BILL OF LADING - Functions
Definition:
Article 1, para 7 of the Hamburg Rules gives a clear definition of the
Bill of Lading:
A Bill of Lading is a document that evidences a contract for the
carriage of goods by sea and the taking over or loading of the goods
and by which the carrier undertakes to deliver the goods upon
surrender of the document. A provision in the bill of lading to deliver
the goods to a named person or to order constitutes such an
undertaking.
Thus, a bill of lading performs three separate functions:
a) It is evidence of the terms of a contract of affreightment
b) It is evidence of the shipment of goods (receipt on board)
c) It is a document of title.
B/L - as evidence of Contract of Carriage
A B/L, even though it normally contains the terms of carriage, is regarded in
the hands of a shipper as evidence of contract of carriage, since the contract
with the shipper is likely to have been concluded orally long before the issue of
the B/L.
B/L - as a Contract of Carriage
This view that the B/L is an evidence of the Contract of Carriage is correct only
in so far as the holder of the B/L is the shipper. Upon endorsement to a third
party, i,e, a consignee or endorsee, in the hands of the third party, the B/L is a
contract of carriage. Any oral or written agreement between the ship owner
and shipper not included in the B/L will have no effect on the third party.
B/L - as a Receipt
Bills of lading originated as no more than documents issued by the carriers to
merchants to evidence receipt by the carriers, in good condition, of cargoes
shipped on board their vessels. Bills of lading thus enabled the shippers or the
Compiled by : Capt. Naveen C Tewari, ARI Saket. New Delhi. (1/16) 1
BILL OF LADING - Functions
receivers of the cargo to establish that cargo 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. The words “shipped on board in apparent good order and condition”
remain the most common form of words used to evidence receipt on board a
vessel, in good condition, of a shipper’s cargo.
B/L - as a Document of Title
Physical inability of the shipper to deliver the cargo (due to long transit
periods) has brought about the B/L to be treated as a symbol for the goods.
Until the goods are physically delivered, possession of the B/L is deemed to be
constructive possession of the goods. Transfer of the B/L by the seller to the
buyer is deemed to be a symbolic delivery of goods to the buyer who then
demands the delivery of the goods on the ships’ arrival.
Bills of Lading in Sets
The bills of lading are issued to the shipper in sets of three or four; if three
copies are issued, one is retained by the master or agent/broker; two
copies (given to the shipper) are dispatched, one usually by express mail,
to the buyer, or to any other addressee of the cargo, i.e. the consignee.
If the shipper and the consignee have agreed to use a letter of credit as a
method of payment, the copies would be tendered to the shipper's bank
together with the other shipping documents in return for the price for the
goods shipped.
By the endorsement and delivery of the bills of lading to any sub-buyer, the
latter as assignees steps into the consignee's shoes and, on arrival of the
ship at the port of destination, the sub-buyer can take immediate delivery
on presenting the bills of lading representing the lot he has purchased from
the importer, who will usually be the consignee.
Compiled by : Capt. Naveen C Tewari, ARI Saket. New Delhi. (1/16) 2
