Aligarh Muslim University

Malappuram Centre

End-Term Assignment

Topic : Function of the Bill Lading

Subject : International Trade Law

Submitted By : Submitted To :
Mohd Natiq Khan Dr. Azmat Ali
18BLLB078 / GI0153 Assistant Professor
4th year Department of Law

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 CONTENT

Introduction

Bill of lading as a receipt

Bill of Lading Falling Within The Carriage of Goods By Sea

Act 1971

Statements as to condition

Statements as to leading marks

Bill of lading as evidence of contract of carriage

Bill of lading as contract of carriage

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Bill of lading as document of title

Delivery of documents

Custom

Practice

Forgery

Conclusion

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Introduction
The importance of the bill of lading can be understood by considering the
following chain of events of a transaction.

An individual wishing to ship a consignment of goods overseas approaches a

shipping line by reserving space on the vessel. This may be done directly or
through an agent. The carrier then instructs the place and time of delivery of the
goods and the individual is then issued with a receipt indicating the type and
quantity of the goods and the condition in which the carrier’s agent received
them. Then, the carrier is responsible for the goods.

The shipper , meanwhile, gets a copy of the carrier’s bill of lading form. He will
enter details regarding the type, quantity of goods shipped together with any
relevant marks, the port of destination and the name of the consignee. The
carrier’s agent will check the cargo details against the tallies at eh time of loading
and will acknowledge them. The freight will be calculated and then the bill will be
signed and will be given to the shipper. The shipper may then directly dispatch
the bill to the consignee or through a bank in the case of international sales
contract by documentary credit.

The consignee may decide to sell the goods while in transit then he may indorse
the bill in favour of the purchaser. Eventually the consignee or indorsee will
surrender the bill at the port of discharge in return for delivery of the goods.

1. Bill of lading as a receipt

When the bill of lading in the hands of the shipper, it becomes a receipt for the
quantity of goods received, the condition of goods received and leading marks.
However, the evidentiary value of the bills in all these cases is not the same in all

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case and it depends upon the circumstances of the case such as whether the bill
falls within the Carriage of Goods by Sea Act 1971 or not.

Bill of Lading Falling Within The Carriage of Goods By Sea Act 1971
Under Article III (3) of this Act, the carrier has to include the leading marks, the
number of packages or pieces or the quantity or weight of the goods and the
apparent order and condition of the goods on the bill of lading. The statements
made on the bill of lading are regarded as prima facie evidence of the receipt of
the goods as described under III(4).

Bill of Lading Not Falling Within The Carriage of Goods By Sea Act 1971
Statements as to quantity: According to Common Law, a statement specifying
quantity received is a prima facie evidence of the quantity shipped. The burden of
proof lies on the carrier to prove that the cargo as specified has not been shipped.
This burden is an absolute one.

In the case of Smith v/s. Bedouin Steam Navigation Co [1896], the bill of lading
stated that 1,000 bales of jute had been shipped, whereas only 988 bales were
delivered. It was held that the carrier could successfully discharge the burden of
proof only if he could show that the goods were not shipped, not merely that the
goods may not possibly have been shipped.

There may be endorsements on the bill of lading with statements such as weight
and quantity unknown and the courts recognize these, since information on
quantity entered on a bill of lading is based on statements made by the shipper
and which does the carrier not normally verify. However, when the statements is
contained as ‘ quantity unknown’ alongside the gross weight entered by the
shippers for the purposes of Section 4 the weight entered is not a representation
that the quantity was shipped.

Example: A bill of lading which states that 11,000 tones of cargo were shipped ‘
quantity unknown’ means that the quantity is unknown and not that that amount

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of cargo was actually shipped, this would be the meaning construed by the
Courts.

According to the Hague/Visby Rules, the shipper can demand the carrier issue a
bill of lading showing ‘either the number of packages or pieces, or the quantity,
weight etc as furnished in writing by the shipper’. Accordingly, the carrier may use
any of these three methods of quantifying cargo. However, he cannot
acknowledge one kind and disclaim knowledge of others.

In the case of Oricon v/s Integraan (1967), the bills of lading acknowledged the
receipt of 2,000 packages of copra cake said to weigh gross 1,05,000 Kgs for the
purposes of calculating freight only. It was held that while each of the bills of
lading being Hague Rules of bills of lading, acknowledged the number of packages
shipped as a prima facie evidence.

