INTERNATIONAL TRADE & FINANCE PROJECT

TOPIC- CARRIAGE OF GOODS BY SEA and BILL OF LADING

SUBMITTED TO- Dr. HINA KAUSAR

SUBMITTED BY- FARHEEN HAIDER
B.A L.L.B 3rd YEAR
Vth Semester
Faculty of Law

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TABLE OF CONTENTS

1.Introduction.
2. Kinds of carriers.
3. Liabilities of a common carrier.
4. Burden of proof.
5. Characteristics of a private carrier.
6. Carriage of goods by sea.
7. Types of frieght.
8. The Carriers responsibilities under a bill of lading.
9. Seaworthiness.
10. Deviation.
11. Duties of a carrier by sea.
12. The carrier‟s immunities.
13. Bill of lading
14. Functions of the bill of lading.
15. Bill of lading as a negotiable instrument.
16. Kinds of a Bill of lading.
17. Clauses of a bill of lading.
18.Bibliography.

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ACKNOWLEDGEMENT

I have taken efforts in this project. However, it would not have been possible without the kind
support and help of many individuals and organizations. I would like to extend my sincere
thanks to all them.
I am highly indebted to Mam Hina kausar for their guidance and constant supervision as well as
for providing necessary information regarding the project and also for their support in completing
the project.
I would like to express my gratitude towards my parents and member of Jamia millia islamia for
their kind cooperation and encouragement which help me in completion of this project. I would
like to express my special gratitude and thanks to industry person for giving me such attention
and time.
My thanks and appreciations also go to my colleague in developing the project and people who
have willingly helped me out with their abilities.

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INTRODUCTION

In the commercial life of any country, the need for carrying goods from one place to another
Cannot be over emphasized. Also, goods are to be moved from one country to another. For
These purposes, a contract of carriage is to be entered into. The persons, organizations or
associations which carry goods are known as carriers. It is the normal, indeed crucial, incident
to the contract of sale that the goods should be shipped to the buyer .Depending on the type of
contract we are dealing with; this duty may fall either on the seller or the buyer. The party who
arranges for the goods to be shipped is the shipper.
“Carriage is simply the transportation of goods/cargo from one location to another. It involves
loading, stowage, transportation, unloading and delivery.”

Definition of a contract of carriage:-A contract of carriage of goods is a contract of bailment

for reward. It may however, be noted that a contract of carriage is not an ordinary contract of
bailment. It is something more than that because the liabilities of the carrier (i.e. the person
transporting the goods) are more than those of the bailee.

There are three persons involved in a contract of carriage. They are:-

1) Carrier: A person who undertakes (i.e. agrees) to transport the goods, is called a carrier (or
carrier of goods).

2) Consignor or shipper: A person, who delivers the goods to the carrier for transportation, is
called a consignor or shipper.

3) Consignee: A person to whom the goods are addressed and to whom the carrier should
deliver the goods is called a consignee.

KINDS OF CARRIERS

The carriers may be classified into two types:-

i) Common carriers
ii) Private carriers

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Common carriers: - A common carrier is one who is engaged in the regular business of
transportation of goods, and undertakes for hire, to transport the goods of any person who
chooses to employ him. The term “common carrier “is defined as:
“Common carrier denotes a person, other than the Government, engaged in the business of
transporting for hire, property from place to place, by land or inland navigation, for all persons
indiscriminately. Persons include any association or body of persons whether incorporated or
not.”1
Characteristics of a common carrier: The characteristics of a common carrier are as follows:-

1) The common carrier must be engaged in a regular business of transportation of goods. A

person who occasionally transports the goods is not a common carrier.

2) The common carrier must carry on his transportation business for money. A person, who
transports the goods free of charges, is not a common carrier.

3) The common carrier must transport the goods only. A carrier who carries passengers is not a
common carrier.

4) The common carrier may be an individual, a firm or a company. But the government is not
considered as a person for this purpose. Thus, the post office is not a common carrier although
it may carry goods.

5) The term common carrier is applied to the transportation of goods by land and inland water
ways. It does not apply to carriage by sea or air.

6) The common carrier must transport the goods of all persons without any indiscrimination. 2 As
a matter of fact, a common carrier is bound to transport the goods of any person provided there
is space in the vehicle. If he refuses to transport the goods besides there being space in the
vehicle, then the carrier is liable to pay damages.3 If a common carrier reserves the right to
refuse to transport the goods of some person, he is not a common carrier.

