Bill of Lading

Bill of lading

bill of lading (sometimes abbreviated as B/L or BoL) is a document issued by a carrier (or his agent) to acknowledge receipt of cargo for shipment. In British English the term relates to ship transport only, and in American English to any type of transportation of goods.

A bill of lading must be negotiable, and serves three main functions:

  • it is a conclusive receipt, i.e. an acknowledgement that the goods have been loaded; and
  • it contains or evidences the terms of the contract of carriage; and
  • it serves as a document of title to the goods, subject to the nemo dat rule.

Bills of lading are one of three crucial documents used in international trade to ensure that exporters receive payment and importersreceive the merchandise. The other two documents are a policy of insurance and an invoice. Whereas a bill of lading is negotiable, both a policy and an invoice are assignable.

Description

A bill of lading is a standard-form document that is transferable by endorsement (or by lawful transfer of possession). Most shipments by sea are covered by the Hague Rules, the Hague-Visby Rules or the Hamburg Rules, which require that the carrier MUST issue to the shipper a bill of lading identifying the nature, quantity, quality and leading marks of the goods.

In the case of Coventry v Gladstone, Lord Justice Blackburn defined a bill of lading as "A writing signed on behalf of the owner of ship in which goods are embarked, acknowledging the receipt of the Goods, and undertaking to deliver them at the end of the voyage, subject to such conditions as may be mentioned in the bill of lading. Therefore, it can be stated that the bill of lading was introduced to provide a receipt to the shipper in the absence of the owners.

History

While there is evidence of the existence of receipts for goods loaded aboard merchant vessels stretching back as far as Roman times, and the practice of recording cargo aboard ship in the ship's log is almost as long-lived as shipping itself, the modern bill of lading only came into use with the growth of international trade in the medieval world.

The growth of mercantilism (which produced other financial innovations such as the charterparty (once carta partita), the bill of exchange and the insurance policy) produced a requirement for a title document that could be traded in much the same way as the goods themselves. It was this new avenue of trade that produced the bill of lading in much the same form as we know today.

Although the term "bill of lading" is well known and well understood, it may become obsolete. Articles 1:15 & 1:16 of the Rotterdam Rules create the new term "transport document"; but (assuming the Rotterdam Rules come into force) it remains to be seen whether shippers, carriers and "maritime performing parties" (another new Rotterdam Rules coinage) will abandon the familiar term "bill of lading".

Roles and purposes of bill of lading
As cargo receipt

The principal use of the bill of lading is as a receipt issued by the carrier once the goods have been loaded onto the vessel. This receipt can be used as proof of shipment for customs and insurance purposes, and also as commercial proof of completing a contractual obligation, especially under Incoterms such as CFR (cost and freight) and FOB (free on board).

There are two types where bill of lading can be used as carrier's receipt for goods. The first is on board bill of lading, also known as clean bill of lading. Clean bill of lading is used when there is no discrepancy between description filled by shipper and the actual goods shipped on board. Clean bill of lading indicates that the goods have been properly loaded on board the carrier's ship according to the prima facie evidence. If the carrier finds out that the bill of lading is different from goods on board, one can provide contradictory evidence on clean bill of lading. It is valid as long as in the hand of the carrier, but once it is transferred and negotiated to the third party, it cannot be rebutted and the carrier can no longer mark discrepancy. The second is claused bill of lading. Claused bill of lading is used when there is some discrepancy between description in the bill of lading and the actual goods. For claused bill of lading, one can mark only when the goods are loaded.

As evidence of the contract of carriage

The bill of lading from carrier to shipper can be used as an evidence of the contract of carriage by the fact that carrier has received the goods and upon the receipt the carrier would deliver the goods. In this case, the bill of lading would be used as a contract of carriage. Also, the bill of lading can perform as a contract of a carriage. In this case, the bill of lading can be used if shipper does not properly ship the goods than the shipper cannot receive the bill of lading from the carrier. Eventually, the shipper would have to deliver the bill of lading to the seller. In this case, the bill of lading is used as a contract of carriage between seller and carrier. However, when the bill of lading is negotiated to a bona fide third party then the bill of lading becomes a conclusive evidence where no contradictory evidence can be introduced. It is because the third party cannot examine the actual shipment and can only pay attention to the document itself, not survey or examination of the shipment itself. However, the bill of lading will rarely be the contract itself, since the cargo space will have been booked previously, perhaps by telephone, email or letter. The preliminary contract will be acknowledged by both the shipper and carrier to incorporate the carrier's standard terms of business. If the Hague-Visby Rules apply, then all of the Rules will be automatically annexed to the bill of lading, thus forming a statutory contract.

 
As title

When the bill of lading is used as a document of title, it is particularly related to the case of buyer. When the buyer is entitled to received goods from the carrier, bill of lading in this case performs as document of title for the goods. There are two types of bill of lading that can perform as document of title. They are straight bill of lading and order bill of lading. Straight bill of lading is a bill of lading issued to a named consignee that is not negotiable. In this case, the bill of lading should be directed only to one specific consignee indicated on the bill of lading. Order bill of lading is the opposite from a straight bill of lading and there is no specific or named consignee. Therefore, an order bill of lading can be negotiated to a third party.

Simply, the bill of lading confers prima facie title over the goods to the named consignee or lawful holder. Under the "nemo dat quod non habet" rule ("no one gives what he doesn't have"), a seller cannot pass better title than he himself has; so if the goods are subject to an encumbrance (such as a mortgage, charge or hypothec), or even stolen, the bill of lading will not grant full title to the holder. Original Source