Regarding the evidentiary bill of lading is concerned; the Hague/Visby Rules serve
as prima facie evidence of the amount of cargo shipped.

Statements as to condition:
This is the second type of statement, in which the bill of lading is a representation
by the ship owner as to the condition in which the goods were shipped.

In Common Law, the statements as to the condition of the goods shipped are
regarded as prima facie evidence in the hands of the shipper, but conclusive
evidence in the hands of a bona fide purchaser.

In the case of Compania Naviera Vascongada v/s Churchill (1906), the timber
became badly stained with petroleum while awaiting shipment; the master
nevertheless issued a bill of acknowledging that the timber had been shipped in
good order and condition. It was held that the ship owners were estopped from
denying the truth of the statement against the assignee of the bill. In order to
make the statement in the bill of lading binding as an estoppel it is necessary that
the person so acting upon it would have done so upon a prejudice, wherein in this

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case the defendants were prejudiced since they accepted the bills of lading as a
good tender on the belief that the timber was in good condition.

The estoppel will be effective only in respect of defects, which would be apparent
on a reasonable inspection by the carrier or his agents. In the case of Silver v/s
Ocean Steamship Co (1930), the ship owners had issued clean bill of lading
covering cargo of Chinese eggs shipped in 42 - lbs square tins which were not
covered with any cloth or packing. When the goods arrived at their destination in
a damaged condition, the Court of Appeal held that while the ship owners were
estopped from contending either the cargo was insufficiently packed or that the
tins were gashed on shipment, they were not estopped from alleging that pin -
hole perforations in the tins were present on shipment, since the latter would not
necessarily be apparent on reasonable inspection.

Statements as to leading marks:

Where the carrier records leading marks on the bill of lading, he will not be
estopped at common law from denying the goods were shipped under the marks
as described in the bill. However, where the marks are essential to the
identification of description of the cargo, the prima facie evidence rule is applied.
The distinction between a public and a private mark is an important factor in
establishing whether a mark is or is not material to the identity of the goods.

Indemnity agreements: Indemnity agreements may be agreed to be entered into

by the shipper and the carrier to produce a clean bill of lading, that is, a bill of
lading with no reservations on it. It affects its commercial value in number of
ways:

i. The consignee normally relies on the bill of lading to establish whether the
goods as agreed in the contract of sale have been shipped and where the bill of
lading is claused he may refuse payment.

ii. Should the consignee or the shipper want to sell the cargo during transit, it is
unlikely to be sold on the basis of a claused bill of lading.

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iii. As a document of title the bill of lading is often used to raise money from banks
and finance houses. These institutions normally prefer to lend money against a
clean of lading.

2. Bill of lading as evidence of contract of carriage

In the hands of the shipper a bill of lading serves as evidence of the contract of
carriage though it contains the terms of carriage. The contract with the shipper is
likely to have been concluded orally long before the issue of the bill of lading. The
document may vary some of the agreed terms or contains terms that have not
been agreed to by the parties.

In the case of Crooks v/s Allan (1879) according to Lush J, a bill of lading is not a
contract, only evidence of the contract. If a shipper of goods is not aware when
he ships them or is not informed in the course of the shipment, that the bill of
lading which will be tendered to him which will contain such a clause, he has a
right to suppose that his goods are received on the usual terms.

In the case of The Ardennes (1951) the ship’s agent assured the shipper that the
vessel of a consignment of oranges would sail directly to London and arrive there
before 1 December. The ship however, stopped at Antwerp on her way to London
and arrived at London on 4th December. When sued for breach of contract by the
shipper, the ship owner relied on the bill of lading, which contained a clause
giving the ship liberty to deviate during the course of her voyage. It was held that
the oral evidence put forward by the shipper was admissible.

3. Bill of lading as contract of carriage

Upon endorsement to a third party, the bill of lading is a contract of carriage, but
so far as the holder of the bill is the shipper, the bill of lading can be evidenced
only as a carriage of contract. Any oral or written agreement between the shipper
and the ship owner not expressed on the bill of lading will not affect the third

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party on the grounds of lack of notice. In the case of Leduc v/s Ward (1888), The
endorsee of a bill of lading sued the ship owner for loss to cargo due to deviation
in the course. The ship owner contended that they were not liable, since the
shipper was aware at the time of shipment that the ship would deviate. The court
held that anything that took place between the shipper and the ship owner not
embodied in the bill of lading could not affect the endorsee.

