CHANAKYA NATIONAL LAW UNIVERSITY

PATNA

A PROJECT WORK ON THE TOPIC

CHOICE OF FORUM GOVERNING BILLS

OF LADING

Submitted to : Submitted by :

Dr. P.P.Rao Rajeev Ranjan

(FACULTY OF PRIVATE INTERNATIONAL LAW) Roll No.- 1360

B.A.L.LB(Hons.)

9TH SEM. 5TH Year

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 ACKNOWLEDGEMENT

I would like to thank my faculty P.P.Rao Sir whose guidance helped me a lot with
structuring my project.
I owe the present accomplishment of my project to my friends, who helped me
immensely with materials throughout the project and without whom I couldn’t have
completed it in the present way.
I would also like to extend my gratitude to my parents and all those unseen hands
who helped me out at every stage of my project.
THANK YOU,
RAJEEV RANJAN

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 PARTICULARS PAGE

1. ACKNOWLEDGEMENT 02

2. RESEARCH METHODOLOGY 04

3. CHAPTER 1 05-09

4. CHAPTER 2 10-14

5. CHAPTER 3 15-16

6. CHAPTER- 4 17-20

7. 21-24
CHAPTER-5

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RESEARCH METHODOLOGY
Aims and Objectives:
The aim of this research paper is to present a detailed study on Bill of Lading.
Scope and Limitations:
The researcher has used the doctrinal method and has relied on the secondary sources for the
content of the research paper.
Owing to the large number of topics that could be included in the project, the scope of this research
paper is exceedingly vast. However in the interest of brevity, this paper has been limited to the
topics which deal with judicial aspect of the topic only.

Chapterisation:
The project has been divided into five chapters :
 The first chapter deals with the Introduction Part.
 The second chapter deals with the concept of bill of lading.
 The third chapter deals with different bill of ladings.
 The fourth one deals with the international regulations.
 The fifth one deals with the selection of forum in bill of lading.

Sources of data :
The researcher has relied on the following secondary sources of data:
• Books
• Websites
• Articles
Method of Writing
The method of writing followed in this project is both analytical and descriptive.
Mode of Citation :
The researcher has followed a uniform mode of citation in this project.

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CHAPTER-1

INTRODUCTION : CONCEPT OF CARRIAGE

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

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ii) Private carriers

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. Bu 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

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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If a common carrier reserves the right to refuse to transport the goods of some person, he is not
a common carrier.

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.

RIGHTS OF A COMMON CARRIER

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 tramroad 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 tramroad constructed under section 22 of 1863, is
not limited by special contract. However, the owner of such railroad or tramroad 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
tyres of the vehicle. Thus, the carrier is not liable to pay damages.9

A 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., AIR2002 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.

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

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CHAPTER-2

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

FUNCTIONS OF THE BILL OF LADING13

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).

13
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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 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

FUNCTIONS OF THE BILL OF LADING14

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.

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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
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 .
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 of cargo was actually
shipped.
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.

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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
15
were shipped in In Compania Naviera Vasconzada V Churchill and Sim timber 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)
16
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 estop
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 I 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.17 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

15
[1906] 1 Lloyds Rep 642
16
[1947] AC 46, PC
17
[1901] 1 KB 548, CA

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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.

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CHAPTER-3

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 gods 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.

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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”.

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.

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CHAPTER-4

INTERNATIONAL EFFORT AT REGULATING BILLS OF LADING

An ocean-going carrier issues a bill of lading to a shipper as a receipt for the goods to be shipped
and as a contract for the transport and delivery of the goods by a common carrier. The United
States did not begin to regulate bills of lading until the late 1800s when it enacted the Harter Act
(the "Act") which prohibits exculpatory clauses that relieve the carrier from liability." In exchange
for this prohibition, carriers received a limitation on their liability for certain types of negligence
resulting in damage to cargo. The Harter Act spurred the development of the International
Convention for Unification of Certain Rules Relating to Bills of Lading (the "Hague Rules") and,
eventually, COGSA in the United States.

