Lloyd's Maritime and Commercial Law Quarterly
SHIP’S DELIVERY ORDERS
Nigel Teare.
The practice of issuing “delivery orders” in lieu of bills of lading is now of a respectable age1, yet there are still problems regarding both the definition and acceptability of delivery orders under international contracts of sale. The need for delivery orders is well known:—
“This modification is made so as to enable a seller to split up a bulk consignment into smaller parcels and to sell them to different buyers while the goods are still at sea. A seller often only has one bill of lading for the whole consignment; he cannot deliver that one bill of lading to each of the buyers, because it contains more goods than the particular contract of sale; so the seller in each of his contracts of sale stipulates for the right to give a ship’s delivery order. The bulk consignment can then be split up into small parcels each covered by a ship’s delivery order instead of a bill of lading.”
(Denning L.J., in Colin & Shields v. Weddel & Co. Ltd. (C.A.) [1952] 2 Lloyd’s Rep. 9.)
Thus many c.i.f. contracts permit the seller to tender a delivery order instead of the bill of lading. In view of the variety of documents which are described as “delivery orders”2 there has been some uncertainty as to what type of delivery order the seller is bound to tender to the buyer.
In Krohn & Co. v. Thegra N.V.3 Kerr, J., attempted to define, though not exhaustively, the term “ship’s delivery order” as used in c.i.f. contracts. Although this must be a matter of construction in each case, his Lordship held that the nature and objects of a c.i.f. contract required that, prima facie, “ship’s delivery orders” be construed as being documents which place the buyers in as
“strong and clear-cut a position of control over the goods vis-a-vis the shipowners as possible, albeit only on the basis of holding delivery orders and not bills of lading.”
As a general rule the transfer of a bill of lading under a c.i.f. contract transfers to the buyer, inter alia:—
- (i) the property in the goods, and an immediate right to their possession; and
- (ii) contractual rights against the carrier on the terms of the bill of lading (Bills of Lading Act 1855, s. 1).
Accordingly in Krohn & Co. v. Thegra N.V. Kerr, J., held that a c.i.f. buyer (where the contract permitted tender of “ship’s delivery orders”) would be bound to accept documents which gave control of the goods (i.e., a right to possession) and some rights against the carrier (although the nature of such rights was not fully considered by his Lordship).
“They must … be documents issued by or on behalf of shipowners while the goods are in their possession or at least under their control and containing some form of undertaking that they will be delivered to the buyers (or perhaps to the bearer) on presentation of the documents.”
It is proposed to consider how far such documents do in fact fulfil the objects of a c. i.f. contract. (Although Kerr, J., was concerned solely with ship’s delivery orders
1 Cunningham v. Guthrie [1888] 26 Sc.L.R. 208; Denbigh, Cowan v. Atcherly [1921] 90 L.J.K.B. 836; Heilbert, Symons & Co. Ltd. v. Harvey, Christie-Miller & Co. (1922) 12 Ll.L.Rep. 455.
2 Benjamin’s Sale of Goods pars. 1389-90.
29