Keywords: Bill of Lading, Shipping, Cross-border Trade
AUTHOR: SHARON JUWAH
INTRODUCTION
A Bill of Lading is a document issued by the carrier of goods, to be transferred from the seller to the buyer.[1] It is also a document of title which confers certain legal rights to the holder of the document, such as the right to transfer his title in the goods and the right to use the document as collateral for a loan. Just as the bill of lading confers rights on the holder, it also confers liabilities in relation to the goods. This article seeks to discuss the legal nature of a bill of lading in shipping and cross border trade.
THE LEGAL NATURE OF A BILL OF LADING
To the Exporter
To an exporter, the bill of lading is proof that the goods have been loaded aboard the ship, the exporter has the right to hold the shipping company responsible for any damage to the goods where the goods are discovered to be in bad condition compared to when they were loaded. Thus the shipping company may be held liable in negligence for any damage to the goods. Also, the exporter can claim incentives such as duty drawback through the bill of lading. Under the Cost, Insurance and Freight (CIF) contract, a bill of lading enables the exporter to pay the exact amount of freight to the shipping company.
To the Importer
To the importer, the bill of lading confers title to the goods, through which he can gain possession of the goods. The bill of lading also enables the importer to pay proper freight fees under the FOB[1] (Free on Board) contract. So also, the bill of lading helps the shipping company protect its interest where a false alarm is raised as to the liability for damaged goods, which were actually damaged prior to loading.
FUNCTIONS OF A BILL OF LADING
However, the bill of lading as a legally binding document will be examined by looking at three (3) legal uses of the document. These three broad headings are;
- The bill of lading as a receipt
- The bill of lading as an evidence of contract and;
The bill of lading as a document of title.
BILL OF LADING OF A RECEIPT
The Halsbury’s Laws of England at paragraph 1532 defines a bill of lading as: A document signed by the owner, or by the master or agent of the ship-owner, which states that certain specified goods have been shipped in a particular ship…” According to Pane and Ivamy, a bill of lading is usually signed by the loading broker under modern conditions, but sometimes by the master, acknowledging the quantity and condition of the goods when put on board. The specific effect of this acknowledgement is most significant in view of the rule of law that the ship must deliver “what she received as she received it, unless relieved by the excepted perils”[1]. This was held in the case of Bradley v Federal Steams. A bill of lading forms the basis of any cargo claim by the receiver should the goods be short delivered or damaged on discharged.[2] It also forms the basis upon which a buyer can reject the document and or cargo in a C.I.F contract where the description of the goods does not correspond with their description in the sale invoice. Sometimes, the bill of lading refers to the “leading marks[3]” inscribed on the goods, and sometimes there is a statement as to their quality.
Action for Non-Delivery
The bill of lading is prima facie evidence that the quantity of goods alleged to have been shipped was truly shipped. Where the shipper can successfully prove that the goods were not shipped, he escapes liability in respect of them.[1] In Grant v. Norway[2], a bill of lading was signed by the master for twelve bales of silk, which the ship-owner proved had not been put on-board. The court held that the master had no authority to sign for goods not shipped and the holders of the bill of lading had no claim against the ship-owner for non-delivery of these bales.
It should be noted that if the bill of lading contains words such as “weight and quantity unknown”, it is still not prima facie evidence and for an action for non-delivery to succeed, the shipper must show that the goods were indeed shipped.
Evidence of Goods Shipped
Under the Carriage of Goods Act[3], the bill of lading is prima facie evidence that the quantity of goods alleged to have been shipped have indeed been shipped[4]. To avoid liability, the carrier has the burden of proving that the goods were not shipped as stated in the bill. The shipper on his own part must clearly establish that the goods were shipped and not merely on a probable basis. Thus, in Ecu-Line v. Adelakan[5] a shipment of goods supposedly consisting of a photoplotter Miva 25 machine and a STC photo processing machine was placed aboard the “MV Kagoro”.
The bill of lading was faxed by the Appellant to the respondent but did not list the photoplotter as part of the cargo. On arrival at the port in Nigeria, the Respondent proceeded to claim the cargo but was alarmed to discover that the photoplotter was not included. The Appellant was accused of misplacing the machine and was sued for damages for breach of contract and negligence at the Federal High Court. Judgment was granted in favour of the Respondent. However, on appeal, the court held that a contract of affreightment or transportation of any item by sea must be evidenced by the bill of lading. Where the bill of lading does not mention the particular goods, it is clear evidence that such was not placed aboard the ship.
Under international conventions[6], the carrier is under no obligation to issue a bill of lading, neither is he obligated to acknowledge the quantity of cargo shipped unless the shipper requests it. If no such request is made, then consignees or assignees of the bill are prejudiced, since they have no right to demand compliance with the rule. Although, in practice carriers always want to issue a bill of lading for personal reasons.
