Bill of Lading under Charter Party
Bill of Lading (B/L) is a commercial document covering transportation, some or all of which will be across the sea. Bill of Lading (B/L) stipulates that cargoes have been shipped on a particular vessel or that cargoes have been received for shipment.
Bill of Lading (B/L) is signed by Carrier or on behalf of the Carrier.
Bill of Lading (B/L) stipulates the terms on which cargoes have been delivered to and received by the Carrier. Bill of Lading (B/L) is signed and delivered by the Carrier to the Shippers.
Sea transportation differs from any other form of transportation in that, for a significant period, the cargoes are physically remote. Therefore, physical remoteness adds some exclusive features to Bill of Lading (B/L).
Three (3) Functions of Bill of Lading (B/L):
1- Evidence of a Contract
2- Receipt
3- Document of Title (DOT)
1- Evidence of a Contract
The contract to ship cargo is made well before the Bill of Lading (B/L) is signed. Therefore, when it is first produced the Bill of Lading (B/L) cannot be the contract itself. Nevertheless, a Bill of Lading (B/L) is evidence that there is a contract of shipment between the Shipper and the Carrier (Shipowner or Ship Operator).
In the Ardennes (1950) case, the Shipper was worried that the consignment of Spanish oranges should reach London before a scheduled increase in import duty and obtained an assurance that the vessel would proceed directly to London. On the way, the Shipowner decided to make Antwerp the vessel’s first port of discharge so that the oranges did not reach London until after the critical date. The Shipowner attempted to claim their right under the Liberties Clause in the printed wording of the Bill of Lading (B/L). However, Lord Goddard, in establishing the Shipper’s right to recover damages for breach of contract, highlighted that the contract, albeit a verbal contract, came into existence before the Bill of Lading (B/L) was signed. Furthermore, Lord Goddard, to underline the fact that a Bill of Lading (B/L) was not the contract, pointed out that a Bill of Lading (B/L) is only signed by one party. Therefore, a Bill of Lading (B/L) is evidence of a contract. Undoubtedly, a Bill of Lading (B/L) is considered the best evidence of a contract.
Endorsed Bills of Lading (B/L)
When the Bill of Lading (B/L) is transferred to an Endorsee, then the Bill of Lading (B/L) is the contract of carriage between the Endorsee and the Carrier. The terms of carriage will be those clauses incorporated in the Bill of Lading (B/L) itself. Therefore, an Endorsee of a Bill of Lading (B/L) is not affected by any contract between the Shipper and the Carrier.
If the Carrier (Shipowner or Ship Operator) wants to incorporate into Bills of Lading (B/L) a clause that is completely out of keeping with the customary procedure, the Carrier (Shipowner or Ship Operator) ought not only to make it obvious in words but also to make it apparent by inserting it in such style and such part of the Bills of Lading (B/L) that an individual of ordinary capacity could not fail to notice unusual term.
Bill of Lading (B/L) is not the contract but simply evidence of the contract. It does not follow that an individual, who accepts the Bill of Lading (B/L) that the Carrier delivers, is required and without regard to circumstances bound to abide by all Bill of Lading’s (B/L) terms.
When a Charterer employs the vessel to carry cargo for himself, then the Bill of Lading (B/L) is a Receipt and maybe a Document of Title (DOT) as well for the cargo. In this case, the Bill of Lading (B/L) is neither Evidence of nor the Contract of carriage. The Charterparty retains the contract for the carriage of the cargo between the Charterer and the Carrier (Shipowner or Ship Operator).
When the Shipper is not the Consignee, the Bill of Lading (B/L) is the contract of carriage between the Carrier (Shipowner or Ship Operator) and the Consignee or Endorsee.
Bill of Lading (B/L) on Time Charter (T/C)
Issues may arise when the vessel is on Time Charter (T/C). Who is the Carrier in the contract of carriage under Time Charter (T/C)? The Voyage Charterer (Shipper) made a contract with the Time Charterer (Disponent Shipowner).
When a cargo claim arises the Voyage Charterer’s (Shipper’s) first recourse is inherently against the Time Charterer (Disponent Shipowner) although the damage to the cargo may have been the fault of the vessel. Where the issue can escalate is if the Time Charterer (Disponent Shipowner) is late in dealing with the claim and the Voyage Charterer (Shipper) decides to arrest the ship. Almost invariably, Time Charterparties have clauses that rule how these issues are resolved particularly where the Ship Master is required to sign the Bill of Lading (B/L) on behalf of the Time Charterer (Disponent Shipowner).
2- Receipt
Bill of Lading (B/L) stipulates the quantity and the details of cargoes. In non-containerized cargoes, Bills of Lading (B/L) stipulate the number of tonnes and/or the volume of the cargoes in cubic meters. Furthermore, Bill of Lading (B/L) stipulates any identifying marks or numbers of cargoes.
Bill of Lading (B/L) stipulates the condition of the cargoes when loaded on board. In most Bill of Lading (B/L), the expression “apparent good order and condition” is incorporated. If the “apparent good order and condition” expression is unqualified the Bill of Lading (B/L) is referred to as being a Clean Bill of Lading (B/L). If the cargoes are not in apparent good order and condition then the Bill of Lading (B/L) is referred to as being a Claused Bill of Lading (B/L).
In container shipping, if the cargo is delivered as an FCL (Full Container Load), the Carrier has no way of knowing either the quantity or condition of the cargo themselves and beyond checking that the weight of the container does not exceed its permitted load, the Bill of Lading (B/L) will only show the Container Number. Furthermore, if the Shipper requires a reference to the contents of the container, the Bill of Lading (B/L) will include the expression “said to contain”.
In dry bulk shipping, there is no accurate method for the Ship Master to check the weight of the cargo. A Draft Survey is a reasonable inspection but by no means precise. Consequently, in dry bulk shipping, it is customary for the Bill of Lading (B/L) under a Charterparty to express the weight as Works Weight or Docks Weight, followed by the expression “weight shipped unknown”.
3- Document of Title (DOT)
Bill of Lading (B/L) function as a Document of Title is threefold:
3.1- Negotiable Document
3.2- Claim Cargoes
3.3- Security for Payment
3.1- Negotiable Document
Bill of Lading (B/L) is a Negotiable Document. In other words, Bill of Lading (B/L) is a Transferable Documents. What the transfer of Negotiable Bill of Lading (B/L) does pass is Constructive Possession of the cargoes. In other words, the right to demand of the Carrier the delivery of the cargoes on presentation of the Bills of Lading (B/L). There is no limit to the number of times Bill of Lading (B/L) can be sold-on when the cargoes are still in transit.
3.2- Claim Cargoes
Bill of Lading (B/L) enable the Bill of Lading (B/L) Holder to claim cargoes. The Carrier must only deliver the cargo to the Bill of Lading (B/L) Holder. Therefore, Bill of Lading (B/L) are important documents. Bill of Lading (B/L) is the key to the cargo. The Carrier will not be justified in delivering the cargo to anyone other than the Bill of Lading (B/L) Holder or Bill of Lading (B/L) Holder’s Agent unless there is a particular custom of the port or an Express Agreement to the contrary in the Charterparty.
3.3- Security for Payment
Bill of Lading’s (B/L) third function as a Document of Title (DOT) is a Security for Payment. At the time of cargo shipment, in a case where freight is to be paid on completion of loading, the Carrier or the Carrier’s Agent will not hand over Bill of Lading (B/L) expressing Freight Prepaid without first receiving payment. Furthermore, the function of security for payment materializes when payment for the cargo is via a documentary Letter of Credit (L/C).
International Trade and Bill of Lading (B/L)
In cases where the Shipper has sold the cargoes under a Letter of Credit (L/C) opened through a bank or in cases where the Shipper wants to receive payment before the Consignee receives the cargoes, the Shipper will pass the Original Bill of Lading (B/L) to the bank who, in due course, will arrange a presentation to the Consignee against payment of the cargoes.
