DOMESTIC AND INTERNATIONAL

CARRIAGE OF GOODS
GLUE 3064

BILL OF LADING

CARRIAGE ON A GENERAL SHIP

(CONTRACT OF CARRIAGE EVIDENCED BY A BILL OF

LADING)
The

shipper, usually the seller, may choose to send

the goods on a general ship.

His

goods will be shipped with consignments from

other shippers on the same vessel.

Once

the goods have been shipped, the ship-owner

would issue the seller-shipper with a shipped BL.

Such

a BL in the hands of a seller-shipper

performs three functions: receipt; evidence of
contract of carriage; and document of title.

CONT.
The

bill of lading will not necessarily be the

contract of carriage, which normally will have
been concluded between the shipper and the
carrier before the bill of lading is issued.

Therefore,

the bill of lading, as between the

carrier and the original shipper, amounts only to
evidence of the contract of carriage so that
extrinsic evidence is admissible to the terms of
the contract.

THE ARDENNES [1951] 1 KB 55

Oranges

were shipped on the understanding that

the ship would sail directly to London.
The ship called at Antwerp and the delay caused
loss to the cargo owner.
The BL contained a term which would have
permitted the ship to call at Antwerp.
The carrier relied on the BL.
Held:

The BL was only an evidence of the contract

of carriage. The cargo owner was entitled to prove
that the contract of carriage contained a term
(although oral) that the voyage would be direct.

CONT.
The

seller-shipper must then tender the BL and

other documents required by the contract of sale
either to the buyer or, if a documentary credit is
being used, to the bank.
If the buyer or the bank is actually named on the
BL, they are called consignee and the shipper
will be the consignor.
If the BL is made out to the order of the sellershipper, the latter will on tendering the
documents endorse the bill to the buyer or the
bank.
The transferee of the bill is then known as the
endorsee.

CONT.
Since

the endorsee is not a party to the contract of

carriage there is no privity of contract between
him and the carrier and he has no right to sue the
carrier under contract for any loss of or damage to
the goods.

Thats

why statutory provisions were made to

remedy such a situation.

Where

the endorsee has taken the BL in good

faith then, by virtue of the COGSA 1992, all
rights of suit under the contract of carriage will
have transferred to him, as if he had been a party
to that contract.

NATURE AND TYPES OF

BILLS OF LADING
The

BL is a creation of mercantile custom, a

typical institution of international trade.

The principal purpose of the bill of lading is to

enable the owner of the goods to resell them,
although the goods are not in his hands but are in
the custody of a carrier.

TYPES OF BILLS OF LADING

(1)

Negotiable and Non-negotiable Bills

Bills

of lading can perform their principal function

of enabling a person to dispose of goods which are
not in his possession only if they are negotiable.
Negotiable Bills of Lading are normally used in
the commodity trade where they are purchased
and sold.
On the other hand, where it is anticipated that the
consignee himself will take delivery of the goods
on arrival of the ship and will not deal in the bills
of lading, a non-negotiable bill is perfectly
sufficient.

CONT.
(2)

Clean and Claused Bills of Lading

The

sellers duty is to tender a clean bill of

lading, as opposed to one that has been claused,
indicating some defect in the goods or their
packaging.

The

requirement of a clean bill is even stricter

when payment is made on the buyers behalf
under a bank letter of credit against documents.

CONT.
Alterations

to a bill of lading

bill of lading containing alterations is an

unclean document.

Consequently,

where the original destination has

been corrected by the ships master in an attempt
to make it conform to the destination required
under the sale contract, the buyer may reject it.

CONT.
SIAT

di del Ferro v Tradex Overseas SA

[1980] 1 Lloyds Rep 53

The

name of the port of destination was wrongly

stated in a BL.
The master amended the bill by inserting the
correct destination after deleting the original
entry.
Held:

The buyers were definitely entitled to reject

the documents. The buyers were entitled to
documents which would pass freely in the trade
and an altered bill was not such a document.

THREE FUNCTIONS OF
A BILL OF LADING
(1)

A receipt for the goods shipped;

(2)

An evidence of the contract of carriage; and

(3)

A document of title.

THE BILL OF LADING AS

A RECEIPT
The

bill of lading serves as a receipt for the goods

and therefore written evidence that the carrier
has the goods in its possession.

As

a receipt, the bill of lading will contain

statements about the goods as to, e.g.:
(1) quantity, and
(2) condition.

(1) RECEIPT AS TO QUANTITY

Grant

v Norway (1851) 10 CB 665

bill of lading was signed by the ships master

for 12 bales of silk that in fact were never
shipped.
The plaintiff (endorsee of the BL) sued the shipowners in tort.
Held:

The ship-owners were not liable because

the master had no ostensible authority to
knowingly sign a BL containing misstatement.