1
Section 2 of the Carriers Act, 1865
2
As used in section 2 of the Carriers Act, 1865
3
Crouch v London & North Western Rly Co., (1854) Ex 556

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There are certain exceptional circumstances when the common carrier can lawfully
Refuse to transport the goods of any person. These circumstances are:

a) If there is no space in the vehicle.

b) If the goods are not of the type which he usually transports as a common carrier.

c) If the reasonable charges for carriage are not paid.

d) If the goods are unlawful, of dangerous nature or improperly packed.

e) If the destination is not on his normal route, and also if the destination can be
Reached only through area of disturbance.

There are certain rights that a common carrier possesses. These are:-

1) Right to receive charges: A common carrier is entitled to receive the agreed charges
(remuneration) for his work i.e. for transportation of goods. If the charges for his work are not
agreed, then he is entitled to receive reasonable charges. It may also be noted that a common
carrier can also demand advance payment. But if he accepts the goods without demanding
payment of freight in advance, then he cannot afterwards claim payment until he carried the
goods to the destination.4

2) The carrier is also entitled to charge extra for the risk in respect of scheduled articles.
However, such extra charges must be displayed at the place of booking in English as well as in
the language of that place.5

3) Right of particular lien: The right of lien means a person‟s right to retain the goods until the
lawful charges due in respect of the goods are paid to him. A common carrier can exercise his
lawful right of lien, over the goods transported by him, for his charges.

4
Crouch v Great Northern Rly Co. (1856) 11 Exch 742
5
Section 4 of the Carriers Act, 1865

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LIABILITIES OF A COMMON CARRIER

1) The liability of any common carrier for the loss or damage to any [property including container
pallet or similar article of transport used to consolidate goods delivered] to him to be carried, not
being of the description contained in the schedule to the Carriers Act, 1865, shall not be
deemed to be limited or affected by any public notice; but any such carrier, not being the owner
of a railroad or tram road constructed under the provisions of Act 22 of 18636 may by special
contract, signed by the owner of such property so delivered as last aforesaid or by some person
duly authorized in that behalf by such owner, limit his liability in respect of the same.

2) The liability of the owner of the railroad or tram road constructed under section 22 of 1863 is
not limited by special contract. However, the owner of such railroad or tram road will be held
liable for loss to goods caused by negligence or criminal act on his part or by his agents or
servants.7 Thus, where any loss or damage of goods is caused by criminal acts of the carrier or
his servants or agents, the liability cannot be limited by special contract. 8

3) Common carrier liable for loss or damage caused by neglect or fraud of himself or his agent:
In simple words, a common carrier is liable to pay damages if loss/damage to the goods is
caused by fraud or negligent act of himself or his agent. But when damage to goods takes place
due to an accident taking place ( example bursting of the tyre of the vehicle) it will not constitute
negligence on the part of the driver and it cannot be said that the carrier did not take proper care
in maintaining tyre of the vehicle. Thus, the carrier is not liable to pay damages. 9A carrier will
also not be held liable if the consignment of goods is wrongly delivered. 10

BURDEN OF PROOF

In any suit brought against a common carrier for the loss, damage or non -deliver of goods
(entrusted to him) for carriage, it is not necessary that the plaintiff prove the fault of the carrier
by showing the negligence or any other criminal act of the carrier, his servants or agents.11

6
See now the Land Acquisition Act, 1894, Sec 2
7
Section 7 of Carriers Act, 1865
8
Gaya Muzaffarpur Roadways Co. v Fort Gloster Industries Ltd., AIR 1971 Cal 494
9
State of Rajasthan v Mehta Transport Co., AIR 2002 Raj 157
10
The Manager, Doars Transport (P) Ltd. V Canara Bank , AIR 1992 Mad 324
11
Hussainbhai Mulla Fida Hussain v Motilal Nathulal, AIR 1963 Bom 208

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In other words, the burden of showing that the damage to goods was not caused due to the
negligent act of the carrier or his agents or servants would be entirely on the carrier. 12

2) Private carrier: A private carrier is one who casually or occasionally transports the goods of
persons of his own choice. He is not engaged in the regular business of transportation of the
goods. The private carrier reserves his right to accept or reject the goods offered to him by
carriage. In other words, he undertakes to transport the goods of others on special terms which
are mutually agreed upon between him and the consignor.

Characteristics of a private carrier

1) The private carrier is not engaged in the regular business of transportation of goods.

2) The private carrier is not bound to transport the goods of all persons. He reserves the right to
accept or reject the goods offered to him for transportation.

3) The private carrier transports the goods for selected persons of his own choice, and not for
everybody.

4) The private carrier may also transport the goods gratuitously i.e. without any charge.