Today, most international trade payments are completed via Letter of Credit (L/C). Bills of Lading (B/L) are deemed as a Document of Title to the cargoes. Banks do not want to take actual possession of the cargo. However, Bills of Lading (B/L) allow the banks to facilitate payment for the cargo from the buyer to the seller. If there is any default in payment, the bank could indeed become the actual possessor of the cargo but this is only a last resort position. Therefore, the strictest accuracy of the details in the description of the cargo should appear on the Bills of Lading (B/L). Credit is extended based on a bank’s faith in the facts of the expressed description of the cargo in the Bills of Lading (B/L) and any other documentation the Letter of Credit (L/C) may require:
1- Cargo Invoice
2- Cargo Marine Insurance Policy
3- Consular Documents
4- Cargo Export License
Claused Bill of Lading (B/L) and Letters of Indemnity (LOI)
Banks do not accept Bill of Lading (B/L) that contain any wording to indicate that the cargo, when received on board the ship, was in other than Apparent Good Order and Condition. If any remark appears, the Bill of Lading (B/L) is known as Claused (Unclean) Bill of Lading (B/L). Similarly, banks do not accept Bill of Lading (B/L) that is not Shipped on Board Bill of Lading (B/L). In other words, banks do not accept Received for Shipment Bill of Lading (B/L) which means cargo is not loaded on board the ship.
Usually, the Shipper seeks to present a Letter of Indemnity (LOI) to the Carrier (Shipowner or Ship Operator) which will hold the Carrier (Shipowner or Ship Operator) harmless against the issuance of Clean Bill of Lading (B/L) when in reality the cargo to be shipped is damaged or defective when loaded on the ship. Issuing Clean Bill of Lading (B/L) against a damaged or defective cargo is Fraud and such a Letter of Indemnity (LOI) is not worth the paper it is written on.
In Brown Jenkinson & Co V Percy Dalton (1957) case, an agreement between the Shipper and the Carrier’s (Shipowner or Ship Operator) Agent, whereby the Carrier’s (Shipowner or Ship Operator) Agent agreed to accept from the Shipper the issue of a Letter of Indemnity (LOI) in exchange for the issue of Clean Bill of Lading (B/L) in respect of damaged or defective cargo, was considered by the Court of Appeal to be illegal and unenforceable in the eyes of the law. Undoubtedly, all the elements of the Tort of Deceit were present when the Carrier’s (Shipowner or Ship Operator) Agent made a False Representation which they intended should be relied upon by the receivers of the Bill of Lading (B/L) and the bank.
Any Bill of Lading (B/L) intended for negotiation through a Letter of Credit (L/C) must be issued To Order without any reference to a Consignee. However, Bills of Lading (B/L) may incorporate a space to name a Notify Party. Then, the Bill of Lading (B/L) has to be endorsed by the Shipper which then opens the Bill of Lading (B/L). In other words, anyone holding such Bill of Lading (B/L) can claim title to the cargo even if that person picked up the Bills of Lading (B/L) in the street.
Bill of Lading (B/L) under Charter Party
If a Bill of Lading (B/L) is issued under a Charter Party (Contract of Carriage), the Bill of Lading (B/L) ceases to be considered evidence of this contract. In any contract of carriage which is incorporated in a Charterparty, it is the Charterparty itself that is the contract. Accordingly, the Bill of Lading (B/L) regarding this contract serves simply as a Document of Title (DOT) and as a Receipt.
When the Bill of Lading (B/L) is endorsed to a Third Party (Endorsee), then there is at this point a new and second contract. In this case, the Bill of Lading (B/L) is now deemed as evidence of this second contract.
Incorporation of Charterparty Clauses into Bill of Lading (B/L)
Bills of Lading (B/L) are generally expressed to incorporate the terms and conditions of the Charterparty. How and which provisions are incorporated into the Bills of Lading (B/L) depends primarily on the wording used in the incorporating clause. Only the clauses that are Expressly Incorporated into the Bills of Lading (B/L) will be considered as being so incorporated.
Where the cargo has been loaded on a chartered vessel, the Bills of Lading (B/L) usually incorporate a clause expressing all other conditions and exceptions as per Charterparty. Nevertheless, the incorporating clause does not incorporate provisions that are inconsistent with the Bills of Lading (B/L) or which do not affect the consignee’s right to take delivery. Conclusive Evidence Clause is not considered by the Court to be an exception nor is it considered to be a condition to be performed by a consignee.
For a clause in the Bills of Lading (B/L) to incorporate some or all of the terms of the Charterparty, such a clause must be unambiguous and express. Whether the terms of a Charterparty have been incorporated into the Bills of Lading (B/L) is in each case a matter of construction.
Today, the former interpretation of such clauses as “all terms, conditions, clauses, and exceptions contained in the Charterparty will apply to the Bills of Lading (B/L)” does not be deemed adequate to incorporate any term of the Charterparty which is inconsistent with any Express Term in the Bills of Lading (B/L). Consequently, care must be taken with such incorporation clauses to avoid the possibility of conflicts materializing at a later time.
Incorporation issues become critical when the Bills of Lading (B/L) are transferred from the Charterer to a Third Party (Endorsee) because the Endorsee is not a party to the Charterparty. Therefore, this is where a new contractual case materializes.
The wording of the Bills of Lading (B/L) is the starting pinpoint. A Charterparty clause that is not directly appropriate to the load, carriage, or delivery of the cargoes should not be incorporated into the Bills of Lading (B/L) unless by Express Terms. Even a term that is proper may not be incorporated into the Bills of Lading (B/L) if that term is the proper construction of the relevant contract.
Incorporation Clause:
a- The incorporating clause must be construed to see whether incorporating clause is broad enough to bring about the incorporation of the relevant term. General phrases of incorporation will be effective to incorporate only those terms of the charter which relate to the shipment carriage or discharge of the cargo.
b- The term to be incorporated must make sense in the context of the Bills of Lading (B/L); if the incorporated term does not, it must be rejected.
c- The term to be incorporated must be consistent with the Express Terms of the Bills of Lading (B/L); If the incorporated term is not, it will be rejected.
Arbitration Clause
Arbitration Clause should be directly stipulated in the Bills of Lading (B/L). The parties should not rely upon general terms to accomplish incorporation. Charterparty Arbitration Clause is incorporated into Bills of Lading (B/L) if either there are specific expressions of incorporation in the Bills of Lading (B/L), the Arbitration Clause is so framed as to make sense in the context of the Bills of Lading (B/L) and the clause does not contradict with the Express Terms of the Bills of Lading (B/L); or there are general expressions of incorporation in the Bills of Lading (B/L) and the Arbitration Clause or some other provision in the Charterparty makes it clear that the clause is to govern disagreements under the Bills of Lading (B/L) as well as under the charter. In all other cases, the Charterparty arbitration clause is not incorporated into the Bills of Lading (B/L). A clause aiming to incorporate “all conditions as per charter party” would not express an Arbitration Clause, and a Charterparty Arbitration Clause referring Charterparty disagreements to arbitration could not be manipulated in such a way as to include the Bills of Lading (B/L) disagreements.
Who is the Carrier in the Bills of Lading (B/L)?
When the Bill of Lading (B/L) Holder is not the Charterer the question emerges as to whether it is the Shipowner or the Charterer that the Bill of Lading (B/L) Holder sues for damage to the cargo.
In most cases, the Bills of Lading (B/L) are issued by the Ship Master who is typically the servant and agent of the Shipowner. If cargo is loaded on board a ship under a Charterparty (Contract of Carriage), the usual assumption is that the Shipper has contracted with the Shipowner. In the absence of any exceptional cases, the Shipper may assume that the Ship Master is the agent of the Shipowner. The Ship Master binds the Shipowner even if a form is utilized which is not authorized by the Charterparty (Contract of Carriage). If the Shipper does know the terms of the Charterparty (Contract of Carriage), the Shipper is or should be aware that to sign Bills of Lading (B/L) other than in the particular form is beyond the Ship Master’s authority, the Shipowner will not be liable to the Shipper but the Charterer will be liable.
