History of Admiralty law

&
Bills of Lading
Capt. Pankaj Kapoor
 Bills of Lading

▪ Bills of lading is one of the most important documents issued in

International Transportation of goods.
▪ It’s a document against which banks offer credit to finance International
movement of goods.
▪ Legally a Bill of Lading is defined as a document issued by the carrier. A
Bill of Lading provides details of the goods shipped ,description of cargo,
condition of cargo ,place of origin ,place of destination etc.
▪ Thus, a bill of lading in shipping is a record of the traded goods which
have been received on board. It is a document that establishes an
agreement between a shipper and the carrier for the transportation of
goods
 Bills of Lading

A BILL OF LADING serves the following functions;

a) It’s a document of Title

b) It’s a receipt of goods

c) Its an evidence of a contract

 Bills of Lading

DOCUMENT OF TITLE:
In International movement of goods ,this is the most important function of a
Bill of Lading.
It enables the Holder to deal with the goods described in it as he deems fit. He is
the owner of goods. Under Law the term “Holder” means the OWNER of the goods
meaning the person who has sole “Title” and the right to ownership.
The holder of a bill of lading is entitled to take possession and delivery of the
goods upon surrender of an original bill of lading. Hence a Bill of lading differs
from other documents like a Sea waybill where only proof of identification is
required to take delivery or a Straight Bill. Sea Waybill or Straight bills can not
be transferred.
 Bills of Ladings

In The Delfini Mustill LJ described what is meant by “Document of Title "in

relation with Bill of Lading
“It signifies that in addition to its other characteristics as a receipt for the
goods and evidence of a contract between the shipper & the shipowner, the
Bill of Lading fulfils two distinct functions
1.It is a symbol of constructive possession of the goods which(unlike many
such symbols)can transfer constructive possession by endorsement and
transfer ,it is a transferable “key to the warehouse”
2.It is a document which, although not capable of directly transferring the
property in the goods which it represents, merely by endorsement and
delivery, nevertheless it is capable of being part of the mechanism by which
property is passed.”
 Bills of Lading

RECIEPT OF GOODS
A Bill of Lading acts as a receipt of the goods loaded on board a vessel. Hence
once the goods are loaded it is the duty of CARRIER to issue the Bill of Lading
“on demand”.
The bill of lading records the date on which the entire goods were loaded or
rather the date on which cargo loading was completed. It provides evidence
of the apparent condition and quantity of the goods. Indian law incorporates
the Hague/Visby Rules by the Carriage of Goods by Sea Act. COGSA states that
the figures on the bill of lading will be conclusive evidence between the
carrier and a third party receiver in whose name the title to goods have
passed.
 Bills of Lading
(Evidence of a contract)

This function of a bill of lading can be best understood by the below

explanation
Vessel name : ABC
Charterers name: XYZ
Charterers/shippers wish to export 10,000 pairs of shoes from India to UK .
Charterers (XYZ) and owners of ABC sign a contract of carriage for carriage of
shoes on 19th July.
Ship arrives on 1st August and completes loading on 5th August.
Bill of Lading issued on 5th August on completion of loading.
Since terms & conditions of carriage are already agreed in the “contract of
Carriage” on 19th July ,Bill of Lading merely acts as an EVIDENCE of an
already existing contract between charterers and shipowners
 Bills of Ladings
(Types of Bills of Ladings)
BILLS OF LADINGS ACT AS CONTRACT BETWEEN CARRIER & CONSIGNEE:
1 Contract of Sale

shipper buyer
3
Contract of Carriage Ship 5 After Endorsement a
19th July
2 owner th contract is automatically
B/L issued 5 August created between carrier
& Holder of B/L
NOTE: What is of significance here is that there is NO pre-existing contract between Ship Owner &
Buyer. But as soon as the B/L is endorsed ,a contract is automatically established. Thus B/L becomes
the contract between Ship Owner & buyer. After endorsement B/L becomes a CONCLUSIVE EVIDENCE
of the goods loaded on ship (Leduc v Ward)
 Bills of Ladings

EVIDENCE OF A CONTRACT;

As a “Contract of Carriage” is already signed before the

vessel arrives and the goods are loaded ,the bill of lading
merely acts as an evidence of the contract of carriage. It
is not the contract of carriage itself.
Thus a contract of carriage for goods exists well before
the Bills of Ladings are issued.
Though as between the carrier and the consignee a Bill of
Lading acts as an actual contract of carriage.
 Bills of Ladings