CARRIAGE OF GOODS BY SEA

Carriage is frequently the final step in a contract for the sale of goods. The shipper is often the
vendor of the cargo. The ultimate consignee is often the buyer of the cargo. Risk and title to the
goods will often pass during the course of the contract of carriage. There is a general
presumption that title passes when risk passes but this is a rebuttal presumption. The exact
point at which risk and title pass depends on the terms of the contract of sale and the Intention
of the parties.
Contract of Affreightment: A contract to carry goods by sea is called the “contract of
affreightment” and the consideration or charges paid for the carriage is called the“freight”. A
contract of affreightment may take either of the two forms, namely—

(i) a charter party, where an entire ship, or a principal part of a ship is placed at the disposal of
merchant known as a charterer); A charter party may be for a particular period, or for a
particular voyage. In the former case it is called a time charter party and in the latter case, a

12
Assam Bengal Roadways Ltd. V Union of India, AIR 1988 Kant 157

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voyage charter party has no specific form; the form varies from trade to trade depending on the
customs of the trade.

(ii) a bill of lading where the goods are to be carried in a general ship and the person consigning
the goods is known as a shipper.

There are three persons involved in a contract of affreightment. These are:-

1) Ship-owner: A person who is the owner of the ship and undertakes to transport the goods is
called a “ship-owner”. In other words, he is the carrier of the goods.

2) Charterer: A person, who hires the ship and delivers the goods to the ship-owner for
transportation, is called a charterer. In other words, he is the consignor of the goods and is also
known as a shipper.

3) Consignee: - A person to whom the goods are addressed and to whom the ship-owner
should deliver the goods is called a “consignee”.

TYPES OF FREIGHT

1) Lump sum freight: - While freight is normally arranged according to weight, measurement or
value, the shipper may agree to pay a lump sum as freight for the use of the entire ship or a
portion thereof. In this case, the amount of freight payable by the shipper is fixed and invariable
and , if the ship-owner is ready to perform his contract, is payable whether the shipper uses the
hired space to full capacity, or loads below capacity or does not load at all. Moreover, in the
absence of agreement to the contrary, the whole lump sum freight is payable if only part of the
loaded cargo is delivered by the ship-owner at the port of destination and the remainder is lost.
However, the ship-owner cannot claim lump sum freight if he is unable to deliver at least part of
the cargo.

2) Pro rata freight: - It is the freight which is payable proportionate to the goods loaded on the
ship or to the use of carrying capacity of the ship. Sometimes, ship-owner agrees to load the full
cargo. But only loads and carries a part of it. In such cases also, he will be entitled to pro-rata
freight only unless there is an express agreement for the payment of the whole freight.

3) Dead freight: - Where the shipper fails to load the cargo or the full cargo after arranging with
the ship-owner for its carriage, he is in breach of the contract of carriage and is liable to pay the
agreed freight as damages (dead freight). But the ship-owner, who uses the freight space which
would have been taken up by the goods of the defaulting shipper, and carries therein goods of
other shippers, has to deduct the earned freight when claiming damages.

4) Back freight: - When the delivery of the goods has been prevented by events beyond the
control of ship owner or his master, the master is empowered to take steps in dealing with the
goods. The ship owner then becomes entitled to charge the shipper or the cargo owner back
freight to cover expenses incurred by the shipmaster.

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5) Primage: - It is the extra freight which is payable, by an agreement, to the captain of the ship.
It is calculated at a fixed percentage on the ordinary freight. As a matter of fact, it is a sort of
reward to the captain of a ship for taking care of the cargo put on board the ship. Nowadays, the
payment of primage is not a common practice.

THE CARRIER’S ( IMPLIED)RESPONSIBILITIES UNDER A BILL OF LADING

The common law implies three undertakings by the carrier into a contract of carriage by sea.
These terms may be excluded by express terms in the contract. The common law differs in
these matters from the Hague-Visby Rules. The three terms relate to the seaworthiness of the
vessel, to deviation from route and to delay.

SEAWORTHINESS

When goods are to be carried by sea the fitness of the vessel which is to do so is obviously a
matter of concern to any person having an interest in the goods. At common law it is an implied
term of the contract of contract that the ship shall be seaworthy. A ship is not seaworthy if it has
a defect which a prudent owner would have required to be rectified before sending the ship to
sea. This requirement is absolute; the ship must be seaworthy and it is not enough that every
effort has been made to make it so.

The ship must be seaworthy in two respects. It must be fit to sail on the particular voyage or a
particular stage of the voyage and it must be fit to receive the particular cargo. As regards the
ship itself, unseaworthiness can take many forms. It may be a physical defect, such as
inefficient engines but it may also take the form of incompetence on the part of the crew. In this
respect the ship must be seaworthy when it sails and there is no breach of term if it is so but
becomes unseaworthy while on the voyage.