CONT.
Section

3 of the Bills of Lading Act, 1855

decision in Grant v Norway led to the

enactment of section 3 of the Bills of Lading Act
1855, by which statements in the bill of lading
that goods have been shipped shall be conclusive
evidence of this fact.

The

The

problem is that this conclusive presumption

binds only the master or other person signing the
bill and it therefore is useless for the purpose of
an action against the carrier.

CONT.
Section

4 of the COGSA, 1992

rule in Grant v Norway was repealed by

section 4 of the COGSA 1992.

The

Statements

representing that goods have been

shipped aboard a vessel shall be conclusive
evidence of that fact against the carrier, provided
the bill of lading was signed by the master or by
some other person with (actual, implied or
apparent) authority from the carrier to sign bills
of lading.

(2) RECEIPT AS TO CONDITION

Bills

of lading usually contain the printed words,

shipped in apparent good order and condition.

If

the statement is clear and unqualified by any

clause as to bad condition noted in the bill of
lading, the carrier will be estopped, as against the
endorsee, from denying the truth of the bill of
lading statement, provided the endorsee had
acted to his detriment by relying on the
statement.

CONT.
Compania

Naviera Vascongada v Churchill

& Sim [1906] 1 KB 237

Timber

was stained with oil when shipped but a

clean bill of lading was nonetheless issued to the
shipper who indorsed it to a third party.
The endorsee sued the carrier in respect of the
damage.
The carrier was estopped, by the statement in the
bill of lading, from saying that the timber was in
bad condition when loaded and was thus liable to
the endorsee for the damage.

EVIDENCE OF THE CONTRACT

OF CARRIAGE
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 as between
shipper and carrier, since the contract is agreed
before the bill is issued.

As

between the carrier and a bona fide

transferee, however, the bill of lading terms of
the contract of carriage are conclusive and the
carrier is estopped from citing external evidence
to the contrary.

A DOCUMENT OF TITLE
The

significance of the bill of lading as a

document of title is that the delivery of the bill is
tantamount to the delivery of the underlying goods
because the bill carries with it constructive
possession of the goods.

SANDERS V MACLEAN (1883) 11 QBD

327 [BOWEN LJ ]
Bill

of lading is a key which in the hands of a

rightful owner is intended to unlock the doors of
the warehouse, floating or fixed, in which the
goods may chance to be and its endorsement
and delivery is a symbolical delivery of the
cargo.

CLEMENS HORST CO V BIDDELL

BROS. [1912] AC 18
The

seller under a CIF contract tendered the

bill of lading to the buyer but the latter refused
to pay until the goods themselves were
delivered.

Held:

Since possession of the bill of lading

amounted in law to the possession of the goods
the seller was entitled to perform his part of
the contract by handing over the document.

TORT OF CONVERSION
If

the carrier 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 rigorously insist on
the production of a bill of 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.
In some instances, letters of indemnity have to be
provided by a bank.

CONT.
Sze

Hai Tong Bank v Rambler Cycle Co Ltd

[1959] MLJ 200; [1959] AC 576 (PC,
Singapore)
An English company had sold bicycle parts to
importers in Singapore. The goods were shipped
in a vessel owned by the Glen Line Ltd. The
sellers instructed the Bank of China to collect the
proceeds and release the bills of lading to the
buyers on payment.
The buyers however induced the carriers to
deliver the goods to them without the bills of
lading on an indemnity given by the buyers and
their bank, the Sze Hai Tong Bank.

CONT.
When

the sellers discovered what had happened,

they brought proceedings in the courts of
Singapore against the carriers for damages for
breach of contract and conversion.

The

carriers brought in as third parties the Sze

Hai Tong Bank, against which the carriers
claimed a declaration of indemnity.

Held:

The carriers were liable. The bank was

obliged to indemnify them.

INDEMNITIES AND BILLS OF LADING

A

claused bill of lading will not normally be

acceptable to a third party such as a buyer under
a CIF contract or a bank.
For this reason, a practice has developed whereby
the carrier issues a clean bill of lading for goods
shipped in a situation where only a claused BL
is appropriate.
The shipper in return offers the carrier an
indemnity, under which the shipper will
recompense him for any loss sustained as the
result of the issue of a clean bill of lading.

CONT.
If

the carrier is held liable to an endorsee for the

damage, the question arises as to whether or not
the carrier can sue the shipper on the indemnity.

If

both 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 bona fide consignee or endorsee, who
will take up the bill and part with his money,
thinking that the goods were not defective when
shipped.

CONT.
Such

fraud renders the indemnity illegal; the

carrier cannot claim under it against the
exporter and, from the carriers point of view,
such indemnity is completely worthless.

Not

all indemnities given for clean bills of lading

are illegal.

