Bill of Lading as a Receipt
The bill of lading acts as a receipt, confirming to the shipper the details of the goods which he has entrusted to the shipowner by loading them on board. As a receipt, they record the quantity, nature and the condition of goods loaded aboard the ship.
Every time goods are placed on board a ship, the shipper is entitled to demand a bill of lading containing certain terms. Most bills of lading will be subject to the Hague or Hague-Visby Rules, either under national law or under the terms of the bill of lading contract. These rules may be replaced in the future by the Rotterdam Rules, which will make many changes. At present, it is unclear if or when the Rotterdam Rules will apply.
Article III of the Hague & Hague-Visby Rules provides: 3. After receiving the goods into his charge, the carrier or the master or agent of the carrier, shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things
(a) The leading marks necessary for the identification of the goods as the same are furnished in writing by the shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown clearly upon the goods if uncovered, or on the cases or coverings in which such goods are contained, in such manner as should ordinarily remain legible until the end of the voyage;
(b) Either the number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper;
(c) The apparent order and condition of the goods: Provided that no carrier, master or agent of the carrier, shall be bound to state or show in the bill of lading any marks, number, quantity, or weight which he has reasonable ground for suspecting not accurately to represent the goods actually received or which he has had no reasonable means of checking.
Such a bill of lading be prima facie evidence of the receipt of the goods as therein described in accordance with paragraph 3(a), (b) and (c). English law says that a bill of lading is a representation about the quality and weight of the goods shipped. The representation is made by the bill of lading carrier. If that representation contains no qualification then it is prima facie evidence of the shipment of the quantity of goods stated in the bill [as in Delfini (1990)]. Prima facie means that the carrier under the bill of lading can challenge the bill of lading quantity, if there is a dispute with the shipper, but the carrier must provide evidence.
However, once the bill of lading has been transferred to a third party, that is, the buyer of the goods, then the details, such as the quantity, recorded in the bill of lading cannot be challenged by the carrier. He is bound by the details in the bill. What if the master of the ship disputes the amount of goods loaded and thinks it is less than what the shippers say? He is entitled to refuse to sign the bill of lading [as in Boukadoura (1989)]. Typically this problem is resolved in one of two ways.
Letter of Indemnity (LOI)
A Letter of Indemnity can be issued by the shipper or charterer to the carrier. More commonly, the face of the bill of lading is marked with the words ‘the stated weights and/or quantities and grades are supplied by the shipper and these weights and/or quantities and grades are unknown to the master.’ These words mean the carrier is not making a representation of quantity etc, and so is not bound.
Usually, this is included in the printed terms of the bill of lading such as CONLINEBILL 2000. The bill of lading is a receipt describing the condition of goods on shipment. It is typical that bills of lading contain a representation that the goods are shipped in ‘apparent good order and condition’. If the goods are loaded on board in apparent good order and condition, then there will be no written qualifications Clauses added by the master onto the bill of lading. Such a bill of lading is said to be Clean.
If the goods are not in apparent good order and condition on loading, the Ship Master or the Carrier is required to Clause the bill of lading recording the defects in the goods. Once that bill of lading is transferred to a third party acting in good faith, that is, the buyer of the goods, then the carrier under a clean bill of lading is bound by the representation as to the apparent good order and condition of the cargo. That is the case even if the goods were not in apparent good order and condition on shipment.
Even if the carrier can prove that the goods were not in good condition on loading, he cannot challenge that. He should have claused the bill of lading when it was issued. Apparent good order and condition was defined many years ago in Peter De Grosse (1875) as meaning ‘apparently and, so far as meets the eye, and externally, they were placed in good order on board the ship’. Therefore, there is no representation as to the quality of the goods, nor to any non-visible condition of the goods.
The Ship Master has a responsibility to record accurately the apparent order and condition of the goods in the bill of lading. However, he is not an expert, and will probably load lots of different cargoes. Two different cases, David Agmashenebeli (2003) and Sea Success Maritime Inc. v African Maritime Carriera Ltd (2005) held that the Ship Master had a responsibility to make a reasonable assessment of the condition of the goods, using his own knowledge, on the understanding that he was not an expert. The condition of the goods is an area where real dispute can arise, as even if the shippers say that the goods are in apparent good order and condition, the master may not agree. This is a dispute that must be resolved before the vessel sails.