E.G. The Maori King (Cargo owners) v Hughes 13 a ship was held to be unseaworthy in respect
of a cargo of frozen meat because refrigeration equipment was defective. In this respect the
ship must be seaworthy when the cargo is loaded and there is no breach of the implied term if it
becomes unfit for the cargo after the cargo has been loaded. The legal effect of a breach of the
term will depend on the effect of the breach on the contract. If the breach results in
unseaworthiness which is such as to frustrate the commercial purpose of the contract of
carriage the cargo owner will be entitled to repudiate the contract. If it is not so serious he must
rely on the action for damages.
Under a contract for carriage in a general ship the cargo owner will normally be in the latter
position unless he is the original shipper. Also, if there is a breach of the implied term, the
carrier cannot rely on a clause absolving him from liability for some cause of loss or damage
unless the loss/ damage was actually caused by the unseaworthiness.

13
[1895] 2 QB 550, CA

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On the other hand, under the Hague-Visby Rules, the carrier is liable before and at the
beginning of the voyage, to exercise due diligence to make the ship seaworthy, properly man,
equip and supply the ship and make the cargo spaces fit and safe for the reception, carriage
and preservation of goods. This is identical with the common law but in this case, the burden on
the carrier is only to exercise due diligence to make the ship seaworthy. It is not absolute like
that in common law. If due diligence has not been used to make the ship seaworthy the carrier
will be liable for any loss or damage resulting from the unseaworthiness even though the
primary cause of the loss of damage was one for which the carrier would not otherwise be liable
under the Rules.

DEVIATION

There is an implied undertaking at common law in any contract for the carriage of goods by sea
that the vessel will at unreasonably deviate for the agreed route or, if there is no agreed route,
form the usual route or, if there is no usual route, from the direct route. Since the undertaking is
implied it can be excluded by an express term in the contract.

There is no breach of the term if a ship deviates on reasonable grounds as, for example, to
avoid the dangerous weather or to save the life at sea, although deviation to save property at
sea is not a permitted deviation art common law as it is under the Hague-Visby Rules.14The
importance of the term for the cargo owner lies in the legal effect of a breach of the term by the
carrier. Any voluntary and unjustified deviation is a fundamental breach of the contract of
carriage. In consequence, the cargo owner is entitled to repudiate the contract and, if he does
so, the carrier will lose the benefit of any immunity in the contract protecting him from liability for
loss or damage except those available to a common carrier and even the common carrier‟s
defenses will only be open to him if he can prove that the loss or damage would have occurred
even if there had been no deviation.

Example:-Joseph Thorley Ltd. V Orchis Steamship Co15.-A vessel carrying goods from Cyprus
to London deviated, at the beginning of the voyage, to ports of Eastern Mediterranean. When
the vessel arrived at London the cargo was damaged by the negligence of the stevedores
unloading it. When the cargo owner sued in respect of this damage the carrier pleaded a clause
in the contract absolving him from liability for any such damage. It was held that because the
vessel had deviated the cargo, owner was entitled to repudiate the contract of carriage and the
carrier was not then entitled to the benefit of the community unless he should show that the
damage by stevedores in London would have occurred even if the vessel had not deviated in
the Eastern Mediterranean, a demonstration which clearly presented some difficulties. A cargo
owner is not bound to repudiate the contract in these circumstances. He may waive the breach
of the undertaking either expressly or by implication. Any such waiver will not, however, affect

14
Rio Tinto Co v Seed Shipping Co (1926) 42 TLR 381
15
[1907] 1 KB 660, CA

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the rights of a subsequent indorsee of a bill of lading who takes it without knowledge of the
deviation.

DUTIES OF A CARRIER BY SEA

In case of carriage of goods by sea, the carrier is the ship-owner or the charterer who enters
into a contract with the consignor (shipper) for the carriage of goods. The duties of a carrier by
sea are:-

1) Duty to exercise due diligence: - It is the most important duty of a carrier by sea.The duty
requires that the carrier shall be bound, before and at the commencement of the voyage, to
exercise due diligence in respect of the following:-
(a) To make the ship seaworthy
(b)To properly man, equip and supply the ship
(c) To make the holds, refrigerating and cool chambers, and all other parts of the ship in which
the goods are carried, fit and safe for their reception, carriage and preservation.

The words “before and at the beginning of the voyage” are important in respect of the above
stated duties. This means the period from at least the beginning of the loading until the vessel
starts on the voyage. If there is failure to exercise due diligence during that period, the carrier
will be held liable for the loss. Thus, where the ship was seaworthy when the cargo was loaded
but was lost in fire before the beginning of voyage, the carrier was held liable for the loss.

2) Duty to load and handle the goods properly:-It is another duty of the carrier to be careful in
dealing with the goods to be carried on board the ship. This duty requires that the carrier shall
properly and carefully load, handle, stow (i.e. store or fill properly), carry, keep, care for and
discharge the goods carried by him.