Sometimes, primarily in the liner trade, Charterers issue their Bills of Lading (B/L), putting themselves forward as the contractual Carrier. In such cases, the Bills of Lading (B/L) Holder will have a choice as to whom to sue for damages to the cargo. In practice, the Bills of Lading (B/L) Holder will protect his interest against both Shipowners and the Charterers.
Bills of Lading’s (B/L) Important Clauses
Ship Operators have been pursuing to incorporate clauses into the Bills of Lading (B/L) that will give them as many rights and immunities as possible. In some cases, such clauses comprise the terms of carriage under which the cargo is carried on the Bills of Lading (B/L). Bills of Lading’s (B/L) Important Clauses are:-
1- Lien Clause: Lien Clause specifies that the Shipowner is entitled to a lien on the cargo in particular cases related to non-payment of the freight. This is a Contractual Lien.
2- Clause Paramount: By Clause Paramount the Hague-Visby Rules may be incorporated within the terms of the Bills of Lading (B/L). Hague-Visby Rules are automatically incorporated into any Bills of Lading (B/L) that serve to evidence the contract of carriage and which is issued in respect of a port of shipment from the United Kingdom. Clause Paramount is crucial because unless expressly incorporated, the Hague-Visby Rules do not apply to Charterparties. Therefore, if a Bill of Lading (B/L) is issued under a Charterparty, the Charterparty will not be covered by the Hague-Visby Rules unless the Hague-Visby Rules are expressly incorporated into the Bill of Lading (B/L).
3- Voyage Clause: Voyage Clause allows the ship to steam with or without pilots or tugs, to tow or to be towed, and to call at any port in any order both on and off the announced route, and to carry particular cargoes on deck.
Hague-Visby Rules (Article 1c) exclude live animals and goods carried on deck from the definition of goods to which the Hague-Visby Rules apply. Nevertheless, in consideration of cargo carried on deck, the exclusion is only effective where the contract of carriage expressly remarks that the goods are carried on deck.
When a Voyage Clause that expressed that cargo may be carried on deck does not have the effect of excluding the Hague-Visby Rules. The Hague-Visby Rules may only be excluded by an Express Notification in the Bills of Lading (B/L) that the precise cargo is being carried on deck. Such a notification would serve as a forewarning to the Consignees (Endorsees) of the Bills of Lading (B/L) that the cargo was being shipped as Deck Cargo. Therefore, the Consignees (Endorsees) would have a total understanding of the facts when accepting the documents and would know that the carriage of the Deck Cargo was not subject to the obligations imposed on the Carrier by the Hague-Visby Rules.
In the absence of Deck Cargo Express Notification in the Bills of Lading (B/L), the Consignees (Endorsees) of the Bills of Lading (B/L) would be entitled to presume that Hague-Visby Rules’ obligations were so imposed. A mere general liberty to carry cargo on deck is not a statement in the contract of carriage that the goods are being carried on deck.
4- Himalaya Clause: Himalaya Clause is incorporated into the Charter Parties (C/P) or Bills of Lading (B/L) to provide to servants, agents, subcontractors, etc. of the Carrier (Shipowner or Ship Operator) the advantages of all the exclusions and limitations enjoyed by the actual Carrier (Shipowner or Ship Operator) under the Bills of Lading (B/L) which protects them against Consignees (Endorsees) for claims in Contract or Tort.
In Adler Vs Dickson (The Himalaya) 1955 Case, Ship Master, and Bosun were held responsible for a passenger who fell due to incorrect rigging of the gang-plank. The injured passenger realized that she could not claim damages from the shipping line under the phrasing of the passenger ticket. The injured passenger successfully sued the Ship Master and the errant Bosun in Tort. Consequently, Shipowners incorporated a clause, expressed in the form of the Himalaya Clause, in all passenger tickets and Bills of Lading (B/L).
Incorporating a Himalaya Clause into a Bill of Lading (B/L) drafted under the Hague Visby Rules is redundant because a form of Himalaya Clause is contained in Article IV bis of the Hague Visby Rules
If the Carrier (Shipowner or Ship Operator) contracts as an agent for a Third Party, for instance, a Dockworker Company, the Third Party can enforce the terms of the Bill of Lading (B/L) against the Shipper:
a- If the Bill of Lading (B/L) explicitly states that the Dockworker Company is entitled to be protected by the provisions in the Bill of Lading (B/L) which limit liability
b- If the Bill of Lading (B/L) explicitly states that the Carrier, in addition to contracting for these provisions on his behalf is also contracting as an agent for the Third Party (Dockworker Company) that those provisions should apply to the Third Party
c- The Carrier has authority from the Third Party (Dockworker Company) to do that
d- Any problems about consideration moving from the Third Party (Dockworker Company) would be overcome
5- General Average (GA) Clause: The Bill of Lading (B/L) expresses the fact that if General Average (GA) is to arise then the York-Antwerp Rules should apply
6- Transhipment Clause: Transhipment Clause expresses the circumstances under which cargo must be transshipped. Transhipment Clause authorizes the Shipowner to undertake a voyage in this way and is a means of enabling the Shipowner to be exonerated from responsibility once the cargo has unloaded from the ship, even though the Shipowner has, under the terms of the Bill of Lading (B/L), undertaken to carry the cargo to the final destination.
7- Salvage Clause: Salvage Clause apply in circumstances where it may be necessary to salve a ship and/or a rowboat. Salvage Clause establishes that a Salvage Award should also be paid in cases where there is a sister ship salvage.
8- Freight Clause: The Freight Clause deals with the settlement of freight under the Bill of Lading (B/L).
What are the Types of Bills of Lading (B/L)?
1- Conventional Bills of Lading (B/L)
Conventional Bills of Lading (B/L) are almost invariably Shipped of Lading (B/L). Conventional Bills of Lading (B/L) are issued for any cargo except that which is carried in a container.
Conventional Bills of Lading (B/L) have been the basic document for general cargo for many years. Conventional Bills of Lading (B/L) are the backbone of any documentary Letter of Credit (L/C) transactions.
Ship’s Rail:
The basic legal point is that liability under such Conventional Bills of Lading (B/L) does not commence until the cargo passes the ship’s rail at the loading port and ceases immediately after the cargo passes the vessel’s rail at discharging port. This may cause some conflicts. For instance, cargo slipping out of the sling over the quayside. Cargo has not passed the ship’s rail therefore the Bills of Lading (B/L) requirements will not have come into play.
Whether or not the Dock Workers are sub-contractors to the Carrier (Shipowner or Ship Operator) may be a moot point. Commonly, the Dock Workers are employees of the terminal with whom the Shipper would have a particular agreement. On the other hand, the Stevedores (workers on the ship itself) are almost always servants of the Carrier (Shipowner or Ship Operator).
In another case, the Consignee was delayed in collecting the cargo which was left on the quayside after the vessel sailed. On collecting the cargo, the cargo was encountered to have suffered rain damage while lying on the quayside. No claim is practicable under the Bills of Lading (B/L) which ceased at the Ship’s Rail. There may conceivably be a claim against the Terminal Operator depending upon the contractual position. Possibly even a claim in Tort against the Ship Agent who had a duty of care towards the Cargo Owner.
Unless the Charterparty (Contract for Carriage) delivers for the Shipper to be responsible for the loading and discharging operations, the Carrier (Shipowner or Ship Operator) may be held liable for any cargo damage occurring before loading and/or the subsequent discharge while the cargo is in the Carrier’s possession. Under these circumstances, the Charterparty (Contract for Carriage) terms are presumably to contractually extend the Hague-Visby Rules to comprise these periods thereby giving the Carrier (Shipowner or Ship Operator) the benefit of the defenses.
2- Received for Shipment Bills of Lading (B/L)
In some rare cases, Received for Shipment Bills of Lading (B/L) are issued. For instance, if there is congestion at the port, whereby cargo may be waiting for shipment on board a ship, the Carrier (Shipowner or Ship Operator) may issue Received for Shipment Bills of Lading (B/L) which means that the cargo has been handed over to the Carrier (Shipowner or Ship Operator) and is in the Carrier’s custody, but the cargo has not been loaded on board the ship. The cargo may be stowed in a storage or transit shed or even on the quayside.
