Shipped on Board

“Clausing” B/Ls, it follows that banks will not accept bills of lading which contain any wording to indicate that the goods, when received on board the vessel, were in other than apparent good order and condition. If  such wording does appear the bills of lading are known as ‘unclean’ or ‘claused’ bills of lading. Likewise, a bank will not accept bills of lading which are not ‘shipped on board’ bills of lading, i.e. where the goods have only been ‘received for shipment’ and not actually placed on board the vessel. Because of this problem there is a practice today, which is perhaps all too common, whereby the shipper of the goods will seek to give a Letter of Indemnity to the shipowner, or his agent, which will hold the shipowner harmless against the issuance of a clean bill of lading when in reality the goods to be shipped are actually damaged or defective when loaded on the vessel.  This is in fact fraud and such a letter of indemnity is not worth the paper it is written on. An agreement between agents of the shipowners and the shippers, whereby the shipowners’ agents agreed to accept from the shippers the issue of a Letter of Indemnity in exchange for the issue of a clean bill of lading in respect of defective goods, was considered by the Court of Appeal (Brown Jenkinson & Co –v- Percy Dalton [1957]) to be illegal and unenforceable in the eyes of the law. Indeed, all the elements of the tort of deceit were present when the carriers made a false representation which they intended should be relied upon by the receivers of the bill of lading and the bank. Any B/Ls intended for negotiation through a letter of credit must be made out “To Order” without any reference to a consignee (although there is usually a space to name a “notify party”.  The B/L then has to be endorsed by the shipper which then “opens” the B/L.  Technically this means that anyone holding such a B/L can claim title to the goods even if he “picked it up in the street”.  Fortunately few, if any, cases of this happening have been recorded.