An important question.. Let us first look at some definitions..
Bill of Lading : is a transport document issued by a carrier to convey information about the cargo and the condition in which it has been received and transported..
The bill of lading has 3 basic purposes or roles..
- Evidence of Contract of Carriage
- Receipt of Goods
- Document of Title to the goods
Contract of Carriage : The popularly used conventions and rules covering the Carriage of Goods by Sea define Contract of Carriage as below :
Page 1 of any carrier’s bill of lading will show which of the above conventions govern the carriage..
Let us look at the subject question in the context of containerised cargo..
In normal trade the rates and other terms are negotiated between the shipper/cargo owner and the carrier, and once they reach an agreement or contract (maybe verbal or written), the shipment is “booked” with the carrier and this may be considered as the commencement of the contract of carriage..
The carrier usually sends a booking confirmation as acceptance of the booking..
Clauses in the booking confirmation sent by the carrier will indicate the terms and conditions that will govern the booking and contract of carriage..
I have quoted below, clauses shown on the booking confirmations of some of the lines and you may notice that all of them say that the booking is “subject to the terms and conditions of the line’s bill of lading“, which comes at a much later stage once the shipment has been effected..
CMA-CGM
Shipment shall be subject to CMA CGM bill of lading terms and conditions available in any CMA CGM agencies or on CMA CGM web site: www.cma-cgm.com
Hamburg Sud
THIS BOOKING CONFIRMATION IS SUBJECT TO THE TERMS AND CONDITIONS OF OUR BILL OF LADING OBTAINABLE FROM THE CARRIER OR THE CARRIERS WEBSITE AT:
www.hamburgsud-line.com/hsdg/de/hsdg/termsofuse.jsp.THE CONDITIONS OF OUR BILLS OF LADING AND SEA WAYBILLS CONTAIN LIMITATIONS OF LIABILITY WHICH DEVIATE FROM STATUTORY GERMAN LAW.
Hapag Lloyd
Hapag-Lloyd AG is operating under the terms and conditions of its bill of lading or sea waybill depending on which document will be issued for the shipment. Our terms and conditions will be provided to you upon request or may be viewed at any office of Hapag-lloyd AG or its agents or under www.hapag-lloyd.com.
Safmarine
This contract is subject to the terms, conditions and exceptions, including the law & jurisdiction clause and limitation of liability & declared value clauses, of the current Safmarine Line Bill of Lading (available from the Carrier, its agents and at terms.safmarine.com/carriage), which are applicable with logical amendments (mutatis mutandis).
Agent for shipping line
Remarks:
* Please note that all cargo shipped is subject to terms and conditions on the lines bill of lading
The client has the option to go through the terms and conditions on the bill of lading and advise the carrier if he finds any terms that may not be suitable for his business and/or carriage..
From the above it is clear that although the bill of lading follows the contract of carriage physically, the terms of the contract of carriage are governed by the bill of lading..
The bill of lading also being a receipt for the goods, states the terms on which they were delivered to and received by the ship, and maybe considered as an excellent evidence of these terms, but it is not a contract..
Therefore, as far as containerised trade is concerned, since the contract has already come into existence before the bill of lading is prepared and issued, a bill of lading cannot become a contract of carriage but only be considered as evidence of the contract of carriage..
Let us look at this question in the context of carriage under charter parties..
The bill of lading as an evidence of the contract of carriage applies to shipments where shippers ship cargo in small quantities using either containerised service or break bulk service where there are no full charters or charter parties involved..
Where charter parties are involved, especially where the shipper charters the entire ship from the owner, the bill of lading issued along with a charter party does not evidence the terms of the contract of carriage between shipowner and cargo owner because in this case, the contract between them is governed solely by the terms of the charter party..
In cases where the contract is governed by the charter party, the Bills issued to a charterer acts merely as receipt for the cargo received and shipped and as a document of title in case the charterer decides to sell the goods while they are still in transit..
The bill of lading will, however, typically identify the charter party which is applicable to the carriage of the goods by reference to the date and place of the charter party..
A significant part of the law of carriage of goods by sea is regulated by party autonomy.
1. Analyze why in a chartering legal relationship the contractual parties have freedom to agree on their rights and duties and explain why this freedom is lifted when a third party (i.e., an indorse of a bill of lading issued under a charter party) enters the sea carriage arrangement.
