Straight Bill of Lading

Straight Bill of Lading

The straight bill of lading is a document in less frequent use than a waybill but which, being non-negotiable, is capable of fulfilling similar functions. Straight Bill of Lading differs from the waybill in that it employs the standard bill of lading form which is available for use as either a negotiable or non-negotiable document.

When the form is drafted as a straight bill, the goods are con-signed to a specific person without reference to order or assigns. As a shipping document it possesses all the attributes of the standard bill of lading except that, being non-negotiable, the straight bill exhibits the same deficiencies as a waybill when security is required for documentary credits or similar financial arrangements.

The absence of the attribute of negotiability raises questions similar to to waybills. First is the question as to whether the Hague or Hague-Visby Rules are compulsorily applicable to the contract of carriage covered by it. Lacking any authoritative case law on the point, academic writers came to the almost unanimous conclusion that such regimes were not applicable because a straight bill could not be regarded as a document of title. This approach was decisively rejected by the House of Lords in the case of The Rafaela S. A consigned straight bill of lading had been issued for the carriage of four containers of printing machinery from Durban to Felixstowe with a final indicated destination of Boston. In the event the cargo was discharged at Felixstowe and reshipped on a second vessel owned by the same carrier for carriage to Boston. No new bill of lading was issued. On the voyage to Boston the cargo suffered severe damage and the point at issue was whether the carrier could invoke the Hague-Visby Rules to limit any claim by the cargo owner. Despite the fact that both the initial carriage and the on-carriage were performed by the same carrier, the House of Lords held that two separate contracts were involved.

The on-carriage from Felixstowe to Boston constituted a separate contract with a separate port of shipment, thus entitling the shipper to demand the issue of a new bill of lading. Had such a document been issued, the court presumed that it would have followed the same pattern as that used for the initial carriage, i.e. a straight bill drafted on an otherwise classic bill of lading form. With Felixstowe as the port of shipment, this second contract would be subject to the Hague-Visby Rules provided that the straight bill constituted ‘a bill of lading or similar document of title’ within s1(4) of the Carriage of Goods by Sea Act 1971. Such authority as existed was opposed to such a conclusion on the ground that a straight bill, being non-negotiable, did not constitute a document of title.

Their Lordships initially approached the problem from a policy standpoint. The Hague and Hague-Visby Rules were designed to protect third parties, such as consignees or endorsees, from onerous terms in contracts of carriage in the negotiation of which they had taken no part. Consignees under a straight bill were within the mischief which the Rules sought to correct and were in the same need of protection as consignees under an order bill.

Straight bills were known to the trade at the time of drafting the Hague Rules and there was no evidence to suggest that the draftsmen sought to exclude them from the protection offered by the Rules.

In the circumstances, their Lordships took the view that the phrase ‘bill of lading or similar document of title’ should be given an expansive rather than a restricted interpretation since they saw no sensible commercial reason why straight bills should be excluded from the operation of the Rules. In reaching this conclusion, their Lordships conceded that a different approach had been adopted in the 1992 Carriage of Goods by Sea Act where, for purposes of title to sue, straight bills had been equated with sea waybills and not classified as bills of lading.

Again in the 1991 Report which preceded the Act, the Law Commissioners took the view that a straight bill was not a document of title at common law. Nevertheless, their Lordships were of opinion that a domestic statute of later date could not govern the interpretation of rules based on an international consensus given statutory force in 1924 and 1971. Indeed s 5(5) of the 1992 Act expressly provided that its provisions were to have effect without prejudice to the application of the Hague-Visby Rules. Applying this approach to the facts of the case, Lords Bingham and Steyn took the view that the straight bill in question qualified as a similar document of title within Art I(b) since it exhibited all the characteristics of the standard order bill, with the exception of negotiability, and incorporated an attestation clause requiring presentation of the document before delivery of the goods.

Such a requirement for presentation had a commercial rationale even in the case of a straight bill, since it provided a shipper with security for payment of the price. Lord Rodger, for his part, adopted a more direct approach. A document which described itself as a bill of lading and contained, with the exception of the words to order, all the usual clauses to be found in such a document, qualified in his opinion as a bill of lading within Art I(b).

Accordingly their Lordships held the straight bill to be a document of title with the result that the Hague-Visby Rules were applicable to the contract of carriage covered by it. While this decision is to be welcomed as clarifying the issue of the applicability of the Hague- Visby Rules to a straight bill of lading, it leaves a number of questions unanswered. For example, while a straight bill may be a document of title for purposes of the Hague or Hague-Visby Rules, does it constitute a document of title for other purposes, e.g. for purposes of a documentary credit or the Sale of Goods Act 1979. Certainly it is not a document of title for purposes of the Carriage of Goods by Sea Act 1992 where it is categorized as equivalent to a sea waybill. Again, is presentation of a straight bill always a condition precedent to the delivery of goods under a contract of carriage?

The decision in The Rafaela S is authority for the proposition that presentation is required in the case of a bill including an express attestation clause, but what is the position if such a clause is omitted or deleted? Lord Bingham in the Lords and Rix LJ in the Court of Appeal expressed the opinion obiter that presentation was still necessary, but on the answer to that question may depend whether or not the bill is to be treated as a document of title for purposes of the Hague-Visby Rules. A decision in favor of presentation is also liable to have international repercussions since it would conflict with the provisions of the US Pomerene Act which requires goods carried under a straight bill to be delivered merely on production of proof of identity without any surrender of documents. This legislation is at present only applicable to outward shipments from the United States but proposals are in hand for its extension to inward cargoes. The final point of comparison with the waybill relates to the question of title to sue in the event of loss or damage to cargo. The straight bill is classified as a sea waybill for the purposes of s 1(3) of the Carriage of Goods by Sea Act 1992, with the result that title to sue vests in the consignee identified in the bill.