British Maritime Law Association
Response to Questionnaire
Prepared by CMI Working Group
on Issues of Transport Law
I wish to acknowledge the valuable contribution made to this response by the following members of Essex Court Chambers:
Miss Claire Blanchard
Mr Ricky Diwan
Mr Nigel Eaton
Mr David Foxton
Miss Philippa Hopkins
Mr Paul Key
Mr John Lockey
Mr Nathan Pillow
Mr John Snider
I am also grateful to those who read a draft of this response and made comments on it. These included Mr Peter Morgan, Professor Francis Reynolds QC and Mr Andrew Taylor.
Anthony Diamond QC
BMLAStanding Committee on Carriage of Goods
30 September 1999
1. Obligations of the Carrier
1.1 Receipt of the Goods
Does the period of the Carrier's responsibility for the goods under your national law commence at the same moment as delivery by the seller under a contract of sale on "shipment terms"?
In English law the period of the Carriers responsibility for the goods does not necessarily commence at the same moment as delivery by the seller to the buyer under the contract of sale. The contract of carriage and the contract of sale are two distinct and separate contracts; normally the parties to the two contracts are not the same. The terms of one contract will therefore have little if any relevance to the proper construction of the other contract. The moment when the transfer of risk takes place as between seller and buyer will be governed by the contract of sale. The commencement of the carriers responsibility for the goods will depend on the terms of the contract of carriage and will also depend in large measure on the question at what precise time the goods were in fact delivered into the possession of the carrier or the carriers servants or agents at the place where the transit began.
A contract on "shipment terms" is understood to mean a contract of sale under whose terms the transfer of risk (though not necessarily of property) takes place when the goods are placed on board ship at the port of shipment. Under English law, the fact that the transfer of risk under the relevant contract takes place on shipment does not involve that "delivery" of the goods takes place at that stage. There is no rule in English law that risk passes on delivery and the meaning of "delivery" in CIF and FOB contracts cannot easily be stated.
Under English law, assuming INCOTERMS are not incorporated into the sale contract, FOB, CIF and C&F contracts are all examples of contracts "on shipment terms". In all three cases the risk of loss or damage passes to the buyer on shipment though under many FOB contracts and most CIF and C&F contracts the property will not pass until later. Where INCOTERMS are incorporated into the contract those terms expressly provide for each type of contract (namely for FOB, CIF and CFR contracts) that the transfer of risk is to take place when the goods "pass the ships rail" at the port of shipment.
Traditionally loading was the joint responsibility of shipper and shipowner and it was the duty of the former at his risk and expense to bring the cargo alongside and to lift it to the ships rail and of the shipowner thereafter to receive and stow the cargo. Nowadays, however, there are a wide variety of different practices in different trades and ports under which goods may be delivered into the possession of the sea carrier at an earlier or later stage and under which one or other party may undertake the obligation to receive load and stow the cargo. Thus it is not uncommon in many liner trades for goods to be delivered by the seller to the sea carrier or his agents before the goods are taken on board ship or even before the ship has arrived at the loading port. In other circumstances a shipper or charterer may undertake to load and stow the goods so that his obligations include that part of the loading and stowing operation that takes place after the goods have passed the ships rail.
As an overall generalisation one can say (as noted in para 16 of the introduction to INCOTERMS, 1990) that there is a lack of "synchronisation" between the commencement of the Carriers responsibility under the contract of carriage and the passing of risk from seller to buyer under a contract of sale. It was the perceived lack of synchronisation that led to the introduction of sale contracts on FCA, CPT and CIP terms.
Is it desirable that the moment of delivery both under the contract of sale and the contract of carriage should coincide?
In an ideal world the answer to this question might perhaps be "Yes". But any considered answer to this question should take commercial realities into account. One of the factors bearing on this question is the desire of many buyers and banks to obtain clean on-board bills of lading for the goods they have purchased or on which they are to make an advance. To satisfy this requirement the seller must tender clean bills of lading with the result that if the goods have been lost or damaged while in the custody of the carrier or the carriers agents before shipment the seller may have to replace the damaged goods with sound goods so as to be in a position to require the carrier to issue a clean on-board bill of lading.