The evidentiary value of the bill of lading under The Hague/Visby Rules follow the common law in regarding the bill of lading in the hands of the shipper as prima facie evidence or proof of the amount of cargo shipped, Article III rule 4 however treats the bill of lading as conclusive evidence once it has been sent.
Evidence of Condition of Goods Shipped
A bill of lading is also a receipt by the shipowner as to the condition in which goods were shipped. This refers to the apparent condition in so far as the carrier or his agent is able to determine by reasonable outward inspection[7]. In this age of containerized cargo, a shipper or his agent can only evaluate the outer package of the container and not the condition of its content, only defects observed on the outside can be recorded and he is only bound to deliver the goods in the condition (on the outside) he received it. This is why in practice, many shippers avoid endorsing the damage or defect on cargoes, for financial institutions to sight “a clean bill of lading”.
At common law, the shipowner will be estopped by the admission contained in the bill of lading where evidence shows that the endorsee did not act to his detriment on the face of the bill. To establish such an estoppel, the statement in the bill of lading must be clear and un-ambiguous. According to Ivany and Payne, an admission as to the condition of goods on shipment will bind the shipowner only as a defect which ought to be apparent on reasonable inspection.[8]
Under The Hague/Visby Rule, the carrier is entitled to refuse to acknowledge the condition in which the goods are received in circumstances where there is no reasonable means or opportunity to inspect them. Under Article 15 of the United Nations Convention on Carriage of Goods by Ratification and Enforcement Act (2005), the content of the bill of lading must contain a note a to the state, weight and if applicable, the dangerous character of the goods. Article 17[9] provides that a bill of lading serves as a guarantee by the Shipper of the accuracy of all details contained in the document.
BILL OF LADING AS AN EVIDENCE OF CONTRACT
The bill of lading from a carrier to a shipper can be used as an evidence of the contract of carriage showing that the carrier has received the goods and upon the receipt the carrier would deliver the goods. The 1924 Hague Rules[10] define a Contract of Carriage as one “covered by a bill of lading or any similar document of title, in so far as such document relates to the carriage of goods by sea…”.[11]
The Nigerian court in the case of SuperMaritime (Nig) Ltd v Essential Seafoods Ltd[12]held that ‘ A contract for the carriage of goods in a ship is called a contract of affreightment. In practice these contracts are usually written and most often are expressed in one or other of two types of documents called respectively a charter party and a bill of lading’[13]
Similarly, in the case of Basino Motors Ltd vs Woermann- Line[14], the learned judge commented that a Bill of lading is a written contract between those who are expressed to be parties to it. It seems to be settled law that the bill of lading contains the terms of the contract of carriage of goods and it is the bill of lading that is cynosural in the event of a dispute arising in a contract of affreightment.[15] The general rule of law is that where the parties have embodied the terms of their contract in a written document, extrinsic evidence is not admissible to add to, vary, subtract from or contradict the terms of the written document.[16]
Negotiated Terms of Engagement
In trade, the rates and other terms are negotiated between the shipper and the carrier and once an agreement is reached, the shipment is booked and this may be considered as the commencement of the contract of carriage. The Bill of Lading ordinarily contains terms of engagement between parties involved in the transaction. This was the decision of the court in the Mediterranean Shipping Case.[17] The carrier usually sends a booking confirmation as acceptance of the booking, this booking usually indicates the terms and conditions governing the booking and the contract of carriage. The client can choose to go through the terms and conditions on the bill of lading and point out any term that he does not agree with.
Evidence of Contract of Carriage
The above shows that although a bill of lading follows the contract of carriage physically, the terms of the contract of carriage are governed by the bill of lading. However, in terms of containerized trade, where the contract has already come into existence before the bill of lading is issued, a bill of lading in such situation cannot become a contract of carriage but an evidence of one. The bill of lading as an evidence of the contract of carriage applies to shipments where shippers ship cargo in small quantities using either containerized service or break bulk service where there are no full charterers or charter part involved.
Where the bill of lading is negotiated to a bona fide third party, then the bill of lading becomes conclusive evidence where no contradictory evidence can be introduced, this is because the third party cannot examine the actual shipment and can only pay attention to the document itself. Therefore, the bill of lading in itself cannot be a contract for the carriage of goods, but it can be evidence that such contract exists. This is similar to the ordeal with an electronic bill of lading.
BILL OF LADING AS A DOCUMENT OF TITLE
Right to Possession
A document of title is something which a seller can sell to a buyer in lieu of goods, it enables the holder of the document to deal with the goods described in it as if he was the owner. The bill of lading is the universally recognised symbol of goods in transit. The goods can be bought or sold while they are in transit at sea. This passes the property in the goods and also the right to possession when the vessel arrives at the port of delivery.
