Bill of Lading

Bill of lading as a Document of Title

The most important function of a B/L is as a document of title. Holding a B/L enables a
person (the holder) to claim the goods by presenting the bill. Therefore the physical possession
of a B/L is the equivalent of the actual possession of the goods that are yet to be delivered,
thereby enabling the holder to transfer the B/L to third parties by endorsement whilst the goods
are still in transit.1 Moreover the B/L can be used as security for a debt. 2 Under the Carriage of
Goods by Sea Act (COGSA) 19923 a person who becomes the lawful holder of a B/L in good
faith can present it to claim the goods it covers and the holder can sue the carrier by referring to
the B/L as a contract of carriage. However, it is vital to highlight that transferring a B/L
represents more the transfer of the right to claim the goods rather than the actual transfer of the
right of property of the actual goods.4
S.16, S17 of Sale of Goods Act (SGA) 1979 states that the property of the goods will be
transferred when the actual goods are ascertained and when both parties intend to transfer the
goods or in certain situations the transfer might be dependent upon other circumstances included
in the sale contract. Thus such circumstances are often encountered when buyers and sellers
being strangers both geographically and business-wise do not feel comfortable shipping goods
without the guarantee of payment or before ensuring that the goods are shipped and are in fact
contractual goods. Under these circumstances, the B/L is used to secure the financial and
contractual duties of both parties involved. The buyers require the B/L in order to claim the
goods, this document will be received only upon full payment delivered to the seller. 5 This
1

2
3

Indira Carr, International Trade Law, 4th edn, (London: Routledge-Cavendish, 2010), p183.
John, F, Wilson, Carriage of Goods by Sea, 7th edn, (Great Britain: Clays Ltd, 2010), p133.

S 5(2), (a), (b), (c).

Ibid n 2, p334.
5
S.2(1) SGA (1979)
4

ensures that the buyers will not enter into the possession of the B/L before they meet their
financial contractual duties (i.e. making payments for goods) and thus the property of goods will
pass when both parties intended the goods to pass and not before.6 The carrier is liable in contract
law to the lawful holder of the B/L and thus he is trusted to follow what has been stated by the
shippers in the contract itself and only release the goods delivered to the lawful holder who is in
the physical possession of the B/L. 7 There are rare instances where the goods can be claimed
without producing a B/L. For example, where there is a reasonable and clear explanation given
to the carrier proving the right to receive the goods.8 However as pointed out by Lord Denning,
when a buyer reaches this stage of the sale regardless of whether the property has passed or not,
the buyer ought to produce an endorsed B/L in order to make a good title.9

B/L as a Receipt
The B/L function as a Receipt represents the prima facie evidence for the goods that are
shipped. Given that both the shipper and buyer want to ensure that the goods are shipped, this
function is very important. The B/L should contain statements as to the quantity, apparent
condition of the goods shipped, leading marks, quality and any other information that the carrier
ought to know.10 All the information included in the B/L could determine whether the buyer will
pay for the goods given that he can refuse to receive the B/L if the description of the goods does
not match with the contractual requirements of the goods fixed in the contract of sale. 11 It can be

Ibid n 2, p 334.
Charles, Debattista, Bill of Lading in Export Trade, 3rd edn (West Sussex: Tottel, 2009), p139.
8
Ibid n 17, p 183.
9
Trucks & Spares Ltd v Maritime Agencies (Southampton) Ltd [1951], 2 All E.R. 983.
10
Jason C.T. Chuah, Law of International Trade: Cross-Border Commercial Transactions. 4th edn (London: Sweet
& Maxwell, 2009), p179.
11
Ibid n 18, p119.
7

concluded that inaccurate statements could impede the buyers ability to further negotiate the
B/L if any damage or unforeseen condition of the goods is not included. 12 Usually, the shipper
has the duty to provide the information regarding the goods given that the carrier might not
possess the knowledge or the ability to check all of the information himself and thus wording
such as condition of the goods as observed/the apparent condition of the goods might be used
to show the extent of the carriers knowledge. In some situations, the carrier might include
clauses such as weight/condition unknown attempting to avoid responsibility. However, in
Mata K13 it was held that Art.III (8) Hague/Visby Rules 1968 can only reduce or remove the
carriers liability in the eventuality of loss or damage thus clauses as mentioned above would be
null and have no effect.
The B/L is considered conclusive evidence as to the information provided by the shipper
regarding the shipped goods. In general, the carrier is responsible if the goods do not match the
statements contained in the B/L upon delivery given that it would be assumed that the goods
have either been lost or damaged during transit. However, the carrier can avoid responsibility if
he can prove that the shippers statements were inaccurate and that the goods did not match the
contractual requirements from the beginning.14 The burden of proof falls upon the carrier to
prove that the goods were clearly damaged or lost before they were shipped and not during
transit.15 It is not enough to have a mere likelihood or uncertainty of who is at fault in order for
the carrier to be able to avoid responsibility.16