3- Shipped Bills of Lading (B/L)
When the cargo is actually loaded on board the ship, Received for Shipment Bills of Lading (B/L) is changed with the Shipped Bills of Lading (B/L).
Under Shipped Bills of Lading (B/L), the cargo is safely on board the ship in the custody of the Carrier (Shipowner or Ship Operator), under the Received for Shipment Bills of Lading (B/L) this is not so.
Under Received for Shipment Bills of Lading (B/L), the cargo is wide open to the risks of fire, pilferage, loss, or damage caused by the weather. Received for Shipment Bills of Lading (B/L) give no certainty to the safety of the cargo so far as the various parties to the contract of carriage may be concerned. In these cases, Received for Shipment Bills of Lading (B/L) do not evidence of actual shipment. It may be that the cargo is not actually loaded on board the named ship. There is suspicion as to the actual fulfillment of the Shippers’ legal obligations under the contract. Therefore, the Received for Shipment Bills of Lading (B/L) is not acceptable to banks in the transaction of global trade.
4- Through Bills of Lading (B/L)
Through Bills of Lading (B/L) are identical in formation and function to the Conventional Bills of Lading (B/L), except on the face of Through Bills of Lading (B/L), there are boxes for the name of a pre-carrier to be inserted together with the place of acceptance by the pre-carrier. Thereafter the standard port of loading and port of discharge is followed by the name of the on-carrier with space for showing the place of delivery by the on-carrier.
Through Bills of Lading (B/L) are suitable where the ocean carrier is remote from the place of origin and/or place of destination so that the cargo has to be fed to/from the loading/discharging port of the ocean carrier, generally by short-sea ships.
Through Bills of Lading (B/L) should not be confused with Combined Transport Bills of Lading (CT-B/L). The difference between Through Bills of Lading (B/L) and Combined Transport Bills of Lading (CT-B/L) is that, under Through Bills of Lading (B/L), the Ocean Carrier acts as an Agent for the Pre-Carrier or On-Carrier. Under Through Bills of Lading (B/L), Ocean Carrier undertakes to make the arrangements and charges a single through shipping rate but Ocean Carrier’s liability is only for the ocean voyage, claims arising through issues during pre-carriage or on-carriage have to be made to those parties
5- Combined Transport Bills of Lading (CT-B/L)
Combined Transport Bills of Lading (CT-B/L) were practically designed to serve the container business. The face of the Combined Transport Bills of Lading (CT-B/L) is similar to the Through Bills of Lading (B/L) in having extra boxes for the place of receipt and place of delivery.
The essential difference between a Combined Transport Bills of Lading (CT-B/L) and a Through Bills of Lading (B/L) is that under the Combined Transport Bills of Lading (CT-B/L), the Carrier accepts liability for the Entire Carriage.
In the container business, there may be pre-carriage or on-carriage by rail, barge, or truck and with the ocean carriers becoming ever larger, feeder container ships may be used to or from the hub ports. Combined Transport Bills of Lading (CT-B/L) have to deal with all these arrangements and the clauses on the back of the Combined Transport Bills of Lading (CT-B/L) are developed to facilitate these multiple transportations.
One issue that has to be overcome is the variation in international agreements covering ocean carriage, rail carriage, and road haulage. Especially, the variations in international agreements affect Time-Bars and limitations of Liability.
Therefore, Combined Transport Bills of Lading (CT-B/L) stipulates that if loss or damage is occurring whilst being transported by road the applicable convention will be the international convention CMR (Convention Relative au Contrat de Tranportation des Marchandises par vois de Routs).
Combined Transport Bills of Lading (CT-B/L) stipulates that if loss or damage is occurring when crossing an international border by rail the applicable convention will be CIM (Convention Internationale concernant le transport de Marchandises par Chemin de Fer).
In rare cases, Combined Transport Bills of Lading (CT-B/L) cover ocean carriage and air freight, the air transportation is governed by the Warsaw Convention.
These international conventions’ time-bar periods are much shorter than Hague-Visby Rules. These international conventions’ limitations of liability are different in quantum and procedures of calculation.
Similarly, these international conventions only apply when the transportation is across an international border which means that if no border crossing is concerned then the rules applicable to the country concerned will apply.
It is important to keep in mind that if it is proved that damage was caused during the sea voyage, then the Hague-Visby Rules apply.
Which convention (regulation) applies if it cannot be established at which stage of the transportation the loss or damage took place?
Principally, most carriers stipulate that the claim must be brought under the Hague-Visby Rules; other carriers stipulate an overriding procedure. Both the United Nations (UN) and the International Chamber of Commerce (ICC) have drafted proposed international conventions on intermodalism to clarify this problem. However, to date, neither of these has gained adequate support to convince governments to ratify them.
It can easily be noticed why the Carrier’s liability must commence sooner if the cargo passes into the Carrier’s hands somewhere inland but less easy to see why Combined Transport Bills of Lading (CT-B/L) is required when a Full Container Load (FCL) is booked from Port-to-Port (Quay-to-Quay). The point is that the Carrier requires full control of all the containers intended to be loaded to rearrange the containers near the dock before the container ship arrives so that the correct sequence of loading can be arranged. This procedure is called Container Ship Planning. Container Ship Planning depends not only on the port of discharge but also on the weight of the container as the heavier containers have to be stowed lower down in the container ship. Therefore,
Quay-to-Quay Combined Transport Bills of Lading (CT-B/L) would show the place of receipt CY (Container Yard).
The Shipper’s cargo pass to the Carrier’s custody before crossing the container ship’s rail is the rationale for the essential difference between Combined Transport Bills of Lading (CT-B/L) and other Bills of Lading (B/L).
Combined Transport Bills of Lading (CT-B/L) are Received for Shipment Bills of Lading (B/L). Theoretically, the Shipper can request Received for Shipment Bills of Lading (B/L) as soon as the cargo passes into the Carrier’s control, which could even be at the manufacturer’s doors. Such requests are infrequently if ever, made in practice because the Shipper would then have to return the Received for Shipment Bills of Lading (B/L) to the Carrier to have it endorsed with the details of being shipped on board. Nevertheless, all Combined Transport Bills of Lading (CT-B/L) have to be endorsed on the face with confirmation of being shipped with the date of shipment and a signature by the Carrier or the Carrier’s Agent.
Combined Transport Bills of Lading (CT-B/L) differ from most other Bills of Lading (B/L) because even if Combined Transport Bills of Lading (CT-B/L) are for a simple Door-to-Door movement, the Bills of Lading (B/L) are not spent when the cargo crosses the container ship’s rail at discharging port but remains in force until the cargo pass into the consignee’s control in the discharging port CY (Container Yard). Agreements beyond Door-to-Door stay in force until the cargo reach wherever it had been agreed that the agreement extends.
Difficulties have materialized in this respect because some container operators offer consignees the option of declaring a change of place of inland destination. The Shipper may have initially consigned the container as a Port-to-Port shipment, therefore the destination would appear in the name of a discharging port CY (Container Yard). Under the option granted the Consignee could declare the decision within the stipulated time and could agree to pay the amount offered for the road haulage by the container operators, after which the container could be delivered to the Consignee’s location.
6- Sea Waybills
Sea Waybills are identical in many respects to Bills of Lading (B/L). However, there is one essential difference between Sea Waybills and Bills of Lading (B/L), Sea Waybills are Non-Negotiable.
In many cases, the payment arrangements between buyer and seller do not require a Letter of Credit (L/C). Furthermore, the Consignee has no intention to sell the cargo during the voyage. All that is then needed is for the Sea Waybills to require the Carrier to deliver the goods to a Named Consignee after checking the Consignee’s Identity.
Sea Waybills do not have a Document of Title (DOT) function. Not being a Document of Title there is no requirement to present Sea Waybills to the Carrier to claim the cargo. Therefore, all the difficulties of cargo arriving before the Bills of Lading (B/L) disappear. This qualifies electronic communication and Cargo Manifest can be transmitted by electronic means and preparations to arrange delivery when the time comes can be made.