It thus can make good commercial sense for the parties to enter into a sale contract on "shipment terms" even if the goods are to be delivered to the sea carrier or his agents before the goods are taken on board ship.
The lack of "synchronisation" noted in the introduction to INCOTERMS has not in English law, caused any difficulty in practice. While it would be neater if the moment of delivery both under the contract of sale and the contract of carriage could be made to coincide it is thought that commercial parties must be left to determine for themselves the moment of time at which the transfer of risk is to take place. Many different considerations can play a part and for this reason it is considered impracticable to lay down any general rule to ensure that the moment at which risk passes under the two contracts is made to coincide.
Does the expression "liner terms" or a FIO(S) (free in and out (stowed)) clause define the scope of the contract of carriage and the moment of delivery to the Carrier?
The expression "liner terms" is commonly found in shipping documents and is usually understood to mean that the shipowner undertakes to arrange and bear the cost of loading (at least from the ships rail) and of discharge (at least to the ships rail). In a recent case dealing with the cost of discharge, the Court said:
"Whilst this ("liner terms") is not a term of art, and its precise meaning may vary from case to case, its general meaning is clear. The shipowner undertakes both to load and to discharge the goods and to bear the cost of doing so. He may undertake responsibility also, and the question will arise in particular cases whether his undertaking, as regards either risk or expense, or both, in the case of discharge, extends beyond the ships rail until the goods are loaded and delivered ashore. Thus, a current dictionary definition:
Liner Terms Qualification to a freight rate which signifies that it consists of the ocean carriage and the cost of cargo handling at the loading and discharging ports according to the custom of those ports. This varies widely from country to country and, within countries, from port to port: in some ports, the freight excludes all cargo handling costs while in others the cost of handling between the hold and the ships rail or quay is included. [The Marine Encyclopedic Dictionary by Eric Sullivan, FICS (1992)]
Liner terms therefore means always that the shipowner undertakes to arrange and to bear the costs of discharge, at least to the ships rail".
The meaning FIO(S) (free in and out (stowed)) is in a sense, the converse of "liner terms". It means that the cargo owner, shipper or charterer is to bear the cost to the shipowner of loading, stowing and discharging the cargo, including that part of those operations which take place on board ship. There are however a wide variety of clauses which can be called FIO(S) clauses. The expression "FIO(S)" is commonly found in shipping documents and where it stands alone without further definition its effect is probably confined to dealing with the cost of loading, stowing and discharging the cargo, as opposed to dealing with which party is to arrange for those operations or to assume the risks involved in them.
There have been many reported cases dealing with the question whether, under the words of particular contracts, the parties have effectively transferred from owners to shippers or charterers the duty to load, stow and discharge the cargo (so that, for example, the charterers are made liable for the consequences of bad stowage) or whether the contract deals only with the question which party is to bear the relevant costs.
A "Liner Terms" or FIO(S) clause may be relevant to the question at what moment the carriers responsibility for the goods commences but this is very much dependent on the wording of the particular clause. Such terms standing alone normally deal only with which party is to bear the relevant costs and in such a case they do not define the scope of the contract of carriage or the moment of delivery to the carrier. If the FIO(S) clause goes further and places the whole responsibility and risk of the loading and stowage operation on the shipper it is possible that the stevedores who perform those operations may be treated as the shippers agents; if so, delivery to the carrier would be held to occur when the stevedores place the cargo in the ships holds. Conversely if, under a particular clause the carrier undertakes the whole responsibility and risk of loading the cargo (both before and after ships rail) it will be clear that delivery to the shipowner takes place no later than the stage when the goods are taken up by the stevedores at the commencement of loading.
