Bills of Lading Evidence of Contract

On the reverse side of every standard liner bill of lading form is to be found a detailed set of printed contractual terms or a reference to the ‘long form’ bill in which they are set out in full. The accepted view is that, at least so far as the shipper is concerned, these terms do not constitute the contract of carriage itself, but merely provide evidence of it. The contract is normally concluded orally long before the bill is issued, and the terms are inferred from the carrier’s sailing announcements and from any negotiations with loading brokers before the goods are shipped. Consequently, should the goods be lost or damaged before a bill of lading is issued, the shipper will not be deprived of a remedy for breach of contract. Similarly, if the printed terms of the bill of lading which is subsequently issued do not comply with those of the earlier oral agreement, the shipper is not debarred from submitting oral evidence to establish the precise terms of that agreement. This view was expressed as early as 1879 by Lush J in the following terms: ‘A bill of lading is not the contract but only the evidence of the contract and it does not follow that a person who accepts the bill of lading which the shipowner hands him necessarily, and without regard to circumstances, binds himself to abide by all its stipulations. If a shipper is not aware when he ships them, or is not informed in the course of the shipment, that the bill of lading which will be tendered to him will contain such a clause, he has a right to suppose that his goods are received on the usual terms, and to require a bill of lading which shall express those terms.’ Surprisingly, however, the only actual decision on this point arose at first instance in the case of The Ardennes. Here the claimant exporter wished to ship a consignment of mandarin oranges from Cartegena to London, where he was anxious they should arrive before 1 December in order to avoid a threatened rise in import duty. He explained the position to shipping agents who gave an oral assurance that if the cargo was loaded on 22 November, the vessel would sail direct to London. In fact, the vessel on which the oranges were shipped already had cargo on board destined for Antwerp, while the bill of lading which was eventually issued included a liberty entitling the vessel to call at intermediate ports on the voyage to London. As the result of calling in at Antwerp, the vessel did not reach London until 4 December by which time there had been an increase in import duty and a considerable fall in the market price of oranges due to an influx of other cargoes. When the claimant sought to recover damages for breach of contract, the shipowner pleaded in defence the liberty clause in the bill of lading. If this statement is correct, two reservations still need to be made. First, the bill of lading will clearly provide prima facie evidence of the terms of the contract of carriage and in many cases it may not be easy for the party challenging its accuracy to discharge the burden of proof. Secondly, it is inaccurate to state in general terms that the shipper is no party to the prepara- tion of the bill of lading. In the majority of cases he will be responsible for filling in the details of the cargo to be shipped at which time he will have an opportunity to check the remaining terms of the document. There can be no doubt, however, that once indorsed for value to a bona fide third party, the bill of lading becomes conclusive evidence of the terms of the contract of carriage. In Leduc v Ward the indorsees of a bill of lading sought to recover damages for a consignment of rape seed, shipped from Fiume to Dunkirk, which had been lost off the mouth of the Clyde. They argued that as the vessel had made an unjustifiable deviation to Glasgow, the shipowners could not rely on the perils of the sea exception in the bill. The shipowners on their part contended that the deviation was not unjustified since the shippers were aware at the time of shipment that the vessel intended to call at Glasgow. In rejecting this argument, the Court of Appeal held that, in the circumstances, the bill provided conclusive evidence of the terms of the contract. The decision was in essence based on an interpretation of s 1 of the Bills of Lading Act 185574 which provides that the indorsee of a bill ‘shall have transferred to, and vested in, him all rights of suit, and be subject to the same liability in respect of such goods, as if the contract contained in the bill of lading had been made with himself ’. Fry LJ preferred to rest his judgment ‘on the view that the provision of the statute, making the contract contained in the bill of lading assignable, is inconsistent with the idea that anything which took place between the shipper and the shipowner and not embodied in the bill of lading, could affect the contract’. Up to this point the case appears to be no more than another example of the application of the estoppel doctrine in favour of a bona fide indorsee of the bill for value, and in line with the reaction of the courts towards the receipt function of the bill outlined. A writer has rightly pointed out that this latter argument is equally applicable to the bill in the hands of the shipper and argues that this throws some doubt on the authority of the decision in The Ardennes. His thesis is strengthened by the fact that s 1 of the Bills of Lading Act 1855 specifically refers to ‘the contract contained in the bill of lading’, a point taken up by Fry LJ in Leduc v Ward: ‘Here is a plain declaration of the legislature that there is a con- tract, contained in the bill of lading, and that the benefit of it is to pass to the indorsee under such circumstances as exist in the present case. It seems to me impossible, therefore, now to contend that there is no contract contained in the bill of lading, whatever may have been the case before the statute.’ To hold The Ardennes to be wrongly decided, and to restore the full vigour of the parol evidence rule at this stage, would clearly not conform to the expectations of the reasonable businessman. It must be remembered that the parol evidence rule has itself been much modified since the decision in 1888 in Leduc v Ward,82 while a plea of rectification can be raised where the written document is out of line with the terms of a prior oral agreement. It is also noticeable that Lord Goddard, before giving judgment in The Ardennes, had given full consideration to Leduc v Ward and had come to the conclusion that it ‘was a case between shipowner and indorsee of the bill of lading between whom its terms are conclusive by virtue of the Bills of Lading Act 1855 s 1 . . . Between those parties the statute makes it the con- tract.’84 In these circumstances it might seem preferable to regard The Ardennes principle as still being good law since it conforms with commercial practice and is in line with the attitude adopted towards the receipt function of the bill.

Bills of lading issued to charterers
Where the shipper of goods is also charterer of the vessel, the master will still issue a bill of lading. In such circumstances the bill will merely operate as a receipt for the goods shipped, but will not provide evidence of the contract of carriage. The terms of the contract of carriage between shipowner and charterer are exclusively to be found in the charterparty. Should the charterer, however, subsequently indorse the bill to a bona fide purchaser for value, then the bill will become conclusive evidence of the contract of carriage so far as the indorsee is concerned. The situation then will be identical with that in Leduc v Ward.