Bill Of Lading, Waybill, Ship's Do
Bill of Lading, Waybill, Ship’s DO
By Dr. Arun Kasi
Last Updated 11th August 2021
Bill of Lading
Bill of lading is the most commonly used ‘shipping document’. It has three functions. First, acknowledgement of receipt by the carrier of the good in the condition and order stated therein. Second, a document of constructive possession to the goods (often called document of title in the sense of title to possession). Third, evidence of the terms of the contract of carriage.
A bill of lading is different from mere ‘shipping contracts’ like a Contract of Affreightment and Charterparty. This is because such contracts do not acknowledge receipt of the goods. It follows that they are not documents of constructive possession.
There are principally three types of bills of lading. One is the ‘bearer’ bill. Another is the ‘order’ bill. The other is the ‘straight’ bill. On a bearer bill, there is no person named in the consignee column. The rights of the shipper under a bearer bill, like a ‘cash’ cheque, can be transferred by delivery of the bill. No indorsement is needed. In the case of an order bill, the consignee column will be filled with a name qualified with the words ‘To the Order of’, eg. ‘To the Order of ABC Bank Ltd’. The rights under this bill can be transferred to another by delivery of the bill by indorsement at the rear side of the bill. It can pass on this way by endorsement after endorsement, eg. ABC Bank Ltd signs off (indorses) to Intermediate Buyer Ltd, who in turn signs off (indorses) to Final Buyer Ltd.
These characteristics of the bearer and order bills render them a tradable document, called ‘negotiable’ or ‘transferrable’ instrument. In the case of a straight bill, the consignee is named without any qualification like ‘To Order of’. This cannot be negotiated. Two things must be observed in connection with this. First, the shipper (or consignor) can return the bill to the carrier to have the name of the consignee ‘switched’ to another. Second, the consignee may only obtain the goods by the production of the bill to the carrier. Hence, the negotiable or transferable function is present in this bill, with the limitation that it can only be transferred once.
When the bill is properly transferred to another, the transferee gets two distinct rights. One is the contractual rights under the bill of lading, which is transferred by s 1 of the UK Bills of Lading Act 1855 (now repealed in the UK but applies in Malaysia through ss 3 and 5 of the Malaysian Civil Law Act 1956). In the case of the UK, it is transferred by s 2 of the UK Carriage of Goods by Sea Act 1992. Another is the constructive possession embedded in the bill. This is independent of contract and transfer of contractual rights. By the constructive possession function, the bill acts as a token or symbol of goods. This means the person returning the bill is entitled to possession. The best analogy to this is where one puts his belongings in the customer service counter of a supermarket and collect a goods token. The counter will return the belongings to anyone presenting the token, as the token represents the goods, i.e. constructive possession.
Other terminologies used with bills of lading include ‘switch’ bill, which indicates that the lawful holder of the bill has returned the bill to the carrier and the carrier has issued a replacement bill. Usually, this will be done to remove from the picture the name of the original shipper which will appear in the original bill.
A bill will be called as a through bill where the carriage is carried out in more than one leg of sea voyage, eg. transshipment. There are three types of through bills. One is true through bill (i.e. the original carriers subcontracts on its own behalf to an on-carrier to perform some legs of the sea carriage). Another is a false through bill (i.e. the original carrier passes on to an on-carrier on behalf of the cargo interest). The other is collective through bill (i.e. the original carrier contracts on behalf of itself and all other on-carriers).
A bill is called a ‘clean’ bill when it acknowledges receipt of the goods in good condition and order, without any qualification. It will be a ‘claused’ bill where the apparent condition and order is qualified such as ‘quantity not known’, ‘quality not known’, Relta clause, ‘container said to contain’, etc.
