BILL OF LADING

Introduction

• Bills of lading are proof for the contract of affreightment, which plays a crucial role in
international trade. Therefore, with growing trade, bills of lading are a compelling tool
for ensuring secure transactions.
• This usually arises when a ship owner, or other person authorized to act on his behalf
employs his vessel as a general ship by advertising that he is willing to accept cargo
from people for a particular voyage.
• However, it must be observed that all countries do not follow the same form of
legislation globally. The broad categories may be stated as follows:
i. The Hague Rules.
ii. The Hague/Visby amendments.
iii. The Hamburg Code.
iv. Hybrid systems based on the Hague/Visby and Hamburg regimes.
Purpose
The bill of lading document is meant to act as a transport document as evidence of the
contract of carriage of the goods. A negotiable bill of lading has the following legal qualities:
i. It acts as evidence for the carriage contract containing the terms and conditions under
which the goods transportation will be carried out.
ii. It represents a receipt which endorses that the carrier has received the cargo as per
the contract and the goods are received in good condition.
iii. It is a document of title permitting the sale of goods in transit and raising financial
credit.
iv. Most local and international systems do not consider a bill of lading as a title
document. It provides the right for the delivery to be made to the possessor.
Functions of Bill of Lading
1. Bill of lading as a receipt:-
o 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.
o However, the evidentiary value of the bills in all these cases is not the same in
all 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.

o 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).
 2. Bill of lading as evidence of transportation:-
- Every bill of lading in the hands of a consignee or endorsee for valuable
consideration, representing goods to have been shipped on board a vessel, shall
be conclusive evidence of such shipment as against the master or other person
signing the same"
- Thus, the following points may be drawn up regarding the treatment of bill of
lading as a document evidencing transportation:
a) A bill of lading is an undisputed proof that the transportation of goods
has actually taken place as the carrier issues the bill of lading in which all
the details of the goods which are to be shipped by him are mentioned
such as type, quantity, weight, value and date of shipment of the goods.
b) A bill of lading also serves the purpose of a contract in which both the
carrier and the exporter have entered on agreed terms and conditions,
so this contract between these parties is conclusive that transportation
of the goods have taken place.
c) The buyer or importer can only obtain the delivery of the goods when he
submits/shows the bill of lading or its copy to the carrier.

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 party on the grounds of
lack of notice.
4. Bill of lading as document of title:-
- Generally, a bill of lading serves as a document of title, and its endorsement
and handing over evidences the transfer of title from one party to the other.
- Thus, when a seller of goods transfers the bill of lading to his buyer, the
ownership or title of the goods gets transferred from the seller to the buyer.
- Until goods are physically delivered, the possession of the bill of lading is
deemed to be constructive possession of the goods.
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.
Contents of Freight Bill of Lading
The bill of lading comprises the following details:

