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TitleThe Importance and Various Effects of Bill of Lading in International Trade
TagsBill Of Lading Cargo Consignee Social Institutions Society
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Introduction



According to Webster’s New World Law Dictionary,1 a bill of lading is

defined as “a document issued by a carrier or by a shipper’s agent that identifies

the goods received for shipment, where the goods are to be delivered, and who is

entitled to receive the shipment”. As of today, the bill of lading has played an

important role in governing international trade due to its legal functions as a

receipt of the goods, an evidence of a contract of carriage, and a document of title

to the goods.



Bill of Lading as a Receipt of the Goods



The first legal function of the bill of lading is that it serves as an evidence of

the master’s receipt of the shipper’s goods. Upon receiving the shipper’s goods,

the master is ought to issue a bill of lading, on demand of the shipper, which

contains specific information regarding the goods, primarily the quantity, or

weight, or number of packages, and the condition of the goods loaded.2 This

information will then be regarded as an honest representation of the truth

regarding the goods. Thus, the bill of lading now enables the master, the shipper,

and the receiver to establish the fact whether the goods are loaded onto the vessel

in good condition.



However, we should note that often, the master is unable to confirm the

information of the goods given by the shipper because the goods are concealed

within packaging. An issue might arise when there is a discrepancy between the

quantity, or the condition, of the goods stated in the bill of lading and that of the

goods received by the receiver. Now, it is obvious that since the master is the one

who issues the bill of lading, the master is held liable for this discrepancy instead

of the shipper. At this point, the bill of lading shall be prima facie evidence

between the carrier and the shipper that the actual condition of the goods are in


1 Bill of Lading. (n.d.). Retrieved 15 October 2013, from www.yourdictionary.com/bill-of-lading
2 See Hague and Hague-Visby Rules, Article III, rule 3

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accordance with the information given by the shipper.3 Therefore, it is deemed

that the shipper has guaranteed the accuracy of information provided at the time

of shipment and shall indemnify the carrier against losses, damages, and expenses

arising from such inaccuracies.4



Additionally, this receipt function of the bill of lading can be used as a

commercial proof of completing a contractual obligation between the buyer and

the seller, especially under FOB (Free on Board). Under FOB, the seller must bear

the full liability for the cost and safety of the goods up to the point where the

goods pass the named ship’s rail. The signed bill of lading will then be the proof

that the seller has fulfilled his obligation by delivering the goods safely to the

named ship.



Bill of Lading as a Contract of Carriage



Bill of lading as a contract of carriage has mainly two different legal

functions: it may only serve as the evidence of the contract of carriage or it may

serve as the actual contract of carriage.



As between the shipper and the carrier, the bill of lading only serves as the

evidence of the contract of carriage, not as the contract itself. The contract itself is

formed by the mutual exchange of promises between the shipper and the carrier

that takes place before the bill of lading is issued. A further explanation of this

notion is found in the judgment of a famous case – The Ardennes. In The Ardennes,5

the plaintiff seller, wished to ship Mandarin oranges from Spain to London, and

specifically requested that the oranges should arrive before 1 December in order

to avoid an unwanted rise in import duty. The contract of carriage contained an

express clause that the vessel would sail directly to London. The bill of lading,

which was issued after the contract was made, contained a ‘liberty to deviate’

clause, giving the vessel liberty to call at any port on her way to London. In other


3 See Hague and Hague-Visby Rules, Article III, rule 4; Carriage of Goods by Sea Act 1992, section 4
4 See Hague and Hague-Visby Rules, Article III, rule 5
5 See The Ardennes [1951] 1 KB 55

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words, there was a difference between the terms of the contract and the terms of

the bill of lading. Later, it turned out that, instead sailing to London directly, the

vessel went first to Antwerp to unload another cargo. Therefore, the vessel was

late when it reached London on 4 December. As a result, when the plaintiff’s cargo

arrived in London, (a) there had been an increase in the import duty, and (b) the

price of Mandarin oranges fell, all of which events would not occur should the

vessel arrived in London on time. The ship owner argued that the contract was

the bill of lading and he was allowed to call at any port; however, Lord Goddard

made a point 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… 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.6”



Hence, it is held that the bill of lading, in this case, is just the evidence of the

contract of carriage and not the actual contract itself.



On the other hand, the bill of lading becomes the actual contract of carriage

where it is in the hands of a consignee – or indorsee – which is not involved in the

negotiation of the contract of the carriage. In Leduc v Ward,7 a shipper requested

that a cargo of rapeseed was to be shipped from the port of Fiome to Dunkirk.

Instead of going directly to Dunkirk, the vessel sailed firstly to Glasgow and was

lost, together with the cargo, by perils of the sea. The original contract of carriage

between the shipper and carrier was that the vessel should proceed firstly to

Glasgow; however, there was a ‘liberty clause’ in the bill of lading that enabled the

vessel to call at any port. The facts of this case are similar to those of the case

mentioned in the previous paragraph, but the decision is different. In this case,

Lord Esher said that as far as the consignee was concerned, the contract of


6 Ibid., at p. 59
7 See Leduc v Ward [1888] 20 QBD 475

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