THE CARRIER’S IMMUNITIES

Under the Hague-Visby Rules the carrier will not be liable for loss of or damage to the cargo
caused by the events below16. It should however be noted that these immunities will not avail
the carrier if he has not exercised due diligence to make the ship seaworthy and the loss or
damage was caused by the unseaworthiness.
(a) Act, neglect or default of the master, mariners, pilot or the servants of the carrier in the
navigation or in the management of the ship. While few problems have arisen concerning
“navigation”, difficulties have arisen on what is meant by “management of the ship”. It does not
include care of the cargo, which is a separate duty.

(b) Fire, unless caused by actual fault or privity of the carrier.

16
Art. IV (2)

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(c) Perils, dangers and accidents of the sea or other navigable waters - These are dangers to
which the sea transit is particularly prone, such as stranding, storms,collision and seawater
damage. To come within the immunity it must be shown that the loss or damage was caused by
something more than the ordinary action of wind and waves. There must be an element of
fortuity about the event and it must not be some occurrence which in the ordinary course of
events should have been foreseen and guarded against. Also, the carrier may be protected by
this immunity even though the peril of the sea was not the immediate cause of the loss or
damage.

(d) Act of God- This is any natural event for which no human agency is responsible and against
which precautions could not reasonably have been taken. Thus, a carrier could not plead Act of
God when a ship went aground in a fog, since human agency was necessary to steer the ship
on the shoal.17

(e) Act of war- This is any direct hostile act resulting from war. War probably includes civil war
and does not necessarily involve an official declaration of war.

(f) Public enemies-The nature of these is unclear, though most authorities instance pirates.

(g) Arrest or restraint of princes, rulers or people or seizure under legal process.The phrase
“princes, rulers or people” in effect means “established governments” and the immunity covers
cases of government action such as embargoes, import bans,quarantine restrictions and the
like.
(h) Quarantine restrictions- In view of the preceding immunity there appears to be no reason for
the appearance of this as a separate immunity as far as English law is concerned.

(i)Act or omission of the shipper or owner of the goods, his agent or representative.

(j) Strikes or lockouts or stoppages or restraints of labour whatever cause whether partial or
general.

(k) Riots or civil commotions. A civil commotion has been said to be an intermediate
stage between a riot and a civil war.18

(l) Saving or attempting to save life or property at sea.

(m) Wastage in bulk or weight or any other loss or damage arising from an inherent defect,
quality or vice of the goods. This exception, which in the common law is known as “inherent
vice”, covers any loss occurring through some natural defect or quality in the goods themselves,
as, for example, acid in the fertilizers eventually rotting the bags in which they were packed.

17
Liver Alkali Co v Johnson (1872) LR 7 Exch 267
18
Bolivia Republic v Indemnity Mutual Marine Assurance Co Ltd [1909] 1 KB 785, CA

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“The immunity will naturally not avail the carrier if the damage, though arising from the nature of
the goods, was caused by bad stowage.

(n) Insufficiency or inadequacy of marks.

(o)Insufficiency of packing. This immunity, like the previous one, will not apply where there has
been bad stowage.

(p) Latent defects not discoverable by due diligence.

(q) Any other cause arising without the actual fault or privity of the carrier or without the fault or
neglect of the agents or servants of the carrier…….The carrier will be able to claim the benefit of
this immunity only to the extent that he can prove the absence of fault, privity or neglect.

BILL OF LADING
The term “bill of lading” may be defined as a document acknowledging the shipment of the
goods, and containing the terms and conditions upon which the goods are to be transported by
the ship. It is signed by the ship-owner or his authorized agent or by the master of the ship. It
should also be stamped. 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.

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FUNCTIONS OF THE BILL OF LADING

1. Bill of Lading as a Receipt: - The bill of lading will acknowledge the quantity of goods put on
board, their description and their condition. The bill of lading form will usually be completed by
the shipper or his forwarding agent and sent to the carrier. As the goods are loaded they will be
checked by tally clerks and if the particulars are found to be correct the bill of lading will be
signed for the carrier by his agent, the loading broker. 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.

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).

19
http://www.essexcourt.net/uploads/publication/BILLOFLD.doc

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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 tons of cargo were shipped „quantity unknown‟
means that the quantity is unknown and not that that amount 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: Bill of lading usually contains the printed words,“Shipped in good
order and condition.” At common law, in the hands of the shipper, this statement is not even
prima facie evidence of the condition of the goods when shipped. It amounts merely to evidence
of the condition and if the goods arrive damaged the onus remains with the shipper to show that
the goods were shipped in In Compania Naviera Vasconzada V Churchill and Sim 20 timber

20
[1906] 1 Lloyds Rep 642

15
was stained with oil when shipped but a “clean” bill of lading was nonetheless issued to the
shipper who indorsed it to a third party. The indorsee sued the carrier in respect of the damage.
The carrier was estopped, by the statement in the bill of lading, from denying that the timber
was in good condition when loaded and was thus liable to the indorsee for the damage.

