AN INTRODUCTION TO BILLS OF LADING

Range of Commercial and Legal Functions of Bills of Lading

1. Receipt of Cargo
It is a receipt signed by the Master or the agent on behalf of the ship owner, for goods received
on board or elsewhere into the ship owner’s Custody.
Bills of lading thus enabled the shippers or the receivers of the cargo to establish that cargo that
either was not delivered at all or was delivered in damaged condition at the discharge port had
been loaded on a vessel in good condition and, thus, must have been damaged whilst in the care
of the carrier. This receipt function remains a primary function of the “face” of most bills of
lading (i.e. the side of the bill of lading in which information specific to particular cargoes, such
as the description and weight or volume of bulk cargoes or the dimensions, number and seal
numbers of containers in the case of containerised cargoes, is entered, generally in numbered
boxes). The words “shipped on board in apparent good order and condition” remain, by virtue of
Article III, rule 3 of the Hague and Hague-Visby Rules (and, similarly, Article 15(1)(b) of the
Hamburg Rules), the most common form of words used to evidence receipt on board a vessel, in
good condition, of a shipper’s cargo.
Bills of lading often are prepared by shippers and carriers, if they prepare bills of lading, must
rely principally on information supplied by shippers. Carriers often will have little opportunity,
in the course of loading, independently to confirm all that is said by shippers as to the nature,
condition and quantity of their cargoes, e.g. because cargo is concealed within packaging.
Nonetheless, because the bill of lading is a receipt issued by the carrier, it is the carrier and not
the shipper that will be liable to the receiver for any discrepancies between the quantity and
apparent order and condition of the cargo on shipment, as acknowledged in the bill of lading, and
of the cargo as delivered to the receiver. The bill of lading can be treated as conclusive evidence
as between the carrier and a receiver and as at least prima facie evidence as between the carrier
and the shipper, as to the number, weight or quantity and apparent order and condition of the
cargo on loading (the Carriage of Goods by Sea Act 1971, section 1(6); Hague and Hague-Visby
Rules, Article III, rule 4; the Hamburg Rules, Article 16(3); the Carriage of Goods by Sea Act
1992, section 4). Because the carrier is thereby placed at risk, the information inserted on the
face of the bill of lading generally will be stated or deemed to have been supplied and warranted
by the shipper, which will be required to indemnify the carrier against inaccuracies in the

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information provided for inclusion in the bill of lading( Hague and Hague-Visby Rules, Article
III, rule 5 and Article IV, rule 5(h); Hamburg Rules, Article 17(1); the Carriage of Goods by Sea
Act 1992, section 3(3)).

2. Evidence of a Contract of Carriage

It is an evidence of a contract of carriage between the shipper and carrier for the carriage of
goods by sea. In itself it is not a contract in the sense of being a document signed and witnessed
by or on behalf of both parties. It is only signed by ship owner’s representative which is
customarily not witnessed
Gradually, the terms on which received cargo was to be carried came to be set out (in ever
greater detail and ever smaller print) on the “reverse” side of bills of lading. However, the
manner in which bills of lading are issued has dictated their characterisation, generally, as
documents that contain or evidence, rather than constitute, contracts of carriage. Save for a
“received for shipment” bill of lading, a bill of lading will not or, at least, should not, be issued
until after all of the cargo covered by that bill of lading has been shipped on board the carrying
vessel and, indeed, might not be issued until after the carrying vessel has sailed from the
loadport. However, it would be commercial nonsense to assume that shippers would load their
cargoes onto vessels, and that carriers would accept those cargoes for carriage on board their
vessels, regardless of the terms on which those cargoes were to be carried.
Consequently, it is reasonable to assume, and Courts have long inferred, that a contract of
carriage must have been concluded before or as cargo is tendered and accepted for shipment on
board a vessel, e.g. on completion of a booking note by a shipper or upon the shipper tendering
cargo for loading pursuant to the advertised terms of a liner service, and thus prior to issue of a
bill of lading.

3. Document of Title to Cargo

Cargo often is intended to be sold, or sold on, after it has been consigned to a carrier and the
consignee thus either might not be identified when a bill of lading is issued or might thereafter
alter. The shipper or consignee of a cargo sold, or resold , after consignment to the carrier but
not immediately paid for will require some assurance that the cargo will not be delivered to the
purchaser or end purchaser before the price has been paid. Conversely, if the cargo is sold or
sold on and paid for immediately after consignment to the carrier, the purchaser or end purchaser
will require some assurance that the cargo will be delivered to it, and not to the order of either
the shipper or the original consignee. Similarly, a bank might have advanced funds for the
purchase of the cargo either to the original shipper, or to the consignee, or to a subsequent

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purchaser and will require some assurance that the cargo cannot be disposed of before the bank is
reimbursed.
Thus the holder of the B/L for the time being may be regarded as the rightful owner of the
property described in the bill.

Common “Labels” for Bills of Lading and Analogous Documents

Charterer’s bill; a bill of lading by virtue of which the charterer of a vessel is the contractual
carrier.

Claused bill; a bill of lading that contains a positive notation of a defective condition or shortage
either of the cargo covered or, where material, of its packaging. (The usual qualifications such as
“said to contain” and “condition, weight, etc. unknown” contain no positive notation of any
defect or shortage and thus do not render a bill of lading “claused”.)

Clean bill; a bill of lading that contains no positive notation of a defective condition or shortage
either of the cargo covered or, where material, of its packaging. (A bill of lading can be “clean”
although it contains no positive statement that the cargo covered was shipped “clean”. However,
such positive notation is commonly placed on the face of bills of lading.)