The Harter Act

The passage of the Harter Act in 1893 marked an early attempt by Congress to regulate the private
carriage of cargo. Previously, the courts applied common law to this type of ocean transport. Under
common law, carriers often included unreasonable exceptions for negligence in bills of lading. In
passing the Harter Act, Congress sought to limit the negligence exceptions used by private carriers
to escape liability. The Harter Act permits carriers to insert into bills of lading reasonable clauses
that exempt them from liability for cargo loss or damage. The Act, however, prevents the insertion
of certain clauses that relieve or lessen a carrier's liability. In Knott v. Botany," ' the U.S. Supreme
Court prohibited a provision calling for the law of the ship's flag to apply in any dispute. " The
Court found the particular clause to mean England and would not enforce it because the courts in
England would have upheld another clause that exempted the carrier from liability for negligence.
The Harter Act represents a compromise between the interests of shippers and carriers, enacted by
Congress to address clauses such as the one in Botany Wills, which became necessary due to the
change in shipping upon the introduction of steam-powered vessels. The advent of the steamship
into ocean transport in the 1800s brought with it a few large and powerful corporations that owned
these steamships. These few corporations constituted a shipping oligopoly on the Atlantic seaboard
of the United States and dictated the terms included in bills of lading. Previously, the masters of
sailing vessels provided ship pers with bills of lading that contained reasonable clauses exempting
the carriers from liability for causes such as the perils of the sea and public enemies. The owners

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of steamships, however, used their control over ocean transport to impose unreasonable conditions
on U.S. shippers for the shipment of goods. In England, the courts generally upheld contractual
provisions in bills of lading that exempted the carrier from liability." Most U.S. courts held that
such limitations of liability for negligence violated public policy. Because of the dominance of the
British merchant marine during this period, many U.S. shippers were subjected to English laws
that gave effect to these negligence exceptions contained within the bills of lading. Many U.S.
shipping agents also wrote clauses into bills of lading that specifically provided for the application
of English law. The British control over shipping left U.S. shippers with little choice but to agree
to these clauses, which essentially rendered the bills of lading contracts of adhesion. The
differences between the common laws of the United States and England in the treatment of
exemption clauses, before the introduction of international uniformity in maritime bills of lading,
provided grounds for Congress to concern itself with the protection of U.S. shippers. Thus, through
the Harter Act, the United States became one of the first nations to address the problems that the
advent of the steamship brought to international commerce.

The Hague Rules

After the United States enacted the Harter Act, several British dominions enacted similar
legislation to provide protections for their own shippers. The English courts, however, treated
these national statutes, which copied the Harter Act, as merely an additional clause in a voluntary
bill of lading. The "Harter Act clauses," as the English courts named them, often conflicted with
the provisions of the negotiated bills of lading. Subsequently, the International Law Association
(the "ILA") and the Committee Maritime International (the "CMI"), a group formed by the ILA,
took the lead in addressing the international regulation and standardization of maritime bills of
lading. The CMI spent several years of preparatory work and, in 1921, the ILA adopted the Hague
Rules, a set of principles to govern international maritime bills of lading through voluntary
adoption of these rules into these documents. The representatives of the shipping world and major
maritime nations met at conferences between 1921 and 1924 to consider these rules further, and
they worked to internationalize the compromise reached between the shipper's interests and the
carrier's interests that the Harter Act represented in the United States. In 1924, under CMI auspices
in a diplomatic convention called by Belgium, representatives from various governments convened
to adopt the Hague Rules for mandatory use in all bills of lading and invited all maritime nations

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to adopt these rules. The Hague Rules provide for the standardization of most of the provisions
contained in a bill of lading." The drafters of this international agreement, however, did not intend
for it to impose all the restrictions of a complete international code. The Hague Rules, therefore,
unify certain rules but continue to allow shippers and carriers the freedom to contract in areas not
addressed by the agreement. In these areas, however, the Hague Rules article 3(8) prohibits a
carrier from relieving or lessening its liability. This article provides courts in different nations with
some flexibility to permit or prohibit clauses depending on their reasonableness in the context of
this international agreement and commercial freedom. The subsequent adoption of the Hague
Rules by most of the world's major maritime countries provides shippers and carriers with the
assurance that most provisions in a bill of lading will receive the same treatment in the courts of
these nations. Thus, the Hague Rules provide uniformity in the United States as well as abroad in
the regulation of maritime bills of lading.

The Carriage of Goods by Sea Act of 1936

Congress passed the U.S. Carriage of Goods by Sea Act in 193650 and the United States ratified
the Hague Rules on June 29, 1937, subject to reservations. The provisions of COGSA follow the
Hague Rules except for certain differences, and, like article 3(8) of the Hague Rules, COGSA
section 3(8) controls the additions to a bill of lading permitted under the statute.53 The Committee
of the Merchant Marine and Fisheries of the House of Representatives, which recommended the
passage of the U.S. version of the Hague Rules, stated that the bill defined the rights and liabilities
of carriers and shippers in foreign commerce. Moreover, COGSA placed limitations on the ability
of a carrier to exempt itself from liability. For example, a carrier may not lower his liability below
the US$500 per package value established in the statute. The House Report on COGSA noted that
before enactment of the Harter Act, the hundreds of different forms of bills of lading contained
innumerable exemptions that limited a shipper's recovery for cargo loss. The Committee
recognized the "need ... for uniformity of law in foreign trade." Thus, while the Harter Act
continues to govern domestic commerce involving the nation's waterways, COGSA governs
international bills of lading. In addition, COGSA may apply to domestic commerce through
incorporation in a bill of lading. The unsettled law surrounding forum selection in bills of lading
governed by COGSA revolves around the legislative intent of COGSA section 3(8). The Harter
Act provided the origin for the language contained within article 3(8) of the Hague Rules that