1.2 Inspection of the Goods and Statements in the Bill of Lading
Before dealing with Questions 1.2.1 to 1.2.6 it should be mentioned that there have so far been comparatively few reported English decisions on the effect of Art III Rule 3 of the Hague Rules and the Hague Visby Rules. This may be due, in part, to the fact that, until the introduction of the Hague Visby Rules the particulars inserted in a bill of lading pursuant to the article were only "prima facie evidence of the receipt by the carrier of the goods as therein described" and there was no conclusive evidence clause. Partly it may be due to the construction placed on Art. III Rule 3 in a number of cases that the obligation to issue a bill of lading containing the particulars required by the article arises only "on demand of the shipper" and that simply requesting a bill of lading does not carry with it an implied request that the bill shall contain all the information set out in the article. It has been held that Art. III Rule 3(c) imposes an unqualified or "absolute" duty on the carrier to make an accurate statement of fact as to the apparent order and condition of the goods. The duty is not merely one which the shipowner or master must take reasonable care to perform.
Under your national law in what circumstances would it be held that the Carrier had reasonable grounds for suspicion that the information given by the shipper was inaccurate?
There is no English authority on the point and it is thought that it would be a question of fact in each case whether the carrier can rely on the proviso. In considering whether a master had "reasonable grounds" for suspecting the particulars not accurately to represent the goods, a Court would probably apply the standard of a reasonably competent master. In one case, where a master refused to sign bills of lading containing figures at variance with the ships figures the Court held that he had behaved reasonably in so doing.
In what circumstances would it be held that the carrier had no reasonable means of checking the particulars furnished by the shipper?
There is again no reported case where a shipper has requested that a bill of lading be issued containing certain particulars specified in Art. III Rule 3 and where the carrier has refused on the ground that he had "no reasonable means of checking" those particulars. It is thought that it would be a question of fact in each case whether the carrier can rely on the proviso. Where packages are stuffed in a sealed container the carrier would normally have no means of checking the numbers or characteristics of those packages.
What is the meaning of "apparent"?
A representation that cargo was shipped in apparent good order and condition constitutes an admission as against the shipowner that the goods were shipped externally to all appearances in good condition. The words constitute no admission as to the internal condition of the goods, or as to their quality.
In the case of perishable goods, apparent good order and condition includes apparent ability to withstand ordinary methods of transport.
The Court applies the test whether a Master or Chief Officer having a reasonable degree of skill and expertise, would regard the goods as being externally to all appearances in good condition. Since only external condition is in question a Master has no obligation or right to open packages to inspect their internal condition or quality.
What is the legal effect of clauses such as: "shippers load and count", "said (by shipper) to contain", "particulars provided by shipper" and "weight (etc) unknown"?
Clauses such as these give rise to considerable difficulty in view of the terms of Art. III Rule 3 which oblige the carrier "on demand of the shipper" to issue a bill of lading containing certain particulars of the goods, as furnished in writing by the shipper, unless the proviso applies.
At common law, where the statement of the amount or quantity of the goods in the bill of lading is qualified by such words as "weight or quantity unknown" the bill of lading is not even prima facie evidence against the shipowner of the amount or quantity shipped provided that such amount or quantity is not drastically at odds with the quantity actually loaded and the onus is on the cargo-owner of proving what in fact was shipped.
Where the shipper has demanded a bill of lading showing the number of packages or pieces, or the quantity or the weight as provided by him in writing the carrier is bound under Art. III Rule 3 to issue a bill of lading showing one of these matters. The obligation is alternative. Therefore if the carrier issues a bill of lading showing both the number of pieces and the weight, he may qualify the statement as to weight, e.g. by the words "weight unknown". Such a bill of lading will then be prima facie evidence of the number of pieces but not of the weight.
