. Rambler Cycle Co. Ltd.20 an English company had sold bicycle parts to
importers in Singapore, the goods were shipped in the S.S.Glengarry, which
belonged to Glen Lime Ltd. The sellers instructed the Bank of China to collect the
proceeds and release the bill of lading to the buyers on payment. The buyers
however, induced the carriers to deliver the goods to them without bill of lading
on an indemnity given by the buiyers and their bank, the Sze Hai Tanj Bank.
When the sellers discovered what had happened, they brought proceedings in
the court of Singapore against the carriers for damages for breach of contract
1919
[1957] 2 QB 621
2020
[1959] AC 576
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and conversion, and the carriers brought in as third parties the Sze Hai Tanj
Bank, against which the carriers claimed a declaration of indemnity. The High
Court of Singapore held the carriers to be liable and held further that bank was
obliged to indemnify them. The bank appealed without success to the Court of
Appeal in Singapore and eventually to the judicial committee of the Privy Council.
Lord Denning said-
“It is perfectly clear that a ship owner who delivers without production of the bill of
lading does so at his own peril. The contract is to deliver, on production of the bill
of lading to the person entitled under the bill of lading. They are therefore liable
for breach of contract unless there is some term in the bill of lading protecting
them.”
And they delivered the goods without production of the bill of lading to a person
who was not entitled to receive them. They are, therefore, liable in conversion
unless likewise protected. Hence, the carrier was held liable.
However, the position is quite different under Indian law. The courts are of the
opinion that indemnity bond can be issued and is perfectly legal. 21 The Supreme
Court in Centax (India) Ltd. v. Vinmar Impex Ltd.22 observed that the
commitments of banks must be allowed to be honored free from interference by
the courts. Otherwise, trust in intention at commerce would be irreparably
damaged.
ELECTRONIC SHIPPING DOCUMENTS
2121
New India Assurance Co. Ltd. V. Sanjose Maritime Ltd. And Others
2222
AIR 1986 SC 1924
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was able to call up APL’s website using a used ID and password. The customer
could then gain access to all its current bill of lading information (as entered by
APL) and print this out on the blank forms in its own printer. The bill of lading
could carry an image signature that would be accepted by banks under UCP 500.
The advantage of the system was said to be that the customer could obtain its
negotiable bill of lading earlier than normal.
The most recent project involving electronic bill of lading is the BOLERO (Bills of
lading in Europe) project. The transmission of data is routed through a
centralized online registry, using a system of private and public digital keys for
senders and recipients respectively. This is operated by the Bolero Users
Association, a club to which all its users belong, be they carriers, shippers,
consignees or banks. All its members agree to abide by its rules. Two registers
are operated. The first receives and passes on the parties messages, thereby
acting as register of who is currently entitled to the goods covered by an
electronic bill of lading. The second is a register of the public keys used to
decrypt the messages sent by the club’s members.
In order to be connected to bolero.net, the users computers have to be compliant
with certain industry-standard protocols and they will also need to implement the
bolero net messaging protocol which is based on an open standard internet
language called XML. To secure trade documents sent through the ‘core
messaging platfor’, the bolero net service relies on cryptographic techniques,
commonly known as digital signature and encryption. In theory, encryption
prevents viewing of a document by any party other than the intended receiver,
and digital signatures aim to ensure that signed documents cannot be altered.
Although there are public concerns about fraudulent use of electronic signatures
or hackers breaking into confidential systems, the effectiveness of any new
system has to be judged by weakness in the existing system. Fraud and bill of
lading have been linked for years.
POSITION UNDER INDIAN LAW-
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Position under Indian law is very similar to the position in English law. There are
two main statutes relating to bill of lading in Indian law.
These are-:
Prior to this enactment, there was English Bills of Lding Act, 1855. under that Act,
the transferee of a bill of lading did not acquire a right to sue for a breach of the
contract in his own name and was not liable to be sued upon the contract.
The Act23 provides that all rights of suit shall be transferred to the consignee of
goods named in a bill of lading and ever endorse of a bill of lading to whom the
property in the goods shall pass. Also, the consignee and the endorsee be
subject to the same liabilities in respect of such goods as if the contract
contained in the bill of lading has been made with himself.
The endorsement of the bill of lading, however, does not deprive the ship owner
of his right to claim freight from the original shipper or owner of goods. 24
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a) The leading marks necessary for identification of the goods as the
same are furnished in writing by the shipper before the loading of
such goods starts, provided such marks are stamped or otherwise
shown clearly upon the goods if uncovered, on the cases or
coverings in which such goods are contained in such a manner as
should ordinarily remain legible until the end of the voyage.
b) Either the number of packages or pieces, or the quality or weight,
as the case may be, as furnished in writing by the shipper.
c) The apparent order and condition of goods.
Provided that no carrier, master of agent of the carrier, shall be found to state or
show in the bill of lading any marks, numbers, quantity, or weight which he has
reasonable grounds for suspecting, not accurately to represent the goods
actually received, or which he didn’t check.
The shipper shall be deemed to have guaranteed to the carrier the accuracy at
the time of shipment of the marks, number, quantity, and weight, as furnished by
him, and the shipper shall indemnify the carrier against all loss, damages and
expenses arising or resulting from inaccuracies in such particulars,. The right of
the carrier to such indemnity shall in no way limit his responsibility and liability
under the contract of carriage to any person other that the shipper.
Unless notice of loss or damage and the general nature of loss or damage be
given in writing to the carrier or his agent at the port of discharge before or at the
time of the removal of goods into the custody of the person entitled to delivery
thereof under the contract of carriage, or if the loss or damage be not apparent,
within three days such removal shall be prima facie evidence of the delivery by
the carrier of the goods as described in the bill of lading. In any event the carrier
and the shipper shall be discharged from all liability in respect of loss or damage
unless suit is brought within one year after delivery of the goods or the date when
the goods have been delivered.
As such the law relating to the bill of lading is similar both in India England. Since
Indian law is developed from English law therefore such similarities are bound to
occur. The basic rights and liabilities under both the laws are similar. However it
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is noteworthy that in some areas Indian law is more dynamic like indemnity bond
issued by buyer to receive goods if bill of lading arrives late. But English law has
kept pace with changing developments in technology i.e. electronic bill of lading.
CONCLUSION
Thus, we can see that bill of lading performs a very important role in international
commercial transaction. Though it is not possible to define it precisely yet we can
define it in its functional aspects. A cargo at sea while in the hands of the carrier
is necessarily incapable of physical delivery. During this period of transit and
voyage, the bill of lading by the law is universally recognized as its symbol, and
the endorsement and delivery of the bill operates as a symbolic delivery of the
cargo. Property in the goods passes by such endorsement and delivery of the bill
of lading, whenever it is the 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.
Earlier, where no express terms of carriage had been agreed between the
parties, the courts would imply basic obligations. Gradually, carriers began to
include express terms on the bill itself. Today, these are mainly printed on the
reverse of the bill, but there are still some important clauses on the face of it.
Now days, carriers do not have a very high level of liability, yet it must follow
certain minimum requirements.
REFERENCES
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Gaskell, Nicholas, “Bill of Lading: Law and Contract”, LLP Professional
Publishing, Britain (2000)
Mitra, B.C., “International Maritime Law”, 3rd edn. University Book Agency,
Allahabad (1998)
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