‘Ocean’ bill means an issued by the shipowner or demise charterer usually for a voyage to be performed in a single leg. In practice, Non-Vehicle Owning Carrier (NVOC), also called Non-Vehicle Owning Common Carrier (NVOCC), issues bills of lading. Examples of NVOC issuing the bill are a freight forwarder, time charterer and voyage charterer. In the case of a charterer issuing the bill, usually, there will be a demise clause and/or identity of carrier clause. This will say that the bill is issued on behalf of the shipowner or demise charterer. Accordingly, although signed by the charterer, it will be a shipowner’s bill (i.e. the legal issuer is the shipowner). For purposes of action based on the bill of lading contract, it is necessary to identify who the legal issuer of the bill is.
The lawful holder of the bill has the possessory interest (but not necessarily the proprietary interest) in the goods. Only the lawful holder can claim the goods from the carrier. In practice, while the bill is in transit, the cargo interest will give an indemnity to the carrier and collect the goods on undertaking to deliver the bill later. When the carrier releases the goods on such indemnity, the carrier does so at his own risk. Subsequently, if another person claims the goods with the bill of lading, the carrier will have to compensate him without any defence. This is called a misdelivery action in tort of conversion. In the same circumstances, an action may also lie in contract for non-delivery.
The contractual rights and obligations between the parties, from the commencement of loading to the end of discharge, which is also called approximately ‘tackle to tackle’ or ‘alongside rule’, is usually regulated by one of the international conventions adopted by the relevant legislation. In the case of the UK and Peninsular Malaysia (wef 15 July 2021), the convention is Hague-Visby Rules of 1968 as amended by the SDR Protocol of 1979. In the case of Sabah and Sarawak, it is still the Hague Rules of 1924. This is, in Sarawak, by Merchant Shipping (Implementation of Conventions Relating to Carriage of Goods by Sea and to Liability of Shipowners and Others) Regulations 1960. For Sabah, by Merchant Shipping (Applied Subsidiary Legislation) Regulations 1961, that incorporates by reference the 1960 Sarawak Regulations. For Peninsular Malaysia, the effect is given to the Hague-Visby Rules as amended by the SDR Protocol by the Carriage of Goods by Sea Act 1950 as amended by the Carriage of Goods by Sea (Amendment) Act 2020 (in force from 15 July 2021). In the UK, the Rules are given the force of law by the Carriage of Goods by Sea Act 1972.
Some of the important features of the Hague-Visby Rules as amended by the SDR Protocol is that the liability is limited per package or unit or gross weight of cargo in terms of SDR. Apart from that, in the case of containerised cargo, these Rules declare that the units enumerated in the bill to be contained in the container are the units for the purposes here. The Rules require the carrier to ensure that due diligence is exercised to ensure the vessel is seaworthy and cargoworthy at the outset of the voyage commencing from the time of loading. It imposes on the carrier the obligation to load, carry and discharge the goods with due care. It also comforts the carrier with numerous important defences. One such defence is where cargo is damaged due to the fault of the crew in the management or navigation of the vessel. Another such defence is where the damage is by fire not due to the actual fault or privity of the carrier. These defences are indeed very wide. This tells that the cargo interest must effectively be protected only by its own cargo insurance.
The time limit for taking a cargo action against the carrier is one year from the date of delivery or supposed delivery. In the case of an indemnity (or contribution) action, it is as per the national law subject to a minimum of three months from the relevant date.
The key common law obligation, operating under the Rules regime, is the duty on the carrier not to deviate without reasonable justification.
Where goods are damaged A carrier can be liable on contract, negligence or bailment. The protection afforded to a carrier by the terms of the bill and/or Hague-Visby Rules is typically extended to independent carriers by a Himalaya clause and circular indemnity clause. In the case of agents and servants, the protection under the Rules is extended to them by the terms of the Rules themselves.
There are also obligations on the shipper in relation to dangerous cargo both under the common law and Rules.
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Disclaimer: While every effort has been taken to ensure the accuracy of the information freely provided online as of the date they were uploaded, no liability is accepted in the event of any inaccuracy. Readers are to independently ensure both their accuracy and currency. © Dr. Arun Kasi, 2020. All rights reserved