Originally, Sea Waybills did not give Consignees the same facility to sue the Carrier as was available with the Bills of Lading (B/L). However, this problem was corrected when the Carriage of Goods by Sea Act 1992 replaced the Bill of Lading Act 1855.
7- House Bills of Lading (B/L)
Non-Vessel Operating Carriers (NVOCs) contract as the Carrier with the Shippers of individual cargoes and Non-Vessel Operating Carriers (NVOCs) contract with the Ocean Carrier as an FCL (Full Container Load) Shipper. Therefore, the Container Line issues a Bill of Lading (B/L) for the container with no precise reference to the container’s contents. The Container Line delivers the container to the Non-Vessel Operating Carrier’s (NVOC) Discharging Port Operating Partner. The Non-Vessel Operating Carrier (NVOC) issues the company’s Bill of Lading (B/L) to each consignor. Non-Vessel Operating Carrier’s (NVOC) Discharging Port Operating Partner is responsible for delivering the cargo to the respective consignees against the presentation of the appropriate Bill of Lading (B/L).
Shippers dealing directly with a Container Line should be satisfied as to the Container Line’s integrity, so must Shippers dealing with Non-Vessel Operating Carriers (NVOCs) make their assessments; especially regarding clauses dealing with Limitations of Liability. Fortunately, FIATA (International Federation of Freight Forwarders Associations) has done much to encourage the use of a standard form of House Bills of Lading (B/L).
Mate’s Receipt (MR)
Bills of Lading (B/L) are concluded and signed sometime after the cargo has been loaded therefore the details at the moment of loading of bulk (non-containerized) cargo are documented in the form of a Mate’s Receipt (MR). Traditionally, Mate’s Receipt (MR) is prepared and issued by the Chief Officer (Chief Mate) of a ship whose job is to check the correct receipt of the cargo loaded on board and to supervise the cargo stowage.
Mate’s Receipt (MR) indicates any discrepancies in the quantity or pre-shipment condition of the cargo. From the moment of issue of the Mate’s Receipt (MR), the Shipowner is in full possession of the cargo, and from that moment the Shipowner is responsible for the safety of that cargo per the pre-shipment condition of cargo as stipulated in the Mate’s Receipt (MR).
When the cargo is loaded on board the Shipper can demand the issue of the Bills of Lading (B/L) and all essential data will be transferred from the Mate’s Receipt (MR) to the Bills of Lading (B/L) itself. Today, the Mate’s Receipt (MR) is a copy of the Shipping Note (Dock Receipt) and the checking is carried out by Tally Clerks or Cargo Inspectors.
Neither the Mate’s Receipt (MR) nor indeed the Shipping Note (Dock Receipt) is in any way referred to as a Document of Title (DOT) and the information that is made therein is not conclusive evidence against the Ship Master or the Shipowner.
Missing Bill of Lading (B/L)
It is typical for cargo to be available for collection by the Consignee but the Consignee is unable to do so because the Consignee has no Original Bill of Lading (B/L) to claim the consignment. The Carrier (Shipowner or Ship Operator) must deliver the cargo only to one who presents a valid Original Bill of Lading (B/L).
The Consignee may present a Letter of Indemnity (LOI) for Missing Bills of Lading (B/L). Unlike letters of indemnity for Clean Bills of Lading (B/L), a Letter of Indemnity (LOI) for Missing Bills of Lading (B/L) is not fraudulent but it does have its drawbacks.
First, a Letter of Indemnity (LOI) for Missing Bills of Lading (B/L) has to be comprehensively dependable and this is performed by the letter being countersigned by a First-Class Bank.
Secondly, a Letter of Indemnity (LOI) for Missing Bills of Lading (B/L) must be unqualified. Most banks are hesitant to issue unqualified letters because banks have no method of assessing the risk they are taking.
Thirdly, it is pricey, banks charge substantially for accepting open-ended risks even though banks demand a counter-indemnity from the Consignee.
The concern is how long should the Letter of Indemnity (LOI) for Missing Bills of Lading (B/L) remain valid because the Carrier’s (Shipowner or Ship Operator) absolute obligation to deliver cargo against the Original Bills of Lading (B/L) means that delivery to the wrong party becomes the Tort of Conversion which would leave the Tortfeasor liable for the whole value of the consignment. In most cases, this problem is solved when the Original Bills of Lading (B/L) eventually is received and the Original Bills of Lading (B/L) are then exchanged for the Letter of Indemnity (LOI) which is duly canceled thus extinguishing the bank’s liability.
Irrevocably Lost Bill of Lading (B/L)
In some rare cases, when the Bills of Lading (B/L) have become irrevocably lost and the statute of limitations for the tort of conversion is six (6) years. Nevertheless, it is seldom, if ever that a Carrier (Shipowner or Ship Operator) demands the Letter of Indemnity (LOI) remain valid for all that time.
Prudent Ship Agents obtain the Principal’s agreement to accept a Letter of Indemnity (LOI) for Missing Bills of Lading (B/L) because there is no protection from the Himalaya Clause for Tort of Conversion. Therefore, if the Ship Agent accepts a Letter of Indemnity (LOI) without reference to the Principal and things go wrong, it is the Ship Agent who will face the claim in Tort.
Electronic Bill of Lading (B/L)
The more instantaneous shipment of cargo means that the possibilities are continually increasing for the cargo arriving well before the Bills of Lading (B/L) have worked their way through the banking system. Many initiatives are striving to solve this issue by the use of Electronic Bills of Lading (B/L) alternative to traditional Paper Bills of Lading (B/L). Today, it is possible for a Shipper to receive all the information it needs via the internet or telephone lines. Furthermore, most combined transport operators process cargo arrangements via the internet. A Shipowner could give irrevocable instructions to a Carrier to hold cargo for the disposition of a Named Consignee, who would then be entitled to receive the cargo at the port of destination exclusively based on the instruction and without the necessity to produce any document. Security is accomplished by issuing to each consignee a unique Private Key putting the holder in the same position as if the Consignee had possession of the Original Bills of Lading (B/L). The significant issue still rests with the use of Letters of Credit (L/C) and the need to authorize selling cargo on without any loss of security.
Three Original Bills of Lading (B/L)
Generally, Shippers require three (3) Original Bills of Lading (B/L). In this case, if any one of the Original Bills of Lading (B/L) is being accomplished the others shall be void. The Letter of Credit (L/C) requires all three (3) Original Bills of Lading (B/L) before paying out because banks would not have security for payment if one of the Original Bills of Lading (B/L) is other than in the bank’s possession.
History of Three Original Bills of Lading (B/L)
A manuscript written in 1686 (Malnes Les Mercantoria) commented: “of the Bills of Lading (B/L) there is customarily three Bills of one tenor. One of them is enclosed in the letters carried by the same ship; another Bill is sent overland to the Factor or Party to whom the goods are consigned; the third remaineth with the Merchant, for his testimony against the Ship Master if there were any occasion or loose dealing”.
In 1934, Lord Blackburn wrote: “I have never been able to learn why merchants and shipowners continue the practice of making out a Bill of Lading (B/L) in parts. I should have thought that every purpose would be answered by making out one Bill of Lading (B/L) only which should be the sole Document of Title”.
Today, traditionally, the banks resume directing to a “full set of three (3) shipped on board Bills of Lading (B/L)”. Therefore, all three (3) Original Bills of Lading (B/L) have to be presented when negotiating the Letter of Credit (L/C). Old traditions die hard in the shipping business.
Hague-Visby Rules and Bill of Lading (B/L)
At beginning of the 19th century, many complicated negligence clauses were incorporated by Shipowners into their Bills of Lading (B/L). These negligence clauses were drafted completely to defeat the effect of legal decisions against the Shipowners. Many of these clauses were drafted in an exceptionally ambiguous tone and were quite incomprehensible to interpret, as a result, the position of many Charterers, Shippers, Bankers, and Cargo Underwriters became ludicrous because they were unable to comprehend and interpret the extent of their rights against the Carrier (Shipowner or Ship Operator) in the carriage of cargo by sea. Therefore, a uniform international approach to all Bills of Lading (B/L) was needed, to reconcile the interests of all parties involved in the carriage of cargo by sea.
