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Bill of Lading Freight

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Law and Sea.
Bill of Lading Contract

A bill of lading is a document signed by the shipowner, or by the master or other agent of the shipowner, which states that certain specified goods have been shipped in a particular ship.

Bill of Lading Contract
Last updated: 21-Jun-2015

In Mason v Lickbarrow (1794) 1 H. Bl. 359 per Lord Loughborough at p.404-405

A bill of lading is the written evidence of a contract of the carriage and delivery of goods sent by sea for a certain freight. The contract in legal language is a contract of bailment; 2 Lord Raym. 912. In the usual form of the contract the underetaikng is to deliver to the order or assigns of the shipper. By the delivery on board, the ship-master acquires a special property to support that possession which he holds in the right of another, and to enable him to perform his undertaking. The general property remains with the shipper of the goods until he has disposed of it by some act sufficient in law to transfer property. The indorsement of the bill of lading is simply a direction of the delivery of the goods. When this indorsement is in blank, the holder of the bill of lading may receive the goods, and his receipt will discharge the ship-master; but the holder of the bill, if it came into his hands casually, without any just title, can acquire no property in the goods.

Per Lord Bramwell in Sewell v Burdick [1875] 10 AC 74, at p.105:

It is a receipt for the goods, stating the terms on which they were delivered to and received by the ship, and the excellent evidence of those terms, but it is not a contract. That has been made before the bill of lading was given. Take for instance goods shipped under a charterparty, and a bill of lading differing from the charterparty; as between shipowner and shipper at least the charterparty is binding.

This statement was further explained in S. S. Ardennes (Cargo Owners) v S.S. Ardennes (Owners) (The Ardennes), [1951] 1 KB 55. Case where, in breach of his verbal promise, the shipowner deviated from the route to London and called first at Antwerp but later, in reply to the shipper’s claim for damages, contended that on the terms of Bill of Lading evidence of any other bargain or promise was not admissible. Lord Goddard CJ in his judgment said that:

The contract has come into existence before the bill of lading is signed; the latter is signed by one party only, and handed by him to the shipper usually after the goods have been put on board. No doubt if the shipper finds that the bill contains terms with which he is not content, or does not contain some term for which he has stipulated, he might, if there were time, demand his goods back; but he is not, in my opinion, for that reason, prevented from giving evidence that there was in fact a contract entered into before the bill of lading was signed different from that which is found in the bill of lading or containing some additional term. He is no party to the preparation of the bill of lading [not always the case, remark is mine]; nor does he sign it. It is unnecessary to cite authority further than the two cases already mentioned for the proposition that the bill of lading is not itself the contract; therefore in my opinion evidence as to the true contract is admissible.

Per Morris LJ Brown Jenkinson & Co Ltd v Percy Dalton (London) Ltd, [1957] 2 QB 621 at pp.622-3:

at the request of the defendants, the plaintiffs made a representation which they knew to be false and which they intended should be relied upon by persons who received the bill of lading, including any banker who might be concerned. In these circumstances, all the elements of the tort of deceit were present. Someone who could prove that he suffered damage by relying on the representation could sue for damages. I feel impelled to the conclusion that a promise to indemnify the plaintiffs against any loss resulting to them from making the representation is unenforceable. The claim cannot be put forward without basing it upon an unlawful transaction. The promise upon which the plaintiffs rely is in effect this: if you will make a false representation, which will deceive indorsees or bankers, we will indemnify you against any loss that may result to you. I cannot think that a court should lend its aid to enforce such a bargain.

Thus if a shipowner thinks that he has detected some faulty condition in regard to goods to be taken on board, he may be assured by the shipper that he is entirely mistaken: if he is so persuaded by the shipper, it may be that he could honestly issue a clean bill of lading, while taking an indemnity in case it was later shown that there had in fact been some faulty condition.

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