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Congress incorporated into COGSA. COGSA section 3(8), as adopted by the U.S. Congress,
invalidates any clause in a bill of lading for goods to or from this country63 that, in fact, relieves
or lessens the carrier's liability." One court noted that the strength behind COGSA's policy and,
in particular, the strength of section 3(8) was to provide "the vehicle by which the courts can
enforce the basic policy of the Act. '' Some of the areas in which courts have applied COGSA
section 3(8) to invalidate bill of lading clauses include the location of storage, trade customs, and
forum selection.

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CHAPTER-5

Bills of Lading, Forum Selection, and Public Policy

While the Indussa court relied primarily on its interpretation of the intent behind COGSA section
3(8) to invalidate forum selection, other federal courts have used additional public policy
arguments against these bill of lading provisions. The public policy arguments used by these
courts, however, do not support the application of the absolute invalidity rule over a more
reasonable approach. Relieving or Lessening of a Carrier's Liability, The Indussa court noted that
enforcement of a foreign forum selection clause was against public policy because it tends to lessen
a carrier's liability. The intent behind the Harter Act prohibited the use of bill of lading clauses that
required the jurisdiction of foreign courts or the application of foreign law, which in the 1800s
usually limited a carrier's liability below U.S. standards under common law. The Hague Rules,
however, standardized the regulation of bills of lading in the major maritime nations and negated
much of the disparity between the laws of these nations. Moreover, some countries now apply the
Protocol to Amend the International Convention for the Unification of Certain Rules Relating to
Bills of Lading (the "Visby Rules"), and the Protocol Amending the International Convention for
the Unification of Certain Rules of Law Relating to Bills of Lading (the "Visby Amendment"),
which actually increase the monetary limitation of liability per package. The Hague Rules
represented the first international effort to regulate bills of lading used for ocean transport. As the
Harter Act replaced the common law with regard to maritime bills of lading in the United States,
the Hague Rules replaced the diverse national statutes of the major maritime nations in the
international law of these contracts for carriage. The U.S. Congress noted that the Harter Act
prohibited many of the exemptions from liability held valid by the courts of England and the United
States. The Hague Rules eliminated the varying exemptions contained in international bills of
lading in the nations that adopted this international agreement. The U.S. enactment of the Hague
Rules, in the form of COGSA, replaced the Harter Act in foreign commerce. COGSA uses some
of the same language as the Harter Act, but the same antagonism toward foreign courts should not
exist, because under COGSA the law governing bills of lading became uniform with many other
nations. Thus, this international uniformity permits courts to look at the actual effect of a forum
selection clause rather than finding these provisions invalid per se under COGSA. Representatives
of the maritime world promulgated the Visby Rules in 1968 to address some of the unresolved

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problems of the Hague Rules. The Visby Amendment, which the United States has not adopted,
raises the per unit limitation of liability to approximately US$800, which is higher than the US$500
per package under COGSA. Moreover, under the United Nations Conference on the Carriage of
Goods by Sea (the "Hamburg Rules"), which represents the most recent convention on
international uniformity in bills of lading, the liability of the carrier increases to approximately
US$1000. Thus, in some foreign countries, the financial liability of a carrier actually increases
rather than lessens to presumably render valid a clause choosing a country that adheres to a higher
monetary value. The rationale behind the Indussa decision represents a view of foreign courts as
unable to dispense justice fairly between a shipper and a carrier. The lessening of liability in
COGSA should not lead to a rejection of the right to choose a foreign court for settlement of a
claim.

