Bill of Lading: Precious Documents or Just a Piece of Paper?

Pradeep Jain | June 2015

INTRODUCTION

Bill of Lading (“BL”) is one of the mostimportant and vital documents in the maritimetrade. It is defined as the documents which bearsmany hats i.e. it is evident of receipt of goods onboard, evidence of contract of carriage of goodsand documents of title of goods specified in it. Itis a precious document but a small mistakes makeit piece of paper and leave the affected partyempty hand.Here we will discuss functions of BL andcommon mistakes which can make it Bill ofBlunders;

FUNCTIONS OF BILLS OF LADING:

Evidence of the Contract of carriage;

Reverse side of BL contains terms of theContract but it is not the contract of carriageitself but an evidence of contract of carriage butonly when holder of the BL is shipper and agreedthe terms of carriage before issuance of it. But BLbecomes the contract of carriage in the hand ofthird party which has endorsed it.

It serves as a receipt for the goods shipped;

Originally BL functioned as receipt for the shipped goods. Article III (3) of the Carriage of Goods by Sea Act 1971 and rule 4 of the Hague- Visby Rules provides that the carrier is under the obligation on demand of the shipper to issue a BL which contains information such as the quantity or weight of the goods etc.

It is title of goods;

BL is considered as title of goods and depending upon the terms and conditions of issuance, it can be used as negotiable instruments. Possession of BL is considered as constructive possession of goods until it is a negotiable document of title and before delivery such goods can be transferred to the lawful holder of the BL. The claimant needs to establish his legitimacy to sue the carrier, i.e. that he has the title to sue. This title may be based on the contract of the carriage i.e. B/L (either made or acquired by the claimant) or in tort (conversion or negligence). If the carrier fails to deliver the goods to which the claimant has proved rights the carrier is liable to the claimant in conversation and if the carrier delivers the goods short or damaged then the carrier is liable in negligence. Moreover, if the carrier was in physical possession of the goods and was the cargo interest’s bailee he is liable in bailment. Even if liability is based on the tort or bailment it is still subject to the rules of causation, remoteness, and time limitation applicable by law but also the terms which the parties have agreed to incorporate in their contract. Under English law the Carriage of Goods by Sea Act 1992 section 2 provides that the cargo interests which has the right to sue the carrier are;

The lawful holder of a transferrable bill of lading;
Parties named as consignees on seaway bills and straight bills; and
Parties to whom the carrier has under taken to deliver the goods under a ship’s delivery order.

If a document is not included in the above categories then it needs to be examined whether there is another basis for the title to sue under the common law.

COMMON MISTAKES WHICH MAKE IT PIECES OF PAPER;

As discussed above, BL is a vital documents in maritime trade but some of silly mistakes can be proved to fatal for the holder of it. Further any discrepancies in it can eat the profits due to demurrage or detention arising out of refusal any constituents to act upon it. Followings errors must be avoided at the time of preparation and receipt of it;

Right and accurate description of goods; Avoid the wrong description of the commodities and if such commodities is further classified in sub class then it must be described as such;
Right quantity; Wrong information of gross weight or using the wrong piece count can make such BL void and holder may not able to sue for the quantity paid for;
Instructions of Banks; If goods is being carried under letter of credit then BL must be in accordance with the instructions of the Bank. Even a small discrepensy can create a big dispute landing parties in the costly litigations. Even if parties must agree for some discrepencies which can be accommodated for.
Violations of laws of land or environment laws; Shipped goods must be in accordance with the laws of land where it is being delivered and must identify and list the hazardous materials requirements and also follow the environmental laws strictly.
Correct description of Notify party; Using the wrong name of notify party may land goods in the custom warehouses which will increase the bill of demurrage in absence of inability of right party of take the delivery of goods.
Requirement of carrier; Before issuance of BL, all requirements of carrier must be met as far as documents are concerned. Due to wrong documentation, carrier may escape from its liability in case of any wrong or negligence’s.
Reference of Contract of goods; In case of sale and purchase of contracts, it is strictly advisable to refer contract in BL to avoid any kind of confusion.

CONCLUSION

In the present era, BL is assumed greater importance due to its characteristics and acceptability across the border but it must be prepared and issued carefully to enjoy the benefits of it. Silly mistakes must be avoid to convert this document as documents of sorrow or BILL OF BLUNDERS.

About Author

Pradeep Jain

Pradeep K Jain is the Managing Partner at Singhania & Co., Mumbai Office, and an expert in Maritime and Corporate Law.