2. Briefly analyze, if the above approach is conducive to the “health” of the market.
In a simple sentence, under what circumstances does the BL becomes the contract of carriage?
hI hARIESH,
your articles are top . Pls continue
They are more usefull than treaties of many University professors
All the best
ivo
a
Dear Hariesh,Your articles are very educative to me and it leant me a lot being that i want to take shipping as my career.Sir i am highly requesting for you to kindly help me to get most of this articles in PDF forms so that i can be able to down load for further studing.Best regards
Augustine
Woow shipping articles is very intresting lets enjoy together
Can you please clarify more with some example that how bill of lading becomes contract of carriage. Is it when third party (endorsee) is involved ?
Okey the bill of lading become a contract of carriage of goods once the shipper books the space from carrier (shipping line) .
It happens within specific time then bl becomes evidence of contract of carriage.
Typical pricing per GOH on high end clothing?
This article is very interesting and thanks for sharing it with us. I have only one comment for discussion about the ” document of title”.
I opine that a ” charter party bill of lading ” does not solely act as a document of title but it is subject also to the terms of the charter party. This leads to another issue whether a charter party bill of lading is a negotiable instrument or not. What if charterer breaks one of the conditions stipulated in the charter party and the ship owner resists in releasing the goods to a third party ?
Hi Joe,
correct me where necessary.
CPBL is non negotiable….
CPBL is subject to charter party-an agreement between the charterer and shipowner.
in fact third party in this case,takes the charterer as the shipowner,he is unknown by the vessel owner…..
shipowner has the right to lay a claim in case of any dispute between them against the cargo on board.
third party will have to push the charteter for cargo release,,,,in turn charterer will sort the matter with shipowner for smooth cargo release.
Fraud
We paid a agent shipping agent to ship goods which were duly shipped by a shipping line
but the shipper refused to release the BoL as they had not been paid.
We were held liable by the Line and had to pay the freight charge a second time as the agent had lied to shipper.
Moral trust nobody not even yourself.
Hi Paul, I can sense the frustration in your message and it is understandable.. Unfortunately there are several fraudsters among us.. It has become necessary to take several safeguards against shipping and freight fraud..
Interesting…..however, there are multiple case laws where Bill of lading is rendered nothing but a mere receipt of carriage while the contract encompassed a number of documentation including correspondences exchanged between the parties (both written and even verbal). How can I write blogs here? Can you advise please? Thanks.
Hello Shubbham,
This is an Express BL (or Seaway Bill) issued by the shipping line (Master BL), and it can cover an NVO’s House BL.
Other documents can supplement a BL (vessel certificates, LOIs…) but they only come with negotiable Original BL and only from the actual carrier.
Samuel
It was useful to me thank you
Glad you found it useful Hawa..
Hello Hariesh,
What abt if the Shipper (as declared in the issued and signed B/L) declares officially that the cargo is on financial hold due to unsettled amounts due, therefore the cargo loaded onboard should NOT be discharged until further instructions fm Shipper, while the Charterer who has charter the Vessel under an official c/p declares that there is NO any financial hold and the cargo needs to be discharged ASAP?
In this case what should Vessel’s (Owners) actions?
Thks,
Dimitris
Dear Dimitris,
As a carrier, we cannot comply with this request as we have issued a point-to-point BL and the matter involves the cargo and not the transport.
Keeping a container on board until further notice is just not an option, neither operationally nor contractually. Either shipper requires a change of destination and accepts all related extracosts against a new set of BLs, or the container is discharged at the planned location pending settlement of the issue related to cargo, all extracost accepted (demurrage/detention).
Caution for CODs, in many cases, the request needs to be received by the shipping line up to six days prior to arrival at POD as imports are manifested to the customs who will not accept any change in status (Shanghai comes to mind…)
Hope this helps.
Samuel
Hi Hariesh,
This happens case to case basis,where shipper may put cargo on hold pending instructions for release.
Normally are called collect charges-CC,,,to be collected by the destination local agents on behalf of the shipper…in turn remitted back.
in case cargo is released without this amount being collected at destination..then local agent will have to bear the loss.
This helps?
I would like to ask you for your opinion on the following (mu question may be confusing, but this is because the entire situation is confusing to me). This arose as a matter of insurance sum payment, as cargo was damaged on ship and our P&I insurerers have asked for the relevant B/Ls (specifically, owners B/L was asked for)
If we are charterers of a vessel (a time charter), which we use as feeder vessel, transporting third-party cargo from a smaller port to be transshipped to an ocean vessel for further carriage, I assume that we should be issuing B/Ls to our clients, to whom we have so undertaken to transport the cargo, as carriers. On the other hand, from your post I understand that the owners of the vessel should be issuing B/Ls to us, as receipt for the cargo on board. Does this mean that there may actually be two sets of B/Ls involved in such carriage?
Thank you.
Hello Irina under TC, the charterer is incharge of the commercial operation of the ship whereas the shipowner remains responsible for the technical operation of the vessel.. So in the case of TC, commercially the master of the ship reports to the charterer and as such any bill of lading signed by the master of the ship will be on behalf of the charterer, in this case you.. So if you are chartering the ship on TC from a ship owner and using the ship as a feeder vsl between smaller ports, then yours will be the only bill of lading to be issued.. The shipowner will not be issuing any bills here..
If you were a direct cargo owner then the shipowner will issue the bill as a receipt for the cargo on board, not when you are acting as a TIME CHARTERER..
Trust this assists..
Thank you. It certainly helps. At least it is in line with what I figured for myself the documentation should be. However, could you help with one more issue here. To give you some background, our country (Moldova) has a port only for several years, no experience with maritime shipments and virtually no legislation in the field, so it is really hectic. We usually act as forwarders for our client and undertake to carry door-to-door (we perform local road haulage to local port and, as time-charterers – the feeder leg of the journey to the first transshipment port; and we book the further ocean journey with the maritime C-lines). Since we take over the cargo inland, our shipper-client is not interested in our BL on the feeder leg of the journey (nobody requests it and it is not usually issued; what everybody is interested in is the ocean BL issued by the C-lines). However, even if there is no need for this feeder BL, I suppose there should be a document issued by the feeder vessel owners to us, as time charterers, in confirmation of the cargo received on board. So far, such a document was not ever issued. What they do, is issue a cargo manifest for all cargo on board. But this document has another function. This is why insurers’ question about owners’ BL confused me, as I have a hunch that there should be some kind of document in this respect. Now that we are planning to lay a claim with the vessel owners for cargo damaged on board, this became a rather urgent issue. Is this document a mate’s receipt? Is it something else? Thank you once again
Thank u for ur reply…
I am an MEO class I candidate giving exams…
In my question papers I was going through the topic OSTENSIBLE AUTHORITY and RATIFICATION with respect to signing of Bill of Lading. It would be of great help for my exams if u could plz explain those topics with some examples..
Thanking u in advance..
Plz correct me if my understanding is wrong,
To summarize,
Case 1: A Bill Of Lading is a evidence of contract of carriage between the shipper and the carrier, if no carter party is involved and BL is dealing only with two parties (shipper and the carrier)
Case 2: When there is a charter party involved, the Bill of Lading issued to the shipper/charterer is only the receipt for the goods on board and a Document of Title.
When these goods are sold to other party during the transit or when the Bill of Lading is endorsed to a third party by means of sale to the endorsee, now the Bill of Lading will be a actual contract of carriage between the endorsee and the carrier.
Hi Manikandan, you are right.. 🙂
So, Is it safe to assume that Bill of lading can never be considered as Contract of carriage , but only as evidence of contract.
Unless otherwise a bill of lading is issued with those specific words, yes..
sir, in the initial paragraphs you say that for containerised trade the bill of lading cannot become a contract of carriage. Then , you say that B/L is an evidence of contract of carriage ( purpose 1, para 1) for small shipments. That is in this case also, this is not actually contract of carriage. Again when charter parties are involved, the B/L is merely a receipt. Hence, Please clarify as to when B/L becomes the contract of carriage
Hi Madhav, in my post I have mentioned “Therefore, as far as containerised trade is concerned, since the contract has already come into existence before the bill of lading is prepared and issued, a bill of lading cannot become a contract of carriage but only be considered as evidence of the contract of carriage..”
Trust this clarifies..
Hi Madhav,
maybe to shed more light.
the actual contract of carriage is when the shipper/cargo owner strikes a deal to carry the goods.
this is done during booking of the cargo by either,,,emails…written forms or through tel. calls…verbally.
the BL is is issued when the contract is in existence.thats why it is now…..acts as an evidence of contract of carriage.
You ok now.?
If a Bill of lading, issued under charter party, is indorsed to a bona fide purchaser for a value, the bill of lading will become the conclusive or actual contract of carriage so far as the endorsee is concerned.
The endorsee will only be affected by the charter party if its terms are clearly incorporated in the bill of lading. The bill of lading is contract itself in the sense that it contains the contractual terms between carrier and endorsee.
Hello Prasoon, as long as the relationship is limited between the shipper and carrier it will be simple.. Things become more complicated when the bill of lading is endorsed in favour of an endorsee.. If the endorsee wishes to claim against the carrier it may rely on the terms of the bill of lading.. Under these circumstances, the carrier or shipper will not be able to say “ but the booking note had the following terms…”.. The endorsee can look to the terms of the bill of lading alone..