On the other hand, in Canadian and Dominion Sugar Co Ltd v Canadian National(West
Indies)21 Steamships the bill of lading contained the phrase “signed under guarantee to produce
ship‟s clean receipt”, thus clearly incorporating the receipt terms into the bill of lading. The
receipt stated, “Many bags stained, torn and re-sewn.” The bill of lading statement thus qualified
did not stop the carrier from proving the condition of the timber when shipped.
Statements as to leading marks: Leading marks are the distinguishing marks, code marks,
symbols etc. placed on the goods or their containers by the shipper. Where the Hague-Visby
Rules apply, the carrier can refuse to enter them on the bill of lading unless they are such as
should ordinarily remain legible until the end of the voyage. At Common law the carrier is
entitled to show that goods shipped were marked otherwise than as noted the bill of lading as
long as the marks in question are not material to the description of the goods.

In Parsons V New Zealand Shipping Co.22 some carcasses of frozen lamb were found
On arrival to bear marks different from those in the bill of lading. The marks in question only
reflected details in the shipper‟s storage system and were not related to the quality or
description of the carcasses. The carrier was thus entitled to prove that the carcasses delivered
were the ones actually loaded. It appears, however, that the carrier is not bound by any
statement as to the marks that indicate quality, on the grounds that he is not a judge of quality.

THE BILL OF LADING AS A DOCUMENT OF TITLE

A document of title is one which the law recognizes as representing the goods so that the
transfer of the document to a party will vest in that party the ownership or possession of the
goods to which the document relates, provided that this transfer of rights was intended by the
parties. Some documents of title are so by virtue of the common law‟s recognition or mercantile
usage while others have been made so by statute. The ability to transfer property rights in
goods by the transfer of a document is the keystone of international trade practice.

The bill of lading has long been recognized by the courts, following mercantile usage,as having
this quality. In E Clemens Co V Bidell Bros23, the buyer under a CIF contract was offered a bill
of lading but refused to pay until the goods themselves were delivered. It was held that since
possession of the bill of lading amounted in law to the possession of the goods the seller was
entitled to perform his part of the contract by handing over the document.

21
[1947] AC 46, PC
22
[1901] 1 KB 548, CA
23
[1912] AC 18, HL

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BILL OF LADING AS A NEGOTIABLE INSTRUMENT

A bill of lading is a document of title of the goods mentioned in it i.e. it is a symbol of the
ownership of the goods. Thus, the consignee named in a bill of lading is the owner of the goods
mentioned in it, and can sell them while they are still in sea i.e. in transit. The goods can be
sold by the consignee by transferring the bill of lading to the purchaser. For the purpose of
transferring, the bill of lading may be classified into two types:-
1) Order bill of lading: - In this case, the goods shipped under a bill of lading are made
deliverable to “a particular person” or to “his order.”
2) Bearer bill of lading:-In this case, the goods shipped under a bill of lading are made
deliverable to a “name left blank” or to “a bearer”.

An order bill of lading can be validly transferred by making an endorsement in favour of the
transferee, and then delivering the same to him. And a bearer bill of lading can validly be
transferred by its mere delivery to the transferee. When the bill of lading is validly transferred,
the transferee becomes entitled to the goods mentioned in the bill of lading. This characteristic
of a bill of lading resembles that of a negotiable instrument. On account of this similarity
between the two kinds of instruments, a bill of lading is generally described as “quasi
negotiable” or “as good as negotiable”. It may be noted that a bill of lading is negotiable only in
the sense that it is transferable.

Thus, in the strict legal sense of the term, a bill of lading is not a negotiable instrument.
The points of difference between a negotiable instrument and a bill of lading:-

1) A negotiable instrument is a contract to pay money, and entitles its holder to receive the
money due on it. On the other hand, a bill of lading is not a contract to pay money. It entitles its
holder to obtain the goods covered by it i.e. mentioned in it.