Case Law : Evidence of a Contract

In Crooks v Allen Lord Justice Lush commented “ B/L is not a contract , only an
evidence of a contract”
This position was further strengthened in The Ardennes case (1951). In this case the
claimant was exporting mandarin oranges from Spain to London. The claimant wanted
the cargo to reach London by 1st December in order to avoid paying an increased
import duty. Contract of Carriage negotiated before issuing of B/L had an express clause
stating that the vessel would sail direct to London. But the ship went to Antwerp
(Belgium) before heading for London reaching there on 4th Dec . The bill of lading
contained a ‘liberty to deviate’ clause, which entitled the vessel to call at intermediate
ports on the voyage to London. There was thus conflicting terms between Carriage
contract and B/L. Due to late arrival the claimant had to pay extra duty and suffer
losses as also the prices of oranges had fallen
Held: The claimant brought a successful action against the carrier for damages for
breach of the express provision in the contract not to deviate.
 Bills of Ladings

CASE LAW:
In Leduc v Ward , a ship was confirmed to carry cargo from Rijeka to Dunkirk.
This was made explicit in the B/L. Prior arriving Dunkirk , the ships captain
diverted the ship to Scotland , where the ship sank resulting in complete loss
of cargo.
The cargo owner (or the endorsee) brought a claim against the shipowner for
diverting which is not permitted. However the ship owners contended that
such a deviation was justified as the shippers (sellers) were aware of ships
intention to deviate and the loss of ship & cargo was due to a “perils of sea”
HELD : the deviation was not justifiable and the shipowner, who was denied
the protection of "perils of the sea", was liable to the cargo-owner. The
secondary argument that a sinking was inevitable because of the ubiquity of
the storm was dismissed out of hand as hypothetical.
 Bills of Ladings
(Information available on a B/L)

Following information is available on the face of a Bill of Lading;

▪ Port of Loading: Bill of Lading mentions the port or terminal from where the
goods are loaded
▪ Port of Discharge: It mentions the port of discharge or a range of ports
between which the vessel may be directed to proceed for discharge
▪ Date: mentions the date of issuing a B/L
▪ Name of vessel
▪ Negotiable (Original) or Non-negotiable (COPY): All Bills of Ladings are stamped
whether they are ORIGINALS or COPY. An alternate may also be sometimes
used as NEGOTIABLE or NON-NEGOTIABLE
▪ Number of Originals: Only the ORIGINAL or NEGOTIABLE Bills of Ladings are
marked as Original (1)/ Original (2) etc etc
 Bills of Ladings
(Information available on a B/L)

▪ Shippers name: Shippers name with sometimes address of

shipper is mentioned on the B/L
▪ Name of Consignee: A Bill of Lading depending on the type of
B/L may actually have the name of consignee mentioned or
alternately ,it may have a term like “To the order of -----”
▪ Freight : This section has terms like “Freight Prepaid” or
“Freight as per C/P”
▪ Description of cargo: This section provides the exact description
of the cargo like “10,000 Pairs of Shoes”
▪ Quantity of cargo: This mentions the exact quantity of the
cargo loaded basis which freight is calculated.
 Bills of Ladings
(Information available on a B/L)

▪ Apparent condition of cargo; This usually has a remark

“In apparent good order & condition”
▪ Masters signature: Self Explanatory
▪ Bill of Lading number: Self Explanatory
Bill of Lading -Sample
 Bills of Ladings
(Case Law on shipper’s liability for information on B/L)

In an interesting case ,five containers believed to contain 3,300 bags of PVC granules were shipped
on board a vessel from Busan, Korea to Egypt in 2004. On arrival at Alexandria the containers were
all found to be empty. The receivers in Egypt filed a lawsuit against the carrier claiming
compensation for the non-delivery of the cargo. The matter went up to the Supreme Court.

The appeal in Supreme Court was based on the fact that the containers in question had not been
weighed at the loading port. In addition, on arrival at Alexandria the containers’ seals were found to
be intact without any sign of tampering.

Further, the following disclaimer appeared on the front side of the bill of lading:

“Above particulars furnished by shippers, but without responsibility of or representation by

carrier. ”Shipper’s load, stow, weight and count.”

The Supreme Court held that the above clauses in the bill of lading should have a conclusive effect
on the parties to the contract of carriage and if shippers wish to succeed with their claim they had
to provide evidence that the 3,300 bags of PVC granules were inside the containers at the time
loading on board the vessel. The shippers were unable to do so.
 Bills of Ladings
(Types of Bills of Ladings)