Maritime Bills of Lading and Freedom of Contract

The Supreme Court, in The Bremen, also considered the principle of freedom of contract and the
needs of modern business to provide a general policy in favor of forum selection. The Court noted
that the contract of carriage should be freely negotiated and unaffected by "fraud, undue influence,
or overweening bargaining power" to permit enforcement of a maritime forum selection clause.
The Fourth Circuit in S.S. Elikon specifically defined one COGSA bill of lading as affected by
such factors and, thus, found that it represented an adhesion contract. Therefore, under the
principles of contract law and The Bremen, the court refused to enforce a forum selection clause
in a bill of lading and remanded to the district court for consideration of forum non conveniens.
The Fourth Circuit's representation of bills of lading as adhesion contracts may have been valid at
the end of the last century, but many cargo owners now are sophisticated and experienced
businessmen or corporations with equal, if not more, bargaining power than shipowners. Further
more shipping agents who regularly deal with bills of lading usually execute these contracts for
both the carrier and shipper. Consequently, the shipping agents or brokers become the parties who
may execute the bill of lading rather than a carrier and shipper, who supposedly possess unequal
bargaining status. While the Harter Act was concerned with contracts of adhesion where unequal
bargaining positions existed between a shipper and carrier, the very purpose of the Hague Rules
and COGSA rest upon standard clauses in maritime bills of lading. The law of contracts on the
validity of standardized agreements remains unsettled, but the common law "duty to read" rule,

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which many U.S. courts continue to enforce, places a burden on both parties to read and understand
the terms of an executory contract. Furthermore, the law of contracts encourages forum selection
in international law by providing the courts with more latitude to determine the reasonableness of
a foreign forum. A forum selection clause should receive consideration by the courts to determine
its reasonableness. The condemnation of all such clauses, however, under a contracts theory as
well as for public policy reasons, hinders the goal of uniformity in international bills of lading
strived for in the Hague Rules and COGSA. Moreover, this absolute rule highlights the need for
a more reasonable approach because of the lack of discretion provided to U.S. courts by this view.

Forum Selection and Forum Non Conveniens

The doctrine of forum non conveniens permits a court to decline jurisdiction when an adequate
alternate forum. exists in which to hear a case In Gulf Oil Corp. v. Gilbert, the Supreme Court set
forth guidelines that a court may use to decide the proper forum for a case. In general, a Gilbert
analysis requires the court to balance private interest factors, such as the access to proof, the costs
of obtaining willing witnesses, and compulsory process for unwilling witnesses, against public
interest factors, such as the interest of another forum in having the case heard there. Furthermore,
a court using forum non conveniens in a maritime contract proceeding not involving COGSA
presumes that a choice of law made by the parties should control, but a court still may apply a
forum non conveniens analysis to determine whether another country's laws would violate COGSA
by relieving or lessening a carrier's 1iability. A court may use the forum non conveniens approach
in an admiralty case to allow parties to dismiss a dispute in favor of an alternate forum, including
the one chosen in a forum selection clause, without contravening the legislative intent of COGSA.
Under this approach, the court may consider the reasonableness of the forum selected by
considering the availability of witnesses, the place of contract, and the relative bargaining power
of the parties. Therefore, a forum non conveniens analysis permits a court to ensure that a forum
selection clause receives proper consideration and does not contravene COGSA. The application
of a forum non conveniens analysis, however, places a great burden on a defendant when not
considered in the context of a valid forum selection clause. A motion for dismissal on the grounds
of forum non conveniens usually would require the defendant carrier, as the moving party, to
provide the bases for the granting of the motion. The Bremen, however, placed the burden of
proving the unreasonableness of a forum selection clause on the shipper as the moving party. The

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combination of a forum non conveniens analysis with a valid choice of forum clause recognizes
the needs of modern businessmen to contract freely and removes uncertainty from the terms of a
bargain. The two approaches balance each other by requiring both carriers and shippers to prove
or disprove the reasonableness of the selected forum or the existence of a more convenient forum
for the settlement of a dispute. A forum non conveniens analysis in the context of a valid forum
selection clause would permit courts to implement a less liberal application of The Bremen
principle in cases where COGSA applies to a bill of lading dispute. The court could determine the
applicable law and the appropriate jurisdiction in which to resolve a dispute under a forum
selection clause and decide whether the dismissal of a case would violate the Congressional intent
of COGSA. This more reasonable approach to the consideration of forum selection in bills of
lading gives shippers the protections provided in COGSA and simultaneously considers the
interests of a carrier to ensure fairness in deciding jurisdiction over these disputes arising in
international commerce.

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BIBLIOGRAPHY
Books

1. Day and Griffin: The Law of International Trade, 2nd Edition

2. Incoterms in Practice, International Chamber of Commerce, (ed. and contributor of a chapter

on Incoterms and the Contract of Carriage), 1995

Websites

1. http://westlaw.com

2. http:// www.findarticles.com

3. http://hinduonnet.com

4. http://www.legalserviceindia.com

5. http://www.helplinelaw.com

6. http://www.jstor.org

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