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Outline of bill of lading functions for cargo ships employment in time charter agreement

A bill of lading is a receipt for goods either received (before shipment) or shipped on board. It provides good evidence of the existence and terms of a contract between the shipper and carrier . (A contract of carriage may exist without issue of a bill of lading, however.)

A bill of lading is not a true contract, since it is usually signed by only one of the parties. It is a document of title, signifying that the holder has the legal right to possession of the goods it describes . (The right to possession should not be confused with the right to ownership, which will usually bedetermined by the terms of the sales contract.)

A bill of lading may, depending on how it is made out, be negotiable, i.e. transferable to a third party so as to effect transfer of title to the goods it describes.

The bill of lading as a receipt for goods

The bill of lading’s prime function is as a receipt issued for:

• goods received for shipment either by a carrier or a freight forwarder, etc. pending shipment on a vessel; or

• goods shipped on board the carrying vessel, depending on the wording or endorsements on the bill.

A bill of lading states the quantity and apparent order and condition of the goods when received into the carrier’s care and is normally printed with wording such as “Received in good order and condition unless otherwise stated...” or “shipped in good order and condition unless otherwise stated....”. If this statement is not true, appropriate remarks should be made on the face of the bill of lading. Any shortage or damage to the goods occurring before acceptance by the carrier should therefore be stated on the face of the bill of lading.

If there is no clausing of the bill of lading showing a defective condition or quantity of the goods on receipt by the carrier, the consignee may reasonably expect to receive his goods in good order and condition. Any loss or damage found on delivery will be assumed to be caused by the carrier’s negligence unless he can prove it to be attributable to one of the excepted perils listed in his contract of carriage (e.g. Act of God, inherent vice, etc.).

Where a mate’s receipt is issued, the bill of lading’s description of the quantity/condition of the goods is copied from the description in the mate’s receipt. It is most important, therefore, that the mate’s receipt states the actual quantity/condition of the goods at the time of loading where this is other than “in good order or condition” or differs in quantity from that stated in the shipping note.

Delivery of the goods

The carrier, carrier’s agent or master is legally obliged to deliver the goods to the first person presenting a signed original bill of lading at the discharge port, together with proof of his identity and proof that freight and any other charges due have been paid. (A negotiable bill of lading is effectively, therefore, a cloakroom ticket for cargo: whoever has the bill of lading can collect the cargo.)

Once the goods are released to a receiver (i.e. legally delivered), any carrier’s lien for unpaid freight, etc. will be lost.

If the bill of lading has been transferred by the original consignee, the endorsements on it should be checked before delivery.

If the presented bill of lading appears to be in order, the master or the agent should sign it and date it (known as “sighting the bill”). It is then said to be “accomplished” and is usually stamped “ACCOMPLISHED”. The goods can then be released to the receiver. A delivery order may be issued by the agent to the receiver.

Delivery may be (and in practice is often) made without presentation of a bill of lading, but only when certain precautions have been taken.

For a better understanding of the main functions of a bill of lading it is useful to know the basic documentary procedures used in tramp and liner shipping operations, as outlined below.
Bill of lading freight clause

“Freight” is the remuneration payable by the charterers to the owners for the performance of the contract . It may be called charter party freight in the contract. Frieght clause specifies the freight rate, how freight will be calculated, when it must be paid, and the arrangements for payment. Details of bank accounts may be in a separate document annexed to the charter party.

Bill of lading freight is calculated on shipped or intaken weights, as stated in a bill of lading. Is used in trades where intaken and outturn weights are likely to differ, e.g. where:

• oil evaporates during the voyage;
• there is “clingage”;
• there is sedimentation;
• logs loaded from the water dry out on the voyage;
• ice melts on timber after loading;
• grabs cannot discharge all of a cargo.

Bill of lading freight is the usual type of freight stipulated in tanker charter parties. It may be payable in advance or at destination. Or may be payable, where outstanding, by any endorsee of a bill of lading.

Outline of clean and dirty bill of ladings in cargo ships agreement

A bill of lading is a receipt for goods either received (before shipment) or shipped on board. It provides good evidence of the existence and terms of a contract between the shipper and carrier . (A contract of carriage may exist without issue of a bill of lading, however.)

A clean bill of lading is a bill of lading bearing no superimposed clauses stating a defective condition or shortage of the goods. It states that the goods have been received “in apparent good order and condition...”, without further remarks as to their condition.

