Negotiable Document

A B/Ls role as a document of title is threefold. First it enables the consignee (the bill of lading holder) to claim his goods. The carrier should only deliver the goods if a bill of lading is presented to him. Thus, the bill of lading is crucial, being the “key to the goods”.  The goods must be delivered to the consignee. The carrier is not justified in delivering to anyone another than the consignee or his agents unless there is a special custom of the port or an express agreement to the contrary in the contract for carriage. Secondly a bill of lading is a negotiable document. (Do not confuse this definition with that of a “negotiable instrument”; that title more correctly relates to banknotes and other items which represent cash). The word “negotiable” used in relation to a bill of lading merely means transferable. What the transfer of a negotiable bill of lading does pass is constructive possession i.e. the right to demand of the carrier the delivery of the goods on presentation of the bill of lading.  There is no limit to the number of times a B/L can be “sold-on” provided the goods are still in transit at the time. NB The holder of a bill of lading who endorses it to an endorsee cannot give a better title than he himself has. If he has no title he cannot pass one. The third role as a document of title is a security for payment. Its first function in this context arises at time of shipment.  In a case where freight is to be paid on completion of loading, the line or its agent will not hand over a B/L stating “freight prepaid” without first receiving payment (or a cast-iron agreement for the granting of credit).