The holder of the document is entitled to possession of the goods referred to in it, this right under the bill of lading is transferred by endorsement. Typically, the bill of lading will be issued to a named shipper and consigned ‘to order’[18] which makes the bill negotiable, to endorse the bill of lading, the shipper named in the bill will put his company stamp on the reverse side of the bill of lading and sign it. This is not applicable in the case of an electronic bill of lading.
Negotiability and Transferability
The bill of lading is then transferred with other documents to the shipper’s bank. When the ship arrives at the discharge port, the buyer who is in possession of the bill must present it to the carrier or his agent to obtain delivery of the goods, when delivery is made, then the carrier is protected against any claim for misdelivery of the cargo. It should be noted that a straight bill of lading, that is a bill containing only the name of the person to whom delivery should be made and no other, such bill of lading is neither negotiable nor transferable and such cannot be a document of title.
Possession and Ownership
It should also be noted that the title granted by the bill of lading is often times that of possession and not ownership. In Meyerstein v. Barber[19] Erle CJ said that “the endorsement and delivery of the bill of lading, while the ship is at sea, operate exactly the same as the delivery of the goods themselves to the assignee after the ship’s arrival would do”. This shows that the delivery of the bill of lading is nothing more than the handing over or taking possession of goods.
The bill of lading as a document of title also allows the holder to sue in his own name. This was not the case previously under the Common law because it was believed that a person who is not a party to a contract from the beginning should not be allowed to bring an action under it. However, with the introduction of the Carriage of Goods Act 1992, this position was reversed. This means that a third party can now sue under the Bill of Lading.
CONCLUSION
The Bill of Lading is an important document that protects both the carrier and shipper. It documents details about the shipment and serves as a reference point in the event of a dispute arising. It serves as an evidence of carriage, receipt for goods shipped and title documentation. Parties in any given transaction ought to take all necessary steps to ensure that they understand the purpose and format of a Bill of lading to ensure that their interests are adequately protected.
[1] Schedule , Par 6, Carriage of Goods by Sea Act
[2] (1851), 10 C.B 665
[3] C2 LFN 2004
[4] Section 4, Article III of the Carriage of Goods Act
[5] (2001) 10 NWLR (721) 261
[6] Article III rule 3 of The Hague/Visby Rules
[7] The Galatia (1980) Lloyd’s Rep 453
[8] See also Ardennes (Cargo Owners) V. Ardennes (Owners) (1951) 1 K.B. 55
[9] United Nations Convention on Carriage of Goods by Ratification and Enforcement Act (2005)
[10] Carriage of Goods by Sea Act
[11] See also SuperMaritime (Nig) ltd v Essential Seafoods Ltd (201) LPELR-45109(CA) ; Fraser v. Telegraph Construction Co. (1872) L.R. 7 Q.B. 566, Chartered Bank v. Netherlands India S.N. Co (1883) 10 Q.B.D. 521; Glyn v. East and West India Dock Co. (1882) 7 AC.591
[12] (2018) LPELR-45109(CA)
[13] See also Awolaja v Seatrade Groningen B.V (2002) LPELR (651) 1 at 10
[14] (2009) LPELR (756) 1 at 27-28
[15] See OLAOYE vs. BALOGUN (1990) 5 NWLR (PT. 148) 24, UNION BANK vs. OZIGI (1994) LPELR (3389) 1 at 15, BABA vs. NCATC ZARIA (1991) 5 NWLR (PT. 192) 388 and LAYADE vs. PANALPINA WORLD TRANSPORT NIG LTD (1996) LPELR (1768) 1 at 22
[16] Boothia Maritime Inc v. Fareast Mercantile Co. Ltd 2001 9 NWLR Pt. 772 page 572 SC
[17] Mediterranean Shipping Co v Enemaku & ANor (2012) LPELR-9253(CA)
[18] Article III, Par 7 Carriage of Goods by Sea Act
[19] (1886) 2 LR 38 (CP)
[1] Per Lord Summer in Bradley v. Federal Steams, etc, Co [1927] 137 L.T, 266 at P. 267
[2] See Article III, Par 4 Carriage of Goods by Sea Act
[3] Article III, Par 6 Carriage of Goods by Sea Act
[1] FOB contract is a sale of goods contract used in international overseas trade in which the parties agree that the seller takes all the responsibility until the goods are carried passed to the buyer, and the buyer undertakes all the risks, costs and duties when the goods is passed over
[1] See Article III, Par 6 Carriage of Goods by Sea Act
