1. Functions of a bill of lading
  2. As Evidence of the contract
  3. As Receipt
  4. Receipt for Goods Shipped (in general)
  5. Receipt as to Quantity
  6. Receipt as to Condition
  7. Receipt as to 'Leading Marks'
  8. Receipt as to Quality
  9. Receipt as to Date of Shipment
  10. As a document of title
  11. As a "QUASI NEGOTIABLE" instrument
  12. Commercial Significance of Bills of Lading
  13. Other Aspects of the Commercial Significance of B's/L


Functions of a bill of lading

  1. it is very good evidence of the contract of affreightment, though not the contract itself,
  2. it is a receipt for the goods shipped and contains certain admissions as to their quantity and condition when put on board,
  3. it is a document of title, without which delivery of the goods cannot normally be obtained,
  4. it can be used as a 'quasi negotiable' instrument.

As Evidence of the contract

  1. Where the charterer is also the shipper, the rights of the shipowner and the charterer will be governed by the charter-party alone. The b/l cannot vary or add to the terms of that charter-party unless it is expressly provided.
  2. Where the charterer puts the ship up as a general ship, the contract of carriage will in each case be evidenced by the b/l given to each shipper, irrespective of the terms of the charter-party unless the contrary has been expressly agreed.
  3. Where the charterer indorses a b/l so as to transfer the rights and obligations evidenced by it, the indorsee will not be affected by the terms of the charter party

As Receipt

Receipt for Goods Shipped (in general)

Receipt as to Quantity

i) at Common Law
The b/l is prima facie evidence that the quantity of goods alleged to have been shipped has been shipped in fact. But the shipowner is entitled to show that the goods were never shipped.
If the b/l contains the words "weight and quantity unknown", it is not even prima facie evidence.
There is an implied obligation on the part of the shipper that the b/l which he presents for signature by the master, should relate to the goods actually shipped and that they shall not contain misdescriptions which are known to be incorrect.
ii) under the CGSA '71
A shipper can demand that a b/l be issued to him showing 'either the number of packages or pieces, or the quantity, or weight, as furnished in writing by the shipper. Such a b/l is prima facie evidence of the receipt of the goods as therein described.
The shipper is deemed to have guaranteed the accuracy at the time of shipment of the quantity and weight as furnished by him, and must indemnify the shipowner against all loss, damages and expenses arising from inaccuracies in such particulars.
iii) under the Bills of Lading Act 1855
The b/l is a conclusive evidence, as against the master or other person signing it, that the goods represented to have been shipped were actually shipped.

This does not apply when:
a) the holder of the b/l knew that the goods had not been shipped;
b) the person signing it can show that the misrepresentation was due to the fraud of the shipper, the holder of the b/l, or someone under whom the holder claims.
The above rule does not make a person liable for non-delivery of any goods represented as having been shipped. It only gives the consignee or indorsee for value a statutory estoppel to rely on to show that the goods were shipped.

Receipt as to Condition

The rules apply for goods described in the b/l as being 'shipped in good order and condition'.

a) As between the shipowner and a charterer who was also the shipper;
In this case the position is governed by the charter-party and the purpose served by the b/l is limited to its purpose as a receipt.
b) As between the shipowner and a shipper other than the charterer;
The admissions in the b/l afford some evidence against the shipowner.
The shipper must show that the damage was due to fault on the part of the shipowner, or else that the goods were in fact shipped in good condition internally.
c) As between the shipowner and an indorsee for value of the b/l:

i) At Common Law
The shipowner will be estopped by the admissions contained in it.
The statement in the b/l must be clear and unambiguous (clean bill of lading).
ii) Under the CGSA '71
Any shipper can insist upon the b/l containing a statement as to the 'apparent order and condition' of the goods, which is prima facie evidence of the receipt by the carrier of the goods as therein described.

Receipt as to 'Leading Marks'

i) At Common Law
A person who has signed a b/l can show that the goods shipped were marked otherwise than as stated, unless the marks are material to the description of the goods.
ii) Under the CGSA '71
A shipper can insist on a b/l showing ' the leading marks necessary for the identification of the goods' which is prima facie evidence of the receipt by the shipowner of the goods as therein described.

The master can refuse to incorporate them in the b/l if:
a) the goods are not clearly marked in such a manner as should ordinarily remain legible until the end of the voyage;
b) suspects that the information relating to them supplied by the shipper is inaccurate or he has no reasonable means of checking it.
The shipper is deemed to have guaranteed the accuracy at the time of shipment of the quantity and weight as furnished by him, and must indemnify the shipowner against all loss, damages and expenses arising from inaccuracies in such particulars.

Receipt as to Quality

A master does not generally bind the shipowners by a description of the quality of the goods.

Receipt as to Date of Shipment

Where the date of the b/l is to be accepted as proof of the date of shipment, and the b/l are indorsed, the indorsees are entitled to claim damages from the shipowners on discovering that the shipowners' agents were unauthorized to insert the date and had inserted a false one.

As a document of title

Possession of a b/l is equivalent in law to possession of the goods (rights and liabilities). It enables the holder to obtain delivery of the goods at the port of destination and, during transit, it enables him to 'deliver' (i.e. sell) the goods by merely transferring the b/l.
When the word 'negotiable' is used in relation to a b/l, it merely means transferable.