CONT.
If

the defect in the goods are so minimal that it

does not entitle the buyer to reject the goods,
the tender of an indemnity is legitimate and
convenient.

Only

if the clausing of the bill concerns a serious

matter which would entitle the buyer to reject
the goods, is the indemnity tainted by fraud and
invalid.

CONT.
Brown,

Jenkinson & Co Ltd v Percy Dalton

(London) Ltd [1957] 2 QB 621

The

cargo consisted of 100 barrels of orange juice

and the tally clerk had described the casks as old
and frail and recorded some leaking.
But the plaintiffs (the SO), on the request of the
defendants (the exporters), had issued clean bills
of lading against the defendants indemnity.
Held:

the indemnity was void on ground of public

policy as being in fraud of a bona fide third party.

CONT.
Sze

Hai Tong Bank v Rambler Cycle Co Ltd

[1959] MLJ 200; [1959] AC 576 (PC,
Singapore)

Held:

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 guilty), is
valid and enforceable by the carrier.

RIGHT OF SUIT BY ENDORSEE OF THE

BILL OF LADING
The

problem under common law is that the buyer

is not the shipper of the goods and is therefore
not privy to the contract of carriage with the
carrier.

The

buyer, therefore, has no right to sue the

carrier for breach of the contract of carriage.

The

Bills of Lading Act 1855 was passed to

remedy this problem but unsuccessful.

CONT.
Section
Every

1 of the Bills of Lading Act

consignee of goods named in a bill of

lading, and every endorsee of a bill of lading to
whom the property in the goods therein
mentioned shall pass,shall have transferred
to and vested in him all rights of suit, as if
the contract contained in the bill of lading had
been made with himself.

CONT.
(1)

First weakness: Restrictive application

to modern shipping

The

Bill of Lading Act 1855 has proved in

modern times to be too narrow in its scope.
A range of transport documents used today does
not appear to fall within the meaning of bill of
lading.
Examples of this are sea waybills, which are nonnegotiable, and ships delivery orders.

CONT.
(2)

Second weakness: right of suit tied up

with passing of property

Full

property rights must have passed to the

consignee or endorsee.
The deficiency of the Bill of Lading Act 1855
came to light in the case of bulk shipments,
which were never contemplated when the Act was
passed.
In respect of bulk cargo, property in the goods
will not pass to the buyer until discharge of goods
from the vessel.

CONT.
Carriage

of Goods by Sea Act, 1992

Requirements

under the Bill of Lading Act 1855

proved to be most unsatisfactory and led to calls
for reform and the eventual introduction of
COGSA 1992.

The

COGSA 1992 repealed the Bills of Lading

Act 1855 and introduced a scheme of liability
wholly divorced from the passing of property.

CONT.
Shipping

documents covered by the Act

The

Act is not limited to bills of lading in its

application. According to S. 1(1), it applies to:
(a) Any bill of lading;
(b) Any sea waybill; and
(c) Any ships delivery order.

Provision

is also made for the possibility of

electronic bills of lading (paperless transactions)
in the future. S. 1(5), (6).

CONT.
Sea

Waybills

Shipping

document that is only a receipt of cargo

taken on board a vessel and which, unlike a bill
of lading, is not a document of title.

The

sea waybill is a non-negotiable receipt for the

goods loaded aboard the carrying vessel at the
port of loading, which also evidences the terms
and conditions of the contract of carriage.

CONT.
They

are not negotiable documents, nor

documents of title.

The

sea waybill is described in the Carriage of

Goods by Sea Act 1992 as: Any document which
is not a bill of lading but (a) is such a receipt for
goods as contains or evidences a contract for the
carriage of goods by sea; and (b) identifies the
person to whom delivery of the goods is to be
made by the carrier in accordance with that
contract. [S. 1(3)].

CONT.
Delivery

order

According

to the Uniform Commercial Code

(UCC) a delivery order refers to an:
Order given by an owner of goods to a person
in possession of them (the carrier or
warehouseman) directing that person to deliver
the goods to a person named in the order.

CONT.
Persons

entitled to sue the carrier

According

to s. 2(1), the persons who are

entitled to sue the carrier on the contract of
carriage are:
(1) The lawful holder of the bill of lading
(i.e., the consignee named in the BL or the
endorsee of the BL who, in either case, has
possession of the bill of lading); or
(2) The person to whom delivery of the goods
is to be made in the case of a sea waybill or a
ships delivery order.

CONT.
Section

4, the COGSA 1992

Section

4 of the COGSA 1992 in effect abolishes

the rule in Grant v Norway by providing that:
A bill of lading whichhas been signed by the
master of the vessel shall, in favour of a
person who has become the lawful holder of the
bill, be conclusive evidence against the carrier
of their receipt for shipment..