A dirty bill of lading, also known as a “claused” or “foul” bill, is one claused with remarks such as “torn bags”, “rusty drums”, “three (3) more c/s in dispute - if on board to be delivered”, etc.

A full set of “clean on board bills of lading” is normally demanded as a condition of a bank’s letter of credit, and if not issued will prevent early payment of the exporter by the bank. Pressure may therefore be exerted by a shipper for clean bills to be issued, even where these would not be justified by the actual condition or quantity of the goods.

A Letter of Indemnity (or “back letter”) may be offered by the shipper, promising to indemnify the master or carrier against any loss or liability as a consequence of signing a clean bill of lading. However, acceptance of a Letter of Indemnity of this type in return for clean bills makes the master a party to an act of deception or fraud on banks, consignee/buyer, and insurers, since it is an attempt to obtain payment for goods knowing them to be unsound. There may be personal criminal liability for fraud on the part of the carrier and the master, and a heavy financial liability on the shipowner. This type of Letter of Indemnity has no legal standing in English law and cannot be sued on if the shipper goes back on his promise of indemnity.

A master should consult his owners and their P&I club’s correspondent if he is in any doubt, but should never accept a Letter of Indemnity of this sort without the written orders of his owners.

Signing bills of lading

Where a shipmaster has to sign and issue original bills of lading, great care must be taken to see that all potential contractual pitfalls are covered. In such cases it would be advisable to consult the P&I club correspondent beforehand.

“Shipped” bills of lading are signed on behalf of the carrier by or for the master of the carrying ship. A full set of original bills will be signed, then returned (via the agent) to the shipper. Freight may be payable before signing bills, depending on the carrier’s terms.

Where a mate’s receipt was issued to the shipper on shipment of cargo, this may be required to be surrendered in exchange for the “shipped” bills of lading.

The master or his authorised deputy should always check the following when signing a bill of lading:

1. that the goods have actually been shipped (which may be determined from the ship’s copy of any mate’s receipt issued; this should be identical to the original mate’s receipt issued to the shipper, which should be presented by the shipper when requesting his bills of lading);

2. that the date of shipment is correct, i.e. as stated on the mate’s receipt or standard shipping note;

3. that the bill of lading is not marked “freight paid” or “freight prepaid” if not true;

4. that any clausing of the corresponding mate’s receipt is also contained in the bill of lading;

5. that reference is made to the charter party where one exists;

6. that any charter party terms do not conflict with the bill of lading terms; and

7. that the number of original bills in the set is stated.

Every original in the set must be signed.

Types of Bill of lading forms

A bill of lading is a receipt for goods either received (before shipment) or shipped on board. It provides good evidence of the existence and terms of a contract between the shipper and carrier . (A contract of carriage may exist without issue of a bill of lading, however.)

Bill of lading forms are produced in many styles by shipping companies, shippers, charterers, freight forwarders and organisations such as BIMCO. Several types are used for different purposes.

A “long-form” bill of lading has spaces or boxes on its front for typed details and numerous printed conditions of carriage on its back. Most liner shipping companies print their own long-form bills of lading with their company conditions of carriage on the back.

A “short form” bill of lading has only a few standard terms printed on it, avoiding the need for shippers to hold stocks of bills of lading for every carrier they use, so that they can prepare the bill of lading with the required details before presentation for signature. A short form bill of lading made out for cargo loaded aboard a voyage-chartered ship will usually indicate that the terms and conditions of the relevant charter party are deemed to be incorporated in the bill of lading. This allows any party to whom the bill of lading is transferred to see where the contract of carriage actually is.

A “direct” bill of lading is issued when the goods are for carriage from one port to another. Transshipment is not anticipated although there may be a clause giving the carrier liberty to transship (in which case the goods may lie at the merchant’s risk whilst in the transshipment port). This type of bill of lading has printed clauses on the reverse and is used in liner services.

A “combined transport” bill of lading covers carriage from door-to-door by several modes of transport, which is common in many liner services. The “combined transport operator” (CTO) takes responsibility for the goods throughout the entire journey and issues the CT bill of lading at its start.

A “through” bill of lading is issued when the carriage will involve both sea and other transport modes, but different carriers will be involved at each stage, e.g. a railway company, a shipping company, a road haulier. The bill of lading is issued by the sea carrier but he states on it that he only accepts responsibility for the goods during the sea passage.

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