2) In case of a negotiable instrument, a transferee who gets in good faith and for value (e.g. a
holder in due course) gets a better title than that of the transferor. But, the transferee of a bill of
lading does not get a better title than that of the transferor e.g. if he acquires it bonafide and for
value i.e. the transferee of the bill of lading gets it subject to any defect in the title of the
transferor.
Statement of Principles as per The (Indian) Bills of Lading Act, 1856 .
The standard short form bill of lading is a part of the contract of carriage of goods and it
serves a number of purposes:· it is evidence that a valid contract of carriage exists and it
incorporates the full terms of the contract between the consignor and the carrier by reference
(i.e. the short form simply refers to the main contract as an existing document, whereas the long
form of a bill of lading (connaissement intégral) issued by the carrier sets out all the terms of the
contract of carriage)· it is a receipt signed by the carrier confirming whether goods matching the
contract description have been received in good condition (a bill will be described as clean if the

17
goods have been received on board in apparent good condition and stowed ready for transport);
and· it is also a document of transfer, but not a negotiable instrument, i.e. it governs all the legal
aspects of physical carriage but, unlike a cheque or other negotiable instrument, it does not
affect ownership of the goods actually being carried. This matches everyday experience in that
the contract a person might make with a commercial carrier like FedEx is separate from any
contract for the sale of the goods to be carried.

KINDS OF A BILL OF LADING

A bill of lading is of the following types:-

1) Clean bill of lading: - It is a bill of lading which acknowledges the receipt of the goods in their
perfect condition. The perfect condition of the goods is indicated by using certain words in the
bill of lading such as “shipped in good order and condition. As a matter of fact, a bill of lading
begins with these words, and the ship-owner may cancel these words if the goods are not in a
perfect condition. It may be noted that in case of a clean bill of lading, the ship-owner is bound
to deliver the goods in the same condition in which they were at the time of loading, excepting
the ordinary depreciation of voyage. In this case, the ship-owner cannot take the defence that
the goods were not in a good order and condition when they were loaded on the ship.

2) Qualified bill of lading: - It is a bill of lading which does not acknowledges the receipt of goods
in the perfect condition. The use of certain words such as “goods shipped in a damp condition:
or “weight, value and contents unknown”: indicate that the goods are not in a perfect condition.
If the goods are not in a perfect condition, the ship-owner may retain these words, and cancel
the opening words reading as “shipped in good order and condition”. In this case, the ship-
owner qualifies his liability and is not bound to deliver the goods in the perfect condition.

3) Through bill of lading: - It is a bill of lading which is issued by a ship-owner for the
transportation of goods partly in his own ship, and partly in the ship of another ship-owner for an
inclusive freight. Sometimes the goods are to be carried partly by sea and partly by land, and
the ship-owner has charged for both the carriages i.e. by sea and land. In such cases also, the
bill of lading issued by the ship-owner is a through bill of lading. It may be noted that in such
cases, in the absence of any contrary provision, a contract is considered to be made with the
ship-owner who issues the bill of lading , and he would be liable for the loss occurring on any
part of the journey.

4) Received for shipment bill of lading: - It is a bill of lading which states that the goods have
been received for shipment. It may be noted that it is not a “proper bill of lading”. It operates only
as a receipt of the goods received for shipment. A proper bill of lading, also called the “shipped
bill of lading” is issued only after the goods are loaded on the ship. If a “received bill of lading” is
held by the charterer, he must after the loading of the goods, surrender it to the ship-owner and
obtain from him the“shipped bill of lading”.

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OTHER DOCUMENTS (RELATED TO CARRIAGE BY SEA)

Mate‟s receipt: - It is a temporary receipt given by the person in charge of the ship as an
acknowledgement that the goods have been received on board the ship. After the bill of lading
is prepared, this receipt is handed over to the master in exchange for the bill of lading. It may be
noted that a mate‟s receipts is not a document of title. It simply entitles the holder to receive the
bill of lading from the master of the ship.

Sea way- bill: - A sea way bill is a receipt for goods carried by sea but differs from a bill of lading
in that it is not a document of title. It contains or evidences an undertaking by the carrier to the
shipper to deliver the goods to an identical person. The shipper may, at any time before the
delivery of the goods, change the identity of the person to whom delivery is to be made. The
consignee obtains delivery not by presenting the way-bill, which remains in the hands of the
shipper, but by production of acceptable evidence of his identity as consignee. The sea way-bill
cannot be used as a security. Its chief advantage lies in the fact that it does not have to be
transmitted to the consignee to enable him to obtain the goods.

Delivery orders:-An exporter, who ships the bulk cargo and receives one bill of lading in respect
of it, or an indorsee of this bill of lading, may afterwards, while the goods are in transit, sell
various unascertained portions of the cargo to different buyers. He clearly cannot transfer the
bill of lading to all the buyers and must find some other way to satisfy each buyer‟s demand for
some document evidencing his right to the goods he has bought which will enable him to collect
or resell them. In such cases a delivery order may be used, “delivery order” is not a precise term
and the legal status and effect of such a document will depend on its nature and the
circumstances in which it is issued. A delivery order is not a document of title unless proved to
be so by reason of mercantile custom.