12

Ibid.
Agrosin Pte Ltd v Highway Shipping Co Ltd [1998] 2 Lloyds Rep 614
14
Ibid n 18, p 120.
15
Low, Rouhshi, Replacing the Paper Bill of Lading with an Electronic Bill of Lading: Problems and Possible
Solutions [2000] 5 Intl. Trade & Bus. L. Ann, p161.
16
Smith & Co v Bedouin Steam Navigation Co. [1896] AC 70.
13

Having a clean B/L, without notes concerning damage or loss of goods, is crucial. It is
important because the current and future buyers do not have the opportunity to examine the
condition of the goods and thus they base the sale upon the B/L which is considered the
conclusive evidence for the goods shipped by the seller. Having a B/L which is not clean could
deter future negotiation of the document given that if the goods are determined to be damaged
the possibility of their sale and their value drop significantly.

B/L as evidence of the Contract of Carriage

A contract of carriage is established before the actual creation of the B/L, thus if any
goods are lost or damaged before the B/L is issued, the shipper will have the right to repair the
breach under the contract of carriage.17 The terms contained in the B/L are not the carriage
contract itself, but the evidence of the contract and of its terms. 18 Thus, in practice, the oral
contract is defined before the B/L is issued given that usually the bill is issued and signed by the
carrier or his agent after the actual goods have been shipped on board the vessel.19

Disadvantages of the paper B/L

As considered above, the paper B/L and its implied responsibilities and requirements
seem to deliver a reliable system which ensures the safe transfer or delivery of the goods to the
rightful owner regardless of how many times it is endorsed during transit. However, there are
two main disadvantages of the paper B/L. The first concerns the fast-paced development of
17

Ibid n 18, p132.

SS Ardennes (Cargo Owners) v SS Ardennes (Owners) [1951] 1 KB 55.
19
Ibid n 18, p129.
18

container ships and modern vessels in the carriage by the sea industry. Due to technological
improvements, the ships are often capable of arriving faster at the port of discharge then the
arrival of the Bill of Lading itself.20 Therefore, due to the delay of the B/L, the buyer is not able
to claim the goods. This might result in the deterioration of goods which are perishable or of
goods which are held in temporary containers that cannot guarantee safekeeping for more than
the estimated travel time.21 Moreover it causes congestion in ports thus it affects other shipments,
it adds expense to demurrage 22 and it also creates financial loss for the ship-owner who is not
capable of either contracting new shipments or starting shipments which are already contracted
until he unloads the goods.
Furthermore, the issue of fraud arises given that the B/L is usually issued in sets of three
originals, but only one original can be used to claim the goods upon delivery. There is no
requirement for the carrier to attest that the holder of the B/L is in fact the consignee, thus
physical possession is enough to ensure the right to claim the goods. 23 Thus the issue of more
than one B/L could offer opportunities for fraud where each B/L is negotiated separately or when
the bill is not endorsed but the carrier completes the delivery of the goods based upon the mere
physical possession of that B/L.24 Even though the paper B/L is straightforward and has been
used for many years in many international trade transactions, the disadvantages of it are
becoming more present and acknowledged in the marine industry.25 Moving onwards, an analysis

20

Ibid n 4, p63.
A.Elentably, The Advantage of Activating the Role of the EDI-Bill of Lading and its Role to achieve Possible
Fullest [2012] 4 International Journal on Marine Navigation and Safety of Sea Transportation 599.
22
Boris, Kozolchyk, Evolution and Present State of the Ocean Bill of Lading from a Banking Law Perspective,
[1992] 23 Journal of Maritime Law and Commerce, p 212.
23
See case, Glyn Mill & Co. v East and West India Dock Co. [1882] 7 App. Cas. 591.
24
Ibid n 4, p 67.
25
A.N Yiannopoulos, Ocean Bills of Lading: Traditional Forms, Substitutes and EDI Systems, 1st edn, (Hague:
Kluwer, 1995), p 17-p 18.
21

will be conducted of whether the electronic B/L can function as a traditional B/L whilst removing
the disadvantages.