4. Bill of lading as document of title

Until goods are physically delivered, the possession of the bill of lading is deemed
to be constructive possession of the goods. Transfer of the bill of lading is deemed
to be constructive possession of the goods. Transfer of the bill of lading by the
seller to the buyer is deemed to be symbolic delivery of the goods to the buyer
and the buyer, on the ship’s arrival could demand delivery of the goods.

In the case of Sanders v/s MacLean (1883), the bill of lading by the law merchant
is universally recognized as its symbol and the endorsement and delivery of the
bill of lading operates as a symbolic delivery of the cargo.

The buyer can sell the goods on while they are at sea to the third party by simply
endorsing the bill of lading and delivering it to the third party. The third party, by
becoming the holder, can demand delivery of the goods on arrival.

Not all bills of lading, however, are transferable. To impart transferability to a bill
of lading, it must be drafted as order bills . Upon endorsement, the endorsee
takes the place of the original party to the bill of lading, and will be sue and be
sued on all the terms, express and implied int eh bill of lading despite privity of
contract. This is due to operation of Section 2 and 3 of the Carriage of Goods by
Sea Act, 1992.

A bill of lading need not be equated with a bill of exchange, which is a negotiable
instrument in the strict legal sense.

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In the case of Gurney v/s Behrend (1854) it was observed that a bill of lading is
not like a bill of exchange or a promissory note, a negotiable instrument that
passes by mere delivery to a bona fide transferee for valuable consideration,
without regard to the title of the parties who make the transfer.

Therefore, bill of lading is a transferable document although in some jurisdictions

it is considered as a negotiable instrument.

Delivery of documents
The carrier is under an obligation to deliver the cargo only against the original bill
of lading if not, then he will be liable in contract as well as in tort to the bill of
lading holder. In the absence of bill of lading, if a person wishes to take delivery of
the goods, then he has to prove that he is entitled to the possession of the goods
and there is a reasonable explanation for such absence.

There are ‘notify party’ clauses, which are used in which case, the carrier has to
notify a customs broker, banker, and warehouseman of the arrival of the goods.
In some cases, though not in all, the law of country or custom itself may provide
requires the production of a bill of lading. Therefore, in this case, the carrier will
not be liable in non - production of the bill of lading.

According to Clarke J, there is a difference between the law and custom and such
differentiation is as follows:

Law: If it were a requirement of the law of the place of performance that the
cargo must be delivered to the agent of plaintiffs with out the presentation of an
original bill of lading, the defendants would have performed their obligations
under the contract of carriage.

Custom: Equally, if there were a custom of the port that cargo was always
delivered to the agent of the person entitled to possession without the
production of the original bill of lading, delivery to the agent would probably

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amount to performance of the defendant’s obligations under the contract of
carriage.

Practice: Practice must be distinguished from custom. A vessel may be

discharged by any methods, which is consistent with the practice in the port.
However, it would not be a good performance of the defendant’s obligations
under the contract if it were merely the practice for vessels to deliver the goods
without presentation of a bill of lading.

Forgery
Forgery is a common phenomenon is in international trade. There was an issue
regarding the position of the innocent carrier delivering goods against the bill of
lading.

In the case of Motis Exports Ltd v/s Dampskibsselskabet AF 1912 Aktieselskab

Akteiselskabet Dampskibsselskabet Svendborg (2000) the cargo was under the
Maersk Line Bills of lading which included clause 5(3)(b) which stated the carrier
shall have no liability whatsoever for any loss or damage howsoever caused to the
goods while in its actual or constructive possession before loading or after
discharge over ship’s rail, or if applicable, on the ship’s ramp. The carriers
released the goods against forged bills of lading. It was held that the delivery
against an original bill of lading is obligatory and hence, delivery against a forged
bill of lading will not be construed in favour of the carrier.

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Conclusion
Hence, bills of lading play a very important part in international trade. Depending
upon the rules, which are followed, there are different implications for different
parties, which are involved. This article gives a very brief description of the nature
and functions of the bill of lading.

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Reference
www.legalserviceindia.in

www.blog.ipleaders.in

www.lawctopus.com

www.britannica.com

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