CLAUSES OF A BILL OF LADING

A bill of lading issued in case of a general ship contains the clauses in respect of terms of the
contract of affreightment. These are generally the same as contained in a“charter party”. The
clauses of a bill of lading should state the following particulars:-
1) Name of the parties
2) Name of the ship
3) Port of loading
4) Port of destination
5) Name of the consignee
6) Marks for the identification of the goods such as number of package
7) Statement regarding the condition of the goods and their quantity or quality or
weight
8) Other terms and conditions of contract of affreightment such as amount of freight,
expected perils etc

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 24
AN ELECTRONIC BILL OF LADING

Bills of lading have always been issued as paper documents. However, the replacement of a
paper bill of lading with an electronic bill of lading seems a sensible step forward in the new
electronic commerce world. A major problem facing an electronic bill of lading is the negotiability
of such documents of title. A document of title relies upon the transferability of the document by
physical possession. An electronic bill of lading cannot be handled in physical pos session with
the result that it cannot be produced on delivery, nor endorsed to a new holder. Therefore, this
inhibits the capability of it representing a document of title.
Various ways around this problem have been sought. In 1985, a “bill of lading registry” was
suggested by the Chase Manhattan bank and INTERTANKO, which was established Sea Dock
Registry Ltd. Unfortunately this survived only six months.
The idea of a registry was further developed by the CMI Uniform Rules for Electronic Bills of
Lading adopted in 1990. Also, established in 1996, the UNICTRAL Model Law on Electronic
Commerce aims to solve many of the problems affecting the legal effect of electronic
documents.
The registry system is designed to be a depository for documents, while the rights to the goods
are transferred by the communicating of authenticated messages between the registry and the
parties who have an interest in the goods. The registry facilitates the transfer of title from one
party to another, cancelling the first party‟s title at the moment the title is transferred to the new
holder.

The newest project in this area is called “BOLERO”, whose name stands for Bill of Lading
Electronic Registry organization. BOLERO is an internet-based system and therefore, relatively
inexpensive. BOLERO builds on the CMI Rules but has established a central registry as the
secure third party. BOLERO has set up an electronic registry for bills of lading called “the title
registry”. The registry is a database application. It creates and transfers the rights and
obligations relating to an electronic bill of lading. The title registry deals with any change of
interest in the goods.

Where the BOLERO system is used, the carrier creates a BOLERO bill of lading, sends the
instructions to the title registry and the shipper is logged as holder of the BOLERO bill. If the
holder of the bill wishes to transfer his constructive possession to the bill to another, he can
make the transfer by attornment. Attornment occurs when the holder sends instructions to the
registry that name the new holder. Once these instructions are received the registry sends a
message confirming the new holder. The cargo is delivered to the last holder of the bill by the
registry giving up the BOLERO bill to the carrier.
BOLERO incorporates security for all transactions. Digital signatures of relevant parties are
used and all messages are secure from unauthorized access. In the UK the Electronic

24
Journal of Information, Law and Technology, 2001

20
Communications Act 2000 regulates the provision of electronic signatures, encryption
technology and reliance on third parties such as BOLERO. However,service providers must
have a connection with the jurisdiction, i.e. the service must be provided from premises in the
UK or to persons carrying on a business in the UK. This Act, therefore, does not support
electronic commerce.
The EU Electronic Directive deals with the certain legal aspects of information society services.
The liability of BOLERO or other similar information society service providers is generally set out
in Rule 4 of the Directive. The Article provides for the conclusion of contracts electronically,
although there is no provision for sanctioning the recognition of a contract made and evidenced
by an electronic instrument.
The UNICTRAL Model Law on Electronic Commerce (as amended 1998) was created because
of the inadequate legislation which existed in relation to international trade and electronic
commerce. It covers the main legal issues like requirements for writing, signature, admissibility
and probative value and actions related to contracts of carriage of goods. Its provisions have
generally found their way into national laws and the UK Electronic Communications Ac t 2000 is
consistent with the provisions of the UNICTRAL Model Law.

The International Chamber of Commerce also launched an e-business tool that provides secure
online contracting based on ICC‟s model international sale contract. It enables the speed and
convenience of dealing over the web. Thus, with the ecommerce era moving ahead, the
electronic bill of lading is also gaining ground.

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 BIBLIOGRAPHY

1. Carole Murray, David Holloway and Daren Timon-Hunt: Schmittholf: the Law and Practice of
International Trade, Sweet and Maxwell, London.
2.Dr. Dinesh Sabat: International Trade Law, Allahabad Law Agency, Allahabad.
3.Raj Bhalla : International Trade Law:Theory and practice,Lexis Nexis India, Gurgoan.
4.Ravindra Pratap:India at the WTO Dispute Settlement System , Manak Publications, New
Delhi.
5.A. K. Kaul :Guide to the WTO and GATT:Economics, Law and Politics, Kluwer Law
International, Netherlands.

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