• The complete name and official address of the receiver and the shipper.
• The Purchase order numbers, special reference/ invoice or reference numbers, and
special instructions to help the shipper and the Consignee release the goods for pickup
or are accepted at delivery.
• The date of the pickup acts as a reference to track the freight.
• The description of items includes the number of units being shipped, NMFC freight
class, the weight and dimension of the products, and the nature of the cargo being
carried, i.e. dangerous goods etc.
• If the goods are hazardous, the Department of Transportation hazardous material
designation is tagged, and it is cited on the bill to follow particular rules and
requirements when shipping.
• The packaging details include crates, pallets, cartons, pills, drums etc.
• Any special notes or instructions for the carrier.
Different Types
Depending on your shipping destination and type of cargo, there are different lading bills. They
can be classified based on “how it is executed” and “Method of operation”-
Based on execution
a. Straight bill of lading reveals that the goods are consigned to a specified person, which
is not negotiable, free from existing equities.
✓ It means any endorsee acquires no better rights than those the endorser holds.
✓ This type of bill is also known as a non-negotiable bill of lading, and from the
banker’s point of view, this type of bill of lading is not safe.
✓ This type of bill is prominently used for military cargo.
b. Open bill of lading —This is a negotiable bill of lading in which the name of the
Consignee can be changed with the consignee’s signature and thus transferred multiple
times. A switch bill of lading is a type of open bill of lading.
c. Bearer bill of lading is a bill that states that delivery shall be made to whosoever holds
the bill. Such a bill may be created explicitly or an order bill that fails to nominate the
Consignee, whether in its original form or through an endorsement in blank.
✓ A bearer bill can be negotiated by physical delivery.
✓ They are used for bulk cargo that is turned over in small amounts.
d. Order bill of lading is a bill that uses express words to make the bill negotiable.
✓ This means that delivery is to be made to the further order of the Consignee
using words such as “delivery to A Ltd. or to order or assigns.
 ✓ The cargo is only delivered to the bona fide holder of the lading bill, which must
be verified by an agent who issues the delivery order and the verified bill of
lading. The order bill of lading:
o is the most modern type of bill, which is widely used all over the world
o ensures the safety of delivery of cargo to a bonafide holder of B/L
o Since the ship visits several foreign ports where the language, practice,
and procedures may differ, the master might be inconvenienced during
the cargo delivery. People might fraudulently collect the cargo.
o To overcome this difficulty and avoid future cargo claims and litigations,
the Consignee or the holder must surrender the bill of lading to the
ship’s agent at the discharge port, who will verify the genuineness of
the bill of lading.
- When satisfied, the agent will issue a delivery order and the
verified bill of lading.
- Now, any person can collect the cargo from the ship by
surrendering the bill of lading and the delivery note to the ship.
Based on the Method of Operation
1. Received for shipment bill of lading–This bill is sent from agent /charterer to shipper.
The endorsement of this bill ensures that the carrier has received goods but does not
confirm it is onboard the assigned vessel.
2. Shipped B/L – This bill of lading is Issued when cargo is loaded on board. It binds the
shipowner and the shipper directly.
3. A clean bill of lading states that the cargo has been loaded on board the ship in
apparent good order and condition. Such a bill of lading will not bear a clause or
notation which expressively declares a defective condition of goods and/or the
packaging. The opposite term is a soiled bill of lading. It reflects that the carrier
received the goods in anything but good condition.
4. Through B/L – This bill of lading is a legal document allowing direct cargo delivery from
point A to point B. The bill provides transportation of goods both within domestic
borders and through international shipment as it serves as a receipt of the cargo, a
contract of carriage, and sometimes title for the products as well
5. Combined transport B/L – This bill gives information about cargo transported in large
containers by sea and land, i.e. through multi-model transport.
6. Dirty bill of lading: If the shipowner objects to “the condition of the cargo being in
good order,” they can include a clause thereby causing the bill of lading to be “claused
or dirty” along with the remarks as per the finding of the cargo condition, e.g., torn
packing, broken cargo, shortage in the quantity of the goods, etc.
Indian Bills of Lading Act of 1856
o The Indian Bills of Lading Act of 1856 describes the Bill of Lading as a legal document
and contract between the shipper, carrier, and consignee.
o This legal document functions as a receipt that states the destination of goods to be
dispatched, the quantity of goods to be shipped, and source of the freight.
 o According to Section 1, the rights to this bill of lading are vested in the consignee, that
is, the receiver/customer or the endorsee.
Objectives of the Indian Bills of Lading Act
The Indian Bills of Lading Act of 1856 describes the bill of lading as a legal document
specifically for transportation. The Act makes the bill of lading suitable for the following
purposes:
1. The bill is a legal document that permits the shipment of goods through either seaways
or air travel.
2. The bill acts as evidence for the carriage contract, which contains all the terms and
conditions under which the procedure for transporting goods is carried out.
3. The bill acts as a receipt issued by the transportation company, which endorses that
the carrier has received the goods according to the terms and conditions of the
contract and the goods received did not bear damages.
4. The bill of lading acts as a receipt of the goods shipped and is a contract between the
shipper and the carrier.
5. The bill provides all the details of the shipment and the goods and states the quantity,
types of goods, and other specifications.
6. This bill includes all the details of both the consignor and the consignee. Therefore, it
shows ownership and acts as the title of goods.
7. The shipper sends a copy of this bill to the receiver, which acts as the proof of shipment
and is specified under Section 3 of the Indian Bills of Lading Act, 1856. This bill specifies
that a bill of lading given to the consignee is conclusive proof of shipment.
8. This Bill provides the carrier and the consignee with all the terms and conditions in the
contract.
Who Can Issue the Bill of Lading?
The Indian Bills of Lading Act of 1856 specifies that the carrier shall issue the legal document—
a bill of lading. The carrier conveys the commodities from one destination to the required
delivery destination.
The issuance of a bill of lading depicts that the carrier or the consignor is incharge of the goods
to be shipped. When conveying these goods, the shipping company either opts for freight
collection or prepaid charges.

• Freight Collect: The shipping company bears shipping charges for the shipment of
goods.
• Prepaid Basis: The shipping company asks the consignor to pay shipping charges. The
consignor is required to pay the charges before the delivery of goods.
Digitalisation of Bills of Lading
The Indian Ministry of Shipping, during the tough times of the COVID-19 pandemic,
took the initiative and developed the workings of the bills of lading and adopted the
Electronic Bills of Lading (e-bill).
The government authority proposed an e-bill under the Bills of Lading Act to enhance
the operations of India’s maritime industry. Implementing the e-bill not only benefits
the shipping methods in India but also saves trees and paper costs.
The E-bill allows easy modifications required in the Bill, easy checking of all the details,
and is cost-effective compared with the physical paper bill of lading.
Essentially, e- if this electronic system is adapted correctly, then it will inhibit fraud and
trickery.