Combined Transport/Multimodal Transport/House to House bill; a bill of lading that covers

not only carriage of cargo on an ocean going vessel but all or other stages and/or forms of
carriage, e.g. carriage of the cargo by rail, road or barge from the shipper’s premises to an ocean
port of shipment, from that port to an ocean port of discharge and from that port of discharge by
rail, road or barge to the consignee’s premises. The issuer of such a bill of lading generally
accepts primary responsibility as carrier for all stages and forms of carriage.

Cover bill; a bill of lading issued by one carrier to another carrier that has arranged for cargo
shut out from its own vessel to be shipped on the issuing carrier’s vessel.

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Feeder/Service/Cover bill; a bill of lading issued by a sub-carrier to the main carrier under a combined
transport or through bill of lading, which covers only the stage and form of carriage performed by the
sub-carrier, e.g. carriage by barge of parcels of cargo either from inland ports or from smaller or more
remote coastal ports to a principal coastal port served by a combined transport liner service operator.
(Feeder bills of lading generally are of concern only to main carriers and sub-carriers and do not affect
the relations between main carriers and shippers or consignees that are evidenced or created by the
related combined transport or through bills of lading.)

Liner bill; a bill of lading issued by a particular shipping line that offers a regular, scheduled service
between specified load and discharge ports.

Ocean/Port to Port bill; the “classic” marine bill of lading, which covers ocean port to ocean port
carriage of cargo on a single ocean going vessel and no other stage or form of carriage.

Owner’s bill; a bill of lading by virtue of which the owner of a vessel is the contractual carrier.

Received for Shipment bill; a bill of lading containing an acknowledgement by the carrier that the cargo
covered has been received by it, e.g. at a container yard, for shipment on board a vessel. (A “received for
shipment” bill of lading can be, and often is, converted to a “shipped” bill of lading by subsequent
notation acknowledging that the cargo covered has been shipped on board a vessel.)

Shipped/Shipped on Board/On Board bill; a bill of lading containing an acknowledgement by the carrier
that the cargo covered has been loaded on board a vessel.

Straight bill; a bill of lading that is not transferable by either delivery or indorsement and delivery, e.g.
because it is marked “not negotiable” or is not made out to “bearer”, to “order” or to “assigns”. Straight
bills of lading are used, for example, for “in house” shipments between divisions of large multinationals
or when it is known for certain, prior to shipment of the cargo, that the intended consignee will not sell
the cargo on.

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Through bill; a bill of lading covering more than one stage (or, sometimes, more than one form) of
carriage. Through bills of lading differ from combined transport bills of lading in that the separate stages
and/or forms of carriage, including distinct stages of ocean carriage, generally are intended to be
undertaken by two or more successive carriers as primary carrier. Obvious characteristics are wide
liberties to tranship and purported restrictions on the liabilities of each carrier to the stage of carriage that
it performs.

Waybill/Sea waybill; a receipt for cargo that contains or evidences a contract for the carriage of goods by
sea and which identifies the person to whom the carrier is to deliver that cargo (see, the Carriage of
Goods By Sea Act 1992, section 1(3)). A waybill or sea waybill differs from a bill of lading in that it
lacks transferability and in that the designated consignee thus is not required to produce the waybill in
order to obtain delivery of the cargo. (Since a waybill is not a document of title, it will not attract the
mandatory application of the Hague-Visby Rules as a matter of English law; see, Carriage of Goods by
Sea Act 1971, section 1(2). However, sea waybills are within the ambit of the Carriage of Goods by Sea
Act 1992.)

Procedures for Issue and Correction of Bills of Lading

Issue of Bills of Lading

Generally, following full shipment of cargo under a contract of carriage, a bill of lading (or a set of 3
original bills of lading) covering that cargo is signed by the carrier or its agent and delivered to the
shipper. In practice, bills of lading sometimes are drawn up and presented or readied for signature prior
to completion of loading. However, a bill of lading should never bear a date that is earlier than the date
on which the whole or last of the cargo that it covers was loaded

The bill of lading might be prepared by the shipper and presented to the carrier for signature, in which
case it must be presented to the carrier within a reasonable time after completion of loading of the
material cargo and signed by the carrier within a reasonable time of its presentation.

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Otherwise, and increasingly often in practice, the bill of lading will be prepared by the carrier, principally
from information supplied by the shipper, in which event it should be prepared, signed and delivered to
the shipper within a reasonable time after completion of loading of its cargo.

Precautions to be taken while signing the B/L

1. That the B/L is in proper form, i.e. usually the ship owner’s own form, or the form prescribed by
the C/P
2. That it is correctly dated with the date of shipment
3. That the mates receipt showing
(a) that the goods are actually on board
(b) the apparent order and condition of the goods and details of any shortage have
been surrendered.
4. That the B/L is claused appropriately to show the apparent condition and quantity of cargo.
5. That the freight, if pre-payable, has been paid.

Typical Problems Created by Errors in Bills of Lading

If a bill of lading as issued contains inaccuracies, which most often will occur through mere error
or oversight (but appears increasingly to be occurring as a result of fraud by shippers that also
are cif sellers), that can result in serious problems and potential losses. For example, the carrier
might be at risk of a loss for which it will be unable to claim an indemnity from the shipper
because, by error or neglect of the carrier alone, the quantity of cargo acknowledged as shipped
in the bill of lading is greater than the quantity declared by the shipper as shipped and, thus, is
greater than the quantity available for delivery to the consignee, as against which the bill of
lading might constitute conclusive evidence of the quantity shipped;

To give another, and increasingly common, example, if the date on which the last of the cargo is
shown to have been shipped is inaccurate, the bill of lading might be accepted on behalf of a
purchaser of the cargo who otherwise would have been entitled to reject it (as having been issued
outside the contractual shipment period), resulting in claims by the consignee against the carrier
either for fraudulent or negligent.
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