Voyage Charters

Timothy Young KC; Michael Ashcroft; Julian Cooke; Andrew Taylor; John Kimball; LeRoy Lambert; David Martowski; Michael Sturley

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Chapter 18 Bills of Lading

9.	Bills of Lading	114
	The Captain to sign Bills of Lading at such rate of freight as	115
	presented without prejudice to this Charterparty, but should the	116
	freight by Bills of Lading amount to less than the total chartered	117
	freight the difference to be paid to the Captain in cash on signing	118
	Bills of Lading	119

Bills of Lading in General

18.1 A bill of lading is a document issued by a carrier by sea to a shipper of goods acknowledging the receipt by the carrier on board a named vessel (or for subsequent shipment on board) of the goods described therein, and containing an undertaking to deliver the goods at the place of delivery to the shipper or named consignee, or to his order or assigns, subject to the terms and conditions set out in or incorporated into the document. It also usually is a document of title representing the right to possession of the goods and, therefore, if it is an “order” bill, a bill consigned “to order” and not solely to a named consignee, it allows traders to deal with the goods while they are at sea, the carrier automatically attorning to the holder on the terms of the bill.2

The bill of lading issued under a charterparty

18.2 Where the carrying ship is not under charter, the bill of lading will evidence a contract between the shipper or subsequent holder and the shipowner as carrier. However, when the ship is chartered, the position is more complicated. In this case, too, the bill of lading is usually issued by or on behalf of the shipowner, as carrier, but it may be issued on behalf of the charterer so as to constitute a contract of carriage between the charterer, as carrier, and the shipper or consignee, the shipowner being merely a sub-contractor of the carrier. The question whether the bill of lading is issued on behalf of the shipowner (an “owner’s bill of lading”), or on behalf of the charterer (a “charterer’s bill of lading”), will determine whether it is the owner or the charterer who assumes responsibility for the performance of the contract of carriage contained in the bill of lading, and for the accuracy of the statements which it contains.

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The goods carried under the bill of lading may be shipped by, or consigned to, the charterer himself, and The Dunelmia 3 establishes that, under a charterparty on usual terms4 in those cases, the bill of lading, while in the hands of the charterer, is a mere receipt for the goods, the terms of the contract between the shipowner and the charterer being contained exclusively in the charterparty.5 But as long as the bill of lading is held by a third party, either as shipper, or as consignee or indorsee, it will normally constitute or evidence a separate and distinct contract between the carrier (i.e., usually the shipowner) and the holder. The terms of this contract may differ from those of the charterparty, and may confer upon the owner less generous rights and impose more onerous obligations and responsibilities than those which arise between owner and charterer under the charterparty, and in such a case the owner may have a right of recourse against the charterer. The purpose of clause 9 of the Gencon form, in common with many forms, is to regulate the charterer’s right to require the owner to issue bills of lading which differ from the charterparty, and the owner’s rights of recourse against the charterer in such circumstances.

Further variants

18.3 There is no single type, let alone form, of bill of lading. Bills of lading normally contain a large number of standard terms, whether incorporated from a charterparty or set out in the bill itself or in some “long form” bill which may be incorporated. A bill of lading may be issued solely for sea carriage on one ship or it may be issued to cover sea carriage on successive ships in stages with transhipment and possibly storage; or to cover successive carriages by different means, for example, land carriage whether by road or rail, followed by sea carriage, followed by further land carriage after discharge. The latter type goes by various different names, the “through” bill or the “multi-modal” or the “combined transport” bill being the most common, and it is frequently a difficult question whether the “carrier” for the first or major part of the carriage is responsible as carrier or merely as a forwarding agent or simple agent for the balance of the carriage. The “Conline” bill, for example, is a standard form liner bill of lading, with two columns of printed standard terms, which may be used either for single or multiple sea carriage and also has an option for use as a “through” bill. It provides expressly that the carrier is not liable for losses occurring before loading or after discharge and that the carrier acts only in the capacity of forwarding agent in relation to any on-carriage. 18.4 A bill of lading may be a “charterparty bill”, that is, one incorporating the terms of the charterparty under which it was issued, and which frequently imposes obligations of loading or discharging on someone other than the carrier with corresponding fixed laytime and demurrage obligations; or it may be a “liner bill”, under which the carrier undertakes all or most of the obligations of loading and discharge and the risks attached, in particular of delay. 18.5 Bills of lading may provide that the goods be consigned to a specified person only (a so-called straight bill),6 or to such a person “or order”, and the distinction is central to a determination of issues such as: who is entitled to sue on a bill of lading; what function a bill

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of lading serves as a document of title by which ownership of the underlying goods can be passed; and who has the right of stoppage of the goods in transitu.7 Original parties to a bill of lading contract, namely shipper and carrier, are naturally bound by its terms, as long as they are valid and legal, and transferees of the bill are also subject to its terms provided that the conditions prescribed by law for that effect are satisfied.8 English law does not require a succeeding party to notify his agreement to the particular terms of a bill, as is required in some civil law jurisdictions. A bill of lading may also affect the rights of third parties, such as stevedores or employees of the carrier or even other carriers, who may be able to rely upon certain exemptions or limitations stipulated in their favour in a bill, even though they may not be parties to it as such. 18.6 A bill of lading, whether or not issued under a charterparty, is customarily regarded as having a threefold function, namely, as (1) a receipt, (2) a contract of carriage and (3) a document of title.9 These three functions and the effect of the issue of a bill of lading on relations between a shipowner and charterer are discussed below.

1. Bill of Lading as a Receipt

18.7 The bill of lading usually acknowledges the shipment of specified goods (whether as described by the carrier or by the shipper), and describes the apparent order and condition of the goods and the date of the shipment. It may also describe other matters such as the weight, volume or quality of the goods, and their marks (though often qualified by an “unknown” provision) and in modern trade frequently details required by an underlying letter of credit are set out; this is because it is now common for shippers to fill in the bill of lading forms and present them to the master or carrier’s agent for signature and issuing.

Bailment

18.8 The carrier may become liable upon receipt of goods into his custody, for which a bill of lading is to be issued, otherwise than in contract. By issuing the bill of lading as a receipt, he acknowledges that he is a bailee of the goods and is obliged to deliver them to the bailor or his order in the same order and condition, unless excused by an exception, and this role as bailee for reward is central to his responsibilities under a bill of lading.10 Where the shipowner is not himself the “carrier” under or issuer of the bill of lading, he will still be a bailee of the goods and liable for damage resulting from his want of care subject to any terms on which the bailment was created.11

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Representations in the bill of lading

18.9 The carrier is also responsible for the honesty and reasonable accuracy of the factual statements made on his behalf12 in a bill of lading. This responsibility may arise even if the agent who issues the bill of lading on behalf of the carrier has actual authority to issue only a bill of lading containing correct statements, since a person who, when he became the holder of the bill, was unaware of the falsity of the statement will usually be able to rely on the ostensible authority of the agent to issue the bill as signed by him.13 There are a number of ways in which the carrier may incur liability for the inaccuracy of these statements.

1. Evidence

18.10 The bill of lading is often prima facie evidence of certain facts stated in it,14 such as the quantity of cargo shipped and its apparent good order and condition on shipment, and that evidence is not easily displaced. 18.11 Furthermore, in the hands of a consignee or indorsee, the bill of lading (“shipped” or “received for shipment”) may be conclusive evidence against the carrier of the facts stated therein. The law on this is now set out in Article III rule 4 of the Hague and Hague-Visby Rules and section 4 of the Carriage of Goods by Sea Act 1992. Section 4, the effect of which is discussed below, provides that, when in the hands of a lawful holder, a bill of lading which (a) represents goods to have been shipped on board a vessel and (b) is signed by the master or an agent with actual or apparent authority is conclusive evidence against the carrier of the shipment or receipt for shipment of the goods.

2. Estoppel

18.12 The contents of a bill of lading may also became conclusive as against the carrier as a result of an estoppel, which will arise when the holder of the bill of lading15 has relied to his detriment upon the statement in the bill of lading, and it would be inequitable to allow the carrier to resile from the statement. In the case of a person who (or whose bank) has given value for the bill of lading these requirements will normally be assumed to be satisfied, at any rate where the statement in question relates to quantity, or apparent good order and condition.16 18.13 The bill of lading holder will not be entitled to take advantage of an estoppel if he knew that the statement was untrue, but the mere fact that he had some grounds for suspecting its truth is immaterial; there must be “evidence of conclusive importance”.17

3. Liability in tort

18.14 The transferee of a bill of lading who has suffered loss as a result of taking up the bill of lading in reliance upon a negligent or fraudulent statement contained in it will have a

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cause of action for damages in tort against the carrier on whose behalf the bill has been issued, including claims under the Misrepresentation Act 1967. The damages will place him in the position as if the representation had never been made, not as if it had been true. This may generate consequences which some might regard as startling: for example, shipments of steel are frequently the subject of some superficial corrosion or damage on loading but clean bills of lading are nonetheless issued18 and, if damage is suffered after loading for a reason for which the carrier is not liable in contract, the receiver who has paid against the clean bill may still be entitled to recover from the carrier the full purchase price he has paid.

4. Liability in contract

18.15 It may be an implied term of the contract contained in or evidenced by the bill of lading that certain of the statements contained therein are accurate19 or there may be an implied warranty of authority by the person signing the bill that he has proper authority on behalf of the carrier so to do.20

Statements as to condition

18.16 A statement in the bill of lading that the goods were shipped “in [apparent] good order and condition” refers to the external condition of the cargo as would be apparent to the master (or other servants of the owner) on a reasonable examination21 at the time of loading22 and depending on the actual circumstances prevailing at the load port and the master and other servants of the owner are to do the best they can without disrupting the normal loading procedures.23 The statement is not a contractual one in the sense that the carrier promises that the cargo is in such condition, but where the claimant is able to rely upon an estoppel, on the grounds described above, the result will be much the same as if the statement had contractual force.

A cargo of timber was shipped on board The Virgen de Lourdes at Port Arthur for carriage to London. The timber had been soaked by petrol before shipment and was badly stained and saturated, but bills of lading were issued which stated that the cargo was “in good order and condition … quality unknown”. The purchasers of the cargo, who had paid for it against the bills of lading, claimed for damage to the cargo (1) on the grounds that the words “shipped in good order and condition” were words of contract and obliged the shipowner to deliver the goods in a similar condition, and (2) on the grounds that the shipowner was estopped from disputing the truth of the statement in the bill of lading.

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