As a "QUASI NEGOTIABLE" instrument

A b/l, unlike a bill of exchange, is not a ("fully") negotiable instrument. The holder of a b/l who indorses (transfers) it to an indorsee, cannot therefore give a better title than he himself has. For example, if a b/l is lost or stolen and is acquired by a person who in his turn, sells it to a third party, the indorsee is not the legal owner of the goods described in that b/l.

Commercial Significance of Bills of Lading

Masters used to consider that the only contract that concerned them was their vessel's charter-party. In practice however the b/l is often of at least equal importance, and if the value of the cargo is concerned, in many cases of more importance as the potential consequences to the shipowner of non-fulfilment or breach of that contract can far exceed the potential for non-fulfilment under a vessel's time-charter.
The shipmaster is therefore called upon to do three things, namely to ensure that the quantity and quality of cargo received is properly described, to deliver the goods safely and in good condition at the designated place in accordance with the contract of carriage, and to satisfy himself that the cargo is being delivered to the proper cargo owner.

In signing or allowing the b/l to be signed on his behalf the Master is accepting for the shipowner, that the quantity and quality of cargo received is as described in the b/l.
Quantity must be verified as accurately as possible by whatever means are available, to ensure that the stated quantities have actually been received on board. Failure to do so can render the shipowner liable to claims at the discharge port for shortage of outturn if the quantities stated in the b/l are above those actually discharged. Obviously therefore great care is necessary.
Again every effort must be made to ensure that the b/l properly describes the quality of the cargo that is loaded.

Under the contract of carriage a shipowner is required to carry the cargo stated from the named port of loading to the named discharge port by direct route without deviation unless for safety or emergency reasons, diligently to care for the condition of the cargo being carried, and deliver 'what she receives as she received it, unless relieved by the excepted perils'.
A signed b/l is evidence of the quantity and condition of the goods put on board.
Proper diligence must be exercised not only during the voyage itself, but also prior to commencement of loading to ensure that your vessel is in a fit and proper condition to carry the stated cargo. Hence, checks must be made, and they must also be recorded properly to be of any value as defense against potential claims.
The final responsibility is to ensure that the cargo, in good condition, is fully delivered to the rightful owner.
This is not as easy as it might first appear as the cargo owner named in the b/l may have already sold the cargo before the vessel arrives at the discharge port. Fortunately, purchase of cargo still includes acquisition of the b/l and thus the Master is able to determine the rightful owner of the cargo.

The commercial significance of b/l relies on the fact that they have been long established as a useful, flexible and reliable document for international trade.

Their usefulness arises from the fact that they contain several pieces of information relating to:

  1. the goods (description, quantity and sometimes quality);
  2. the shipper (name and address);
  3. the vessel (name and flag);
  4. the port of loading;
  5. the destination (named port of discharge);
  6. the carrier (name and address);

These details can be used at any time as reference to the contract of affreightment. Furthermore, b/l are accompanied by a set of rules which regulate the activities involved in an ordinary maritime adventure. This way, each party involved in a contract evidenced by a b/l can easily refer to that particular b/l for his rights and liabilities. The rights and liabilities listed in a b/l are terms of the contract of carriage and breach of these terms are often the basis for any potential claims from the parties involved in it.
Usefulness is also gained by the fact that b/l are very practical and easily transferable documents of title. They are also very flexible in the sense that they are widely used, approved and valid as documents of title when it comes to transferring property of goods.

Flexibility is also gained from the fact that b/l are accompanied by a set of rules which governs the whole adventure. There are several sets of rules which are available and which are used according to the situation, the trade, the custom and according to the needs of the contractual parties. Furthermore, more freedom is gained by the fact that these rules can be used partially, altered and enriched as the contractual parties wish in order to meet their requirements.

Hence a b/l is a complete document which incorporates all the general rules which apply to the particular adventure and also all the specific details relating to the particulars of the case.
Reliability is attached to b/l since their are internationally recognized as a legally binding and 'enforced' document relating to international transport. Several conventions and national laws deal and give effect and powers to b/l such as the Hague-Visby rules, the Hamburg rules, the Carriage of Goods by Sea Act '71 (in the U.K.) etc. Courts usually deal with potential claims arising from a maritime adventure with respect to the rules and terms incorporated in the b/l.

The features that give a b/l its high commercial value are:

  1. it gives control of the goods vis-a-vis both the carrier and third parties;
  2. it constitutes a receipt for identified goods by the party undertaking the responsibility for their carriage;
  3. it establishes the apparent condition of the goods when received by the carrier;
  4. it shows that the goods are in movement rather than static;
  5. it establishes privity of contract between the holder of the document and the carrier.

Other Aspects of the Commercial Significance of B's/L

B/l are also commonly used in different methods/systems of payment. In cases of payment where a bank (or banks) is involved, b/l must be presented to the bank along with other important document (such as: insurance policy, certificate of origin, commercial invoice, etc.). Payment using documentary letters of credit or bills of exchange involve bank transactions and hence require the use of b/l.

Furthermore, modern technology has produced EDI (Electronic Data Interchange) systems which are using a computer-based format of a b/l and all transactions can be done via this system. Possession and transfer of b/l is protected by a system of passwords. For example, a b/l can be easily transferred to a person by simple computer communication systems. The buyer" acquires the b/l from its previous owner who gives away his password to the new owner who, in his turn, inserts a new password in that b/l.

Copyright ©, 1997 Marinet