BEARER : These B/L’s are just like a bearer cheque and are highly risky. Just like
a bearer cheque whoever has the possession can take delivery of cargo. These
are very rarely used.
OWNERS: Sometimes owners have their own draft of Bills of Ladings and such
B/L’s are known as “Owners” Bill of Lading.
CHARTERERS: At times Charterers have their own draft of Bill of Ladings. Such
B/L’s are known as “Charterers Bill of Ladings” .
STRAIGHT: In these B/L’s the consignee is fixed and there is no intention to
transfer ownership from the consignee mentioned on the B/L.
Liner: These B/L’s are issued on vessel’s which carry cargoes on fixed
runs(liners).The contract of carriage is usually produced on the back of the B/L’s
 Bills of Ladings
(Types of Bills of Ladings)
SEA WAYBILL : these are “non-negotiable” B/L’s and as such
they serve only two functions of a B/L viz: receipt of goods
& evidence of a contract. Their prime purpose is to avoid
unnecessary delay to the vessel due to late arrival of original
B/L. They are carried on board by the Master who has all the
details of the consignee. He merely has to identify the
consignee and deliver the goods.
SHIPPED: These B/L’s follow a “Received for Shipment” B/L
and are issues as soon as the goods are shipped on board.
 Bills of Ladings
(Types of Bills of Ladings)
ORDER: Order B/L’s are the most common now days.This is a negotiable form
which is addressed “to order” or “to order of [a party]” instead of being consigned to the
buyer. The order bill of lading is commonly used when the purchase of goods is covered by
a letter of credit under the Documentary Credit System or when the intention is to sell the
goods while they are in transit.
Combined transport B/L – This bill gives information about cargo being
transported in containers by sea and land, i.e. through multi-model transport

Dirty bill of lading: If the shipowner raises an objection about “the

condition of the cargo is in good order”, he/she can include a clause thereby
causing the bill of lading to be “claused or dirty” along with the remarks as
per the finding of the cargo condition. E.g. torn packing, broken cargo,
shortage in the quantity of the goods etc
 Bills of Ladings
(Types of Bills of Ladings)
 Bills of Ladings (Types of Bills of Ladings)
CHARTER PARTY BILLS OF LADINGS

Contract of Sale (10,000 pairs of shoes)

shipper Charter Party buyer

Ship
charterer CoC created between
owner owner& recvr after
Contract of Carriage
1.Contract of sale between seller/shipper and buyer/receiver B/L endorsed

2.Contract of carriage between Charterer and shipper

3.Charter Party between Ship owner and Charterer
4.Shipowner issues B/L to Charterer and charterer gives it to Shipper
5.Ship sails on 5th Aug & will reach her destination on 20th Aug
6. On 10th Aug buyer pays seller in full and his name is endorsed in B/L as new owner. Before
endorsement Charterer is the Carrier for Shipper
7.After endorsement title of goods passes to buyers and for them shipowner is carrier
 Bills of Ladings
(Negotiable or Original &
Non Negotiable or Copy)

NEGOTIABLE OR ORIGINAL
Such bills of ladings are the ones which are actually the document of titles
and are negotiable. That is goods can be sold purely by endorsement on the
bills of ladings

NON NEGOTIABLE OR COPIES:

These are merely copies of the original and no sale of goods is possible with
these
 Bills of Ladings
(Precautions when signing Bills of Ladings)

▪ Ensure that the Bill of Lading describes the exact name of cargo
▪ Date on the Bill of Lading should be the date when cargo completed (as per
Uniform Customs & Practices for Documentary Credits or UCP)
▪ Ensure that B/L has remark “Freight as per Charter Party”. If the B/L has a
remark :Freight Prepaid” then Master to sign B/L only if he has WRITTEN
PERMISSION/INSTRUCTIONS from owners.
▪ Master should sign only that many original/negotiable B/L’s as mentioned
like Original (1) Original (2) etc…..
▪ Ensure that all other information on the B/L is as per charterer/owners
instructions.
 Bills of Ladings
(BOLERO SYSTEM)
A recent development in International Transportation of Goods is
introduction of BOLERO system known as Bill of Lading Electronic
Registration Organisation.
The carrier receives electronically shipping instructions and converts
them into a Bolero Bill of Lading (BBL).Carrier then digitally signs
this and sends it back to the shipper via the registry.
The registry then sets up a record of this BBL and gives it a unique
consignment reference number. As soon as the shipper confirms
that he accepts the BBL, he becomes the first recorded holder.
 Bills of Ladings
(BOLERO SYSTEM)
Whenever the shipper wishes to transfer the title ,he send
a transfer request to the proposed new holder via the
registry.
On receipt of this request the proposed new holder has
the right to either accept or refuse the request of transfer
of BBL.
If he accepts, he will become the new recorded holder.
All electronic messages relating to BBL are secured by
digital signatures. This ensures that all the users are the
ones who are actually authorized to do so.
 Claused Bills of Ladings

Number of times , it happens that Charter Parties direct Master to sign “Clean
Bill of Ladings”. This poses a huge problem to Master when the condition of the
goods is not up to the mark.
So what is a Claused Bill of Lading
 A claused bill of lading is used when goods shipped are not as specified in the
specifications or expected quality. They are also ,sometimes known as a "dirty bill of
lading" or "foul bill of lading."
 In a claused bill of lading, the seller may face financial difficulty as banks are
apprehensive in financing such claused Bill of Ladings.
Interestingly the word “CLEAN” should not appear on the Bill of Lading even though the
contract requires a clean bill of lading to be signed
History of Admiralty law
&
Bills of Lading

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