In 1893, the United States of America (USA) passed the Harter Act. Harter Act stipulated many conditions upon which cargoes were shipped to and from the United States of America (USA). Identical legislation was introduced by other governments to correct this unfair situation, such as Australia, which developed its Sea Carriage of Goods Act 1904, and Canada which passed The Water Carriage of Goods Act 1910.
In 1921, a set of regulations was drafted by the Maritime Law Committee of the International Law Association at a meeting at the Hague. These draft rules, subsequently known as the Hague Rules were the subject of negotiation and amendment which culminated in their being incorporated in an International Convention that was signed in Brussels on 25th August 1924 by the major trading governments. Most of the participating governments introduced laws to give effect to the Hague Rules. Therefore, the United Kingdom enacted the Carriage of Goods by Sea Act 1924. The introduction of containerization created dissatisfaction with the limitations of the Hague Rules. Hague Rules were amended by The Brussels Protocol of 1968 and became known as the Hague-Visby Rules.
The preponderance of the maritime governments ratified the Hague-Visby Rules. To give effect to the Hague-Visby Rules, the United Kingdom enacted the Carriage of Goods by Sea Act 1971. Carriage of Goods by Sea Act 1971 repeals the Carriage of Goods by Sea Act 1924 entirety.
Hague-Visby Rules
The Hague-Visby Rules apply to all contracts of carriage which are evidenced by a Bills of Lading (B/L) or a similar Document of Title (DOT) where:
a- Bill of Lading (B/L) is issued in the United Kingdom, or,
b- Shipment from a port within the United Kingdom
Furthermore, the Hague-Visby Rules apply to other such contracts of carriage evidenced by a Bill of Lading (B/L) if expressly incorporated. Therefore, even if the port of shipment is from a nation that has not incorporated the Hague-Visby Rules into its legislation, the Hague-Visby Rules are applicable if the Hague-Visby Rules are expressly incorporated in the Bill of Lading (B/L).
The Hague-Visby Rules particularly refer to Bills of Lading (B/L) or other Documents of Title (DOT). The Hague-Visby Rules do not apply to Charterparties.
Nevertheless, if a Bill of Lading (B/L) is issued in respect of a ship under a Charterparty, the Hague-Visby Rules will apply to the contract evidence by the Bill of Lading (B/L). Therefore, if a Bill of Lading (B/L) is issued to a Charterer within the Charterparty as evidence or receipt only for the cargo, the Hague-Visby Rules are not applicable. However, if the Charterer endorses that Bill of Lading (B/L) in favor of an Endorsee, the Hague-Visby Rules will then govern the relationship between the Charterer and the Endorsee and are applicable from the point of endorsement.
Clause Paramount
The parties to a Charterparty may stipulate that all Bills of Lading (B/L) issued under it shall be governed by the Hague-Visby Rules (Clause Paramount) therefore the Hague-Visby Rules will apply even if the shipment does not originate from a country that has adopted the Hague-Visby Rules.
Hague-Visby Rules and Sea Waybills
The expression Contract of Carriage applies only to Contracts of Carriage governed by a Bill of Lading (B/L) or similar Documents of Title (DOT). A Non-Negotiable Receipt will not necessarily be a Bill of Lading (B/L). Therefore, Sea Waybills expressly stipulate that the Hague-Visby Rules will apply.
The phrase Carrier as used in the Hague-Visby Rules indicates either the Shipowner or the Time Charterer who contracts with the Shipper. Therefore, the Carrier can be sued by the Bills of Lading (B/L) Holder.
Hague-Visby Rules do not apply to carriage or storage before the port of loading or after the port of discharge because that would be inland and not sea carriage. However, if the cargo is discharged and stored at an intermediate port before transshipment to another ship, the Hague-Visby Rules apply during the period of storage.
Carrier (Shipowner or Ship Operator) is entitled to enter into any contract stipulation condition reservation or exemption as to the responsibility and liability of the Carrier (Shipowner or Ship Operator) or the ship for loss of or damage to or in connection with the custody and care and handling of the cargo before the loading on and after the discharge from, the ship on which the cargo is carried by sea. Once the Hague-Visby Rules apply the parties may not change their provisions by contract save in respect of deleting excepted perils or increasing the limit of liability.
Functions of the Hague-Visby Rules
A- Hague-Visby Rules set out the obligations of both parties (Carrier and Shipper), especially the Carrier (Shipowner or Ship Operator) for whom Hague-Visby Rules list the minimum statutory requirements imposed upon the Carrier (Shipowner or Ship Operator) in the undertaking of international business.
B- Hague-Visby Rules set out where a Carrier (Shipowner or Ship Operator) may exempt himself from liability as a consequence of one of the exceptions embodied in the Hague-Visby Rules.
C- Hague-Visby Rules define the limits of the Carrier’s (Shipowner or Ship Operator) liability. The shipper should not consider the Carrier (Shipowner or Ship Operator) as the insurer of his cargo. A prudent Shipper would cover himself from loss or damage to the cargo by taking out an all-risks policy. Any claim to be pursued against the Carrier (Shipowner or Ship Operator) would then be undertaken by the Cargo Insurers.
Important Parts of the Hague-Visby Rules
Hague-Visby Rules Article I: Specifies the definitions of the phrase Carrier and Contract of Carriage. Hague-Visby Rules apply exclusively to Contracts of Carriage covered by a Bill of Lading (B/L). Hague-Visby Rules clarify the position of Bill of Lading (B/L) issued under a Charterparty.
Hague-Visby Rules Article I Rule (1c): Hague-Visby Rules do not cover live animals. Furthermore, Hague-Visby Rules do not cover deck cargo.
To avoid liability the Bills of Lading (B/L) must undoubtedly remark “loaded on deck at shipper’s risk”. If the cargo is loaded on deck but this is not stated on the Bills of Lading (B/L), the full force of the Hague-Visby Rules will apply.
Hague-Visby Rules Article III Rule (1): Before the Hague-Visby Rules were introduced the situation was that in every contract of carriage by sea there was implied an absolute warranty of seaworthiness throughout the sea voyage. The Hague-Visby Rules require that the Shipowners shall exercise due diligence to make the ship seaworthy before and at the beginning of the sea voyage. Furthermore, The Hague-Visby Rules require that the Shipowners shall properly man and equip the ship and also make the holds cargoworthy.
The phrase exercise due diligence may not be taken lightly, it is a personal obligation upon the Shipowner and may be considered a duty of care. Shipowners’ duty of care cannot be delegated. Shipowners cannot abdicate their responsibility to a third party.
In Riverstone Meat Co. v. Lancashire Shipping Co. Case 1961, Riverstone Meat Co. (Plaintiff) contracted with the Lancashire Shipping Co. (Defendant) to ship 150 cases of canned ox tongue from Sydney to London aboard Lancashire Shipping’s controlled MV Muncaster Castle.
The cargo was damaged by seawater. Some months earlier the MV Muncaster Castle underwent a load line survey which was carried out by a reputable firm of surveyors under the supervision of Lloyds Register (LR). After the survey the inspection covers on the storm valves had not been properly tightened by the fitter, therefore, seawater was allowed to enter the hold. The case went all the way to the House of Lords where Lord Radcliffe, in concurring with the judgment against the shipowner Lancashire Shipping Co. (Defendant) made the practical point that it would not make sense for the Riverstone Meat Co. (Plaintiff) to go chasing after contractors and sub-contractors working for the shipowner Lancashire Shipping Co. (Defendant), it was up to the shipowner Lancashire Shipping Co. (Defendant) to cover himself by obtaining satisfactory indemnities from those doing work for the shipowner.
Hague-Visby Rules demand that if the shipowner has provided an appropriately qualified crew of appropriate size at the beginning of the sea voyage, the shipowner has fulfilled his obligation even if the crew’s subsequent incompetence causes issues to arise.