There remain difficulties in English law as regards the effect of including a qualification such as "weight unknown" in a bill of lading in circumstances where a bill of lading stating "weight unknown" would not comply with the requirements of Art. III Rule 3. It is possible that if there were evidence before the Court that the shipper had requested an unqualified statement as to the number of packages or pieces or the quantity or weight of the goods in circumstances where he was entitled to such a statement under Art. III Rule 3, a qualification such as "weight (etc) unknown" might be held to be ineffective. There has been no such evidence in any of the cases which have so far come before the Courts and, as noted above, it has been held that simply requesting a bill of lading does not carry with it an implied request that the bill shall contain all the information set out in the article.
A distinction must be drawn between "weight (etc) unknown" and the other qualifications mentioned in the question such as "shippers load and count", "said by shipper to contain" and "particulars provided by shipper". The effect of the latter clauses is far less certain since it may be held in an appropriate case that by signing the bill of lading the Master has impliedly accepted the shippers particulars or figures. A container packed by the shipper is usually acknowledged as "one container in apparent good order and condition said to contain (the contents) as declared by the shipper". An acknowledgement in this form does not it is thought, constitute conclusive evidence as to the condition or description of the contents in favour of an indorse of the bill of lading.
The questionnaire requests that, in dealing with the qualifications, the position both as between the Carrier and the shipper and the Carrier and subsequent holders of the bill of lading should be considered. Where a bill of lading contains the qualification "weight unknown" and there is no evidence before the Court that the shipper had requested an unqualified statement as to the weight of the goods or the proviso to Art. III Rule 3 applies, then (a) the bill will not be prima facie evidence of the weight of the goods shipped (provided, at any rate that the weight is not drastically at odds with the weight actually shipped) and both the shipper and any subsequent holder of the bill of lading will have the onus of proving the weight which in fact was shipped and (b) where the bill of lading has been transferred to a third party acting in good faith no estoppel can arise by reason of Art. III Rule 4 of the Hague Visby Rules. It is not logically possible to envisage a case where an estoppel can arise in respect of any particulars set out in a bill which are qualified by an effective reservation such as "weight (etc) unknown". It is thought that the same would apply under Art. 16.3 (b) of the Hamburg Rules.
Do you consider that the conclusive evidence rules (Hague-Visby Rules Art. III Rule 4; Hamburg Rules Art. 16 Rule 3; CMI Uniform Rules for Sea Waybills Rule 5(ii)(b)) should be maintained/introduced as regards marks, the number, quantity or weight as furnished by the shipper, and the apparent order and condition of the goods?"
It is considered that there are defects both in Art. III Rule 3 of the Hague Rules and Art. 15 of the Hamburg Rules. The former does not deal sufficiently with the effect of reservations such as "weight etc unknown" and the circumstances in which they are to be effective; the latter extends the required particulars to be included in the bill to an unnecessary extent; for example, the carrier is required to specify both the number of packages or pieces and "the weight of the goods or their quantity otherwise expressed". It is considered that the conclusive evidence rules should be limited to particulars of the goods which would be apparent on a reasonable external examination of the goods. To go further and to require particulars of weight to be stated in the circumstances where it is not customary to weigh the goods at the time of shipment is to invite unnecessary litigation as to the effect of reservations inserted by the shipowner and to risk making a shipowner liable for matters over which he has no control.
More generally, it is considered that the provisions of both the Hague Visby Rules and the Hamburg Rules fulfil a useful commercial function in supporting the function of a bill of lading as a receipt for the goods and in excluding or limiting the right of shipowners to resile from clear statements in the bill of lading where a third party has relied on the accuracy of the bill of lading, usually by paying for the goods shipped.
It is considered that Art. 16 Rule 3 of the Hamburg Rules constitutes an improvement over Art. III Rule 4 of the Hague Visby Rules in one respect; namely in requiring reliance on the description of the goods set out in the bill of lading as a condition for the carrier being deprived of the right to prove that the statement was inaccurate. Art. III Rule 4 of the Hague Visby Rules requires that the third party must have been acting in good faