The Bill of Lading

There are two types of contract for the carriage of goods by sea: a contract evidenced by a bill of lading and a charter party. Although these are two separate contracts, a ship carrying cargo under a bill of lading is often also running under a charter party. A bill of lading is a contract between a carrier (a shipowner or a charterer) and a shipper of goods. The contract states that the carrier undertakes to carry the shipper’s goods to their destination in return for a specified amount of freight payment. The bill of lading is signed by or on behalf of the shipowner and states the terms on which those goods have been delivered to and received by the shipowner. The bill of lading will also contain (or incorporate) the terms on which the goods have been shipped; and, if it is negotiable, it will serve as a document of title to the goods. Most shipping lines have their own forms of bills of lading, and once they are signed by the carrier they will be handed over to the shipper. A clean
bill of lading is undaused, which means it is a fully negotiable document, whereas a dirty bill of lading is claused, which indicates that the cargo is not in perfect condition. A bill of lading has three functions: • It is a receipt of the cargo shipped. • It is both a receipt for the quantity of goods but also provides evidence of the condition of those goods (clean or claused B/L). • It provides evidence of the contract of carriage.  The bill of lading is not the contract but is evidence of a valid contract of carriage of goods by sea. The bill of lading is not issued until the cargo is shipped on board, and the shipper as owner of the goods becomes jointly and severally liable to the carrier for any nonpayment of freight due. The bill of lading is a document of title and is a negotiable document. Thus, the person in possession of the bill of lading may sell the
goods to another person, even during transit of the goods. The bill of lading is then endorsed and the endorsee is entitled to the goods. Title is the right to ownership of property with or without possession. Despite the above, many people acknowledge that in today s environment the bill of lading may not be the most suitable document. It is for this reason that other documents, such as the sea waybill and the combined transport bill of lading, are becoming more common
today. A sea waybill is not a document of title, but it bears the name of the consignee who must only identify himself in order to take delivery of the cargo. It is not a negotiable document; thus it is not accepted by the banks. The purpose of the sea waybill is to avoid delays to the ship and cargoes which may occur when bills of lading are late
in arriving at the discharging port. A combined transport bill oflading covers door-to-door transport by several modes of transport. It
is usually used by liner companies who want to offer a full service to their customers. In a through bill of lading, a shipment of goods starts from and or finishes its voyage at a place at which the main carrying ship does not call. A proper bill of lading includes the following information:

Accurate description of cargo
Ship s name
Date of bill of lading
Name of shipper and consignee
Loading and discharging ports
Payment of freight
Number of bills of lading
Terms of carriage
Security ofpayment/letter of indemnity
Sometimes bills of lading are unavailable at a discharging port. This difficulty can be overcome if the consignee issues a suitable letter of indemnity (LOI) that is fully guaranteed by a reputable bank. Carriers will not give delivery of cargo without production of the fully negotiable bill of lading. However, the carrier may decide to hand over the cargo if he or she is presented with an LOI from a reliable party (such as a bank). This
is because if the carrier delivers the cargo without production of the bill(s) of lading, he or she may face a claim for the value of the cargo from the
holder of the bill(s) of lading if the person who takes delivery of the cargo
is not one and the same. However, most carriers will agree (either at the
time of entering into the charter or thereafter) to give delivery of cargo without bills of lading if they are provided with a letter of indemnity. A letter of indemnity guarantees that contractual provisions will be met failure
to which a financial compensation will be made. It is issued by the bank to
the consignee and releases the carrier from responsibility in case the cargo
is released to the wrong party without the production of the bill of lading.