Hague-Visby Rules Article III Rule 2: Requires the Carrier (Shipowner or Ship Operator) to look after the cargo properly. Hague-Visby Rules Article III Rule 2 draws attention to Article IV (exceptions) this is a continuous obligation.
Hague-Visby Rules Article III Rule 3 and Rule 4: Specify the requirement to issue a Bill of Lading (B/L). Bill of Lading (B/L) must indicate the quantity, and apparent condition of the cargo as well as how the cargo can be efficiently identified.
Hague-Visby Rules Article III Rule 5: Specifies obligations upon the Shipper to guarantee the accuracy of the cargo details supplied.
Hague-Visby Rules Article III Rule 6: Specify the time bar. Hague-Visby Rules Article III Rule 6 notes that any loss or damage has to be notified within three (3) days of taking delivery of the cargo. Hague-Visby Rules Article III Rule 6 stipulates that the “ship will be discharged from all liability unless suit is brought within one (1) year”. The phrase “suit is brought” goes beyond merely claiming writing, court action has to be started. Hague-Visby Rules Article III Rule 6 provides for the parties to extend the time limit by mutual agreement.
Hague-Visby Rules Article III Rule 6bis: Authorizes the Carrier to commence an action for indemnity against a third party even after the one-year time limit provided for in the preceding paragraph if brought within the time allowed by the law of the court seized with the case. Nevertheless, the time allowed shall not be less than three (3) months, starting from the day when the person bringing such an action for indemnity has settled the claim or has been served with process in the action against himself. This addition to Hague-Visby Rules Article III Rule 6 was added to overcome the issues experienced by Carriers who sub-contract all or part of the carriage but remain principally liable to the trader for the performance of the contract because of the absence of any demise clause in the Bill of Lading (B/L). If a claim is made or court action is commenced against such a Carrier at the last minute the Carrier would otherwise have little or no time within which to protect his right of recourse against the sub-contracting Carrier. The addition gives the main Carrier at least three (3) months in which the main Carrier can either settle the claim by amicable agreement or proceed against the sub-contractor. Hague-Visby Rules Article III Rule 6bis can be useful in the case of a container carrier using a Combined Transport Bill of Lading (B/L) where the loss or damage is caused by a feeder ship
Hague-Visby Rules Article IV Rule 1: Reiterates the due diligence requirement and this is followed by the various exceptions included in Hague-Visby Rules Article IV Rule 2.
Hague-Visby Rules Article IV Rule 2a is an important exception that covers acts of negligence or default by those employed by the Shipowner in the navigation or management of the ship. Hague-Visby Rules Article IV Rule 2a emphasizes that the shipowner delivers officers and crew of correct numbers and properly qualified, if their acts or omissions cause damage to the cargo, the shipowner is not liable.
Hague-Visby Rules Article IV Rule 3: Provides the Shipper some degree of similar protection for their errors and omissions.
Hague-Visby Rules Article IV Rule 4: Deviation Clause which goes beyond the Common Law restrictions. Hague-Visby Rules Article IV Rule 4 allows deviation to save property as well as life.
Hague-Visby Rules Article IV Rule 5: Specify the significant financial limitations of liability based on Special Drawing Rights (SDRs) which is a unit of account devised by the International Monetary Fund (IMF). The rate of exchange of any currency can be established against Special Drawing Rights (SDRs). The financial limitation payments are 666,67 units of account per package or 2 units of account per kilo whichever is the highest. Issues have arisen as to what includes a package when a sealed FCL (Full Container Load) is involved. The Carrier has no way of verifying how many individual items are in the container which is why care is taken to include the terms Said to Contain when drafting Bills of Lading (B/L) for FCL (Full Container Load) containers.
Hague-Visby Rules Article IV Rule 5(a): Allows for the minimum level of limitation to be increased above that provided by the Shipper expressly declaring a higher value before shipment and ensuring this is inserted in the Bills of Lading (B/L).
Hague-Visby Rules Article IV Rule 6: Highlights the Carrier’s right to deal with undeclared dangerous cargo.
Hague-Visby Rules Article IV bis: Stipulates Himalaya Clause and provides servants or agents of the Carrier the same protection and limitations as in the contract should a claim be made against them in tort.
Hague-Visby Rules Article V: Ensures that the Hague-Visby Rules do not prevent the insertion of any provision about the General Average (GA).
Hague-Visby Rules Article VI: Allows the Hague-Visby Rules to be incorporated into documents that are not the Bills of Lading (B/L) such as Sea Waybills.
Hague-Visby Rules Article VII: Allows the Hague-Visby Rules to be extended to care or handling of the cargo before and/or after carriage by sea. Hague-Visby Rules Article VII is an important rule in the container business.
Hague-Visby Rules Article VIII and Article IX: Deal with the Hague-Visby Rules not affecting rights and obligations under statutes in force and do not affect compliance with any international agreement concerning nuclear damage.
Hague-Visby Rules Article X: Expresses that Hague-Visby Rules apply to contract states and any contract when the parties choose to incorporate the Hague-Visby Rules.
Hague-Visby Rules solely apply if the Bills of Lading (B/L) are issued in a contracting state or the carriage is from a port in a contracting state.
Hamburg Rules and Bill of Lading (B/L)
In 1978, UNCTAD (United Nations Conference on Trade and Development) drafted a convention entitled Hamburg Rules. Hamburg Rules came into effect on 1st November 1992 which was the date when Hamburg Rules achieved ratification by its twentieth countries; none of the signatories is a prominent maritime nation.
Hamburg Rules mark topics in the Hague-Visby Rules which, in the drafters’ views, are least favorable to cargo-owning nations.
What is the difference between Hague Visby Rules and Hamburg Rules?
The difference between Hamburg Rules and Hague-Visby Rules is that
Hamburg Rules apply to any contract of carriage by sea against payment of freight except a Charterparty. Unlike Hague-Visby Rules, there is no question of restricting Hamburg Rules to Bills of Lading (B/L).
The next significant difference is that the Hamburg Rules apply whether the cargo is loaded or discharged in a contracting nation. If the cargo is loaded in a Hague-Visby Rules nation, the Shippers expect Hague-Visby Rules to apply but if the destination is in a Hamburg Rules nation, the Receivers may insist on their Hamburg Rules with cargo claims arising at the discharging port.
Furthermore, Hamburg Rules sweep aside most exceptions in Hague-Visby Rules. Hamburg Rules mandate the Carrier to prove that the Carrier took all measures to prevent loss or damage to the cargo. In practice, most of the exceptions in the Hague-Visby Rules are beyond the control of the Carrier so Hamburg Rules appear not harsh except that the Hamburg Rules introduce liability for delay.
The financial limits of liability that the Hamburg Rules introduced are higher than Hague-Visby Rules. Hamburg Rules stipulate 835 units of account per package or 2.3 units of account per kilo. Furthermore, Hamburg Rules stipulate two and a half times the freight in the case of delay.
Neither Deck Cargo nor Animals are excluded from the Hamburg Rules although the Carrier is not liable for special risks in the case of animals
The other significant change from Hague-Visby Rules is that the time bar under Hamburg Rules is two (2) years rather than one (1) year.
Hague-Visby Rules have been tested in the courts for many years. Therefore, there is a general objection to the Hamburg Rules by the maritime nations. Much of the wording in the Hamburg Rules is indicative of diplomatic compromise rather than legal consideration.
On the other hand, there is a widespread sentiment that the Hague-Visby Rules require an additional amendment to bring the Hague-Visby Rules into line with modern shipping requirements and concerns. Currently, only five percent (5%) of global trade is represented under Hamburg Rules.
Carriage of Goods by Sea Act 1992
In the United Kingdom, the Carriage of Goods by Sea Act 1971 is the ratification of the Hague-Visby Rules.
On the other hand, the Carriage of Goods by Sea Act 1992 is the Act that replaces the United Kingdom Bills of Lading Act 1855. The Carriage of Goods by Sea Act 1992 does not replace the Carriage of Goods by Sea Act 1971 Act. Many practitioners in the shipping business think that a less confusing title could have been found for the Carriage of Goods by Sea Act 1992. Furthermore, the Carriage of Goods by Sea Act 1992 covers documents other than Bills of Lading (B/L) such as Sea Waybills.
The Carriage of Goods by Sea Act 1992 is the Act that replaces the United Kingdom Bills of Lading Act 1855. Other countries have their legislation covering Bills of Lading (B/L).
Bills of Lading Act 1855
The Bills of Lading Act 1855 was overdue for emendation because the Bills of Lading Act 1855 had certain drawbacks when the Bills of Lading (B/L) were transferred. Furthermore, the Bills of Lading Act 1855 could not cope with some present-day procedures. Nevertheless, for many years the Bills of Lading Act 1855 stood the test of time.
Assignment of Contracts
An assignment is a device that allows one party (Assignor) to transfer the benefit of a performance that one party (Assignor) has contracted to receive to another person in such a way that the Assignee may enforce performance. In this case, the original contract does not stipulate that the benefit of performance should go to a third party. An involuntary assignment by operation of law may occur upon death or bankruptcy. Nevertheless, the common law initially made no provision for the voluntary assignment of contracts. The doctrine of privity prevents an individual who is not a party to the contract from suing upon that contract.
Assignment of Contract of Carriage (Charterparty)
Before the Bills of Lading Act 1855, Under Common Law, when a Bill of Lading (B/L) was issued and passed to the Consignee with the explicit intention of passing the property in the cargo, it did not transfer the rights and liabilities under the contract of carriage to the Consignee. Practically, this would cause a significant problem as the Consignee would have no contractual recourse against the Carrier (Shipowner or Ship Operator) if the cargo was damaged or delayed. The Bills of Lading Act 1855 altered this issue.
Bills of Lading Act 1855 Section 1: stipulates that when property in the cargo passes upon or because of an endorsement, the contractual rights of suit and contractual liabilities are transferred to the Endorsee. Bills of Lading (B/L) may only be transferred to another party if Bills of Lading (B/L) is drafted To Order and so that the property in cargo may pass by assignment of the Bills of Lading (B/L), the subsequent prerequisites must be fulfilled:
1- The cargo must be in transit
2- The Bills of Lading (B/L) must be transferable on the face of it
3- The Bills of Lading (B/L) must have been put in circulation by someone who had a good title to the cargo
4- There must have been an intention to transfer the property
The sheer endorsement and delivery of Bills of Lading (B/L) by way of deposit, for instance to a bank in a Letter of Credit (L/C) transaction, did not pass the property in the cargo to an Endorsee to make the Endorsee liable on the contract in the Bills of Lading (B/L). For the Bills of Lading Act 1855 to apply it is not necessary for the property in the cargo to pass at the same time as the endorsement of the Bills of Lading (B/L). If the contemporaneous transfer of property and the Bills of Lading (B/L) were required then the Bills of Lading Act 1855 would be rendered useless in a considerable number of cases where the contract of sale stipulates the point at which property in the cargo to pass which moment may well be one other than the time of transfer of the Bills of Lading (B/L). When the Shipper retained the proprietary right in the cargo, the Shipper would also retain the rights of suit against the Shipowner under the contract in the Bills of Lading (B/L). In this case, the Bills of Lading Act 1855 could barely be construed as intending to take those rights from the Shipper and transfer them to the Endorsee, in this case, the bankers. If the proprietary rights and the rights of the suit are not transferred, neither would the liabilities under the contract.
Bills of Lading Act 1855 Section 2: stipulates the right of the Shipowner to claim freight from the actual Shipper although the Bills of Lading (B/L) may have been assigned by him. Furthermore, Bills of Lading Act 1855 Section 2 preserves the right of the actual Shipper to stop the cargo in transit.
Bills of Lading Act 1855 Section 3: stipulates that in the hands of the Consignee, the Bills of Lading (B/L) is definitive evidence of shipment as against the Ship Master or Ship Agent signing the Bills of Lading (B/L).
One of the functions of the Bills of Lading (B/L) is to act as a Receipt for the cargo shipped. At Common Law, the Bills of Lading (B/L) are regarded as being Prima Facie evidence that the quantity of cargo alleged to have been shipped has been shipped. Nevertheless, the Shipowner is entitled to prove that the cargo was never shipped. If the Shipowner proves that, the Shipowner will escape liability in respect of the cargo.
Prima Facie evidence is evidence at first sight only, which may be disputed by the party against whom the evidence is offered. In Grant v Norway (1851) Case, a Bill of Lading (B/L) was signed by the Ship Master for twelve (12) bales of silk, which the Shipowner proved had not been loaded on board. It was held that the Ship Master had no authority to sign for cargo not shipped and the Bill of Lading (B/L) Holder had no claim against the Shipowner for non-delivery of these bales
Bills of Lading Act 1855 Section 3 stipulates that the Bills of Lading (B/L) should be conclusive evidence that the cargo represented to have been shipped was in fact shipped. Bills of Lading Act 1855 Section 3 does not create actual liability on the part of the person who signed the Bills of Lading (B/L) if the cargo was in fact not shipped. Therefore, the ability of the Consignee and the Endorsee, to sue on the contract of carriage, was dependent upon the property in the cargo being vested in them upon the transfer of the Bills of Lading (B/L). Consequently, the Bills of Lading Act 1855 formed a marriage between entitlement to sue on the Bills of Lading (B/L) contract and property in the cargo.
In the Aliakmon (1986) Case, the cargo of steel suffered damage due to inappropriate stowage. At that moment, the risk but not the actual property had passed to the CIF Buyer (Cost, Freight, Insurance). As there was no privity of contract between the CIF Buyer and the Carrier, the CIF Buyer could not sue under contract and therefore tried to sue under tort. The case failed because it was held that the Carrier had no duty of care towards the CIF Buyer as the CIF Buyer was not the owner of the cargo at the moment of the alleged negligence.
Carriage of Goods by Sea Act 1992 divorces the ‘marriage formed by the Bills of Lading Act 1855 between property in the cargo and right to sue on the contract of carriage. Under the Carriage of Goods by Sea Act 1992, the lawful Bill of Lading (B/L) Holder (Section 2 (1) (a)) or the person to whom the goods are to be delivered under a Sea Waybill (Section 2 (1) (b)) (who was excluded from the ambit of Section 1 of the Bills of Lading Act 1855) or the person to whom the goods are to be delivered under a ship’s delivery order (Section 2 (1) (c)) can sue on the contract of carriage as if he had been a party to that contract.
Carriage of Goods by Sea Act 1992 stipulates that with the current speed of ships, it is not unusual for the cargo to be correctly delivered against a Letter of Indemnity (LOI). In this case, at the time of delivery, the Consignee is not in actual possession of the Bill of Lading (B/L), and by the time the Bill of Lading (B/L) reaches the Consignee, Bill of Lading (B/L) will have ceased to be a Document of Title (DOT) because the cargo will no longer be in transit.
Carriage of Goods by Sea Act 1992 separates the title to sue from the passing of the property in the cargo; lawful possession of the Bill of Lading (B/L) is sufficient. Even actual possession is not necessary provided that the measures taken to transfer the Bill of Lading (B/L) were made before the Bill of Lading (B/L) ceased to be a Document of Title (DOT).
Carriage of Goods by Sea Act 1992, after listing the Bill of Lading (B/L) Holder or the person to whom delivery is to be made under a Sea Waybill or ship delivery order then stipulates “shall have transferred to and vested in him all rights of suit under the contract of carriage as if he had been a party to that contract”
Under the Carriage of Goods by Sea Act 1992, with rights come liabilities, and the person who demands delivery under a Bill of Lading (B/L), Sea Waybill, or Ship Delivery Order becomes subject to the same liabilities as the original Shipper which may possess obligations to pay the freight, demurrage, etc. These liabilities are not imposed on a party who merely holds the Bill of Lading (B/L) as security for payment, such as a bank.
Under the Carriage of Goods by Sea Act 1992, a Bill of Lading (B/L) is deemed conclusive evidence of such shipment against the Carrier which appears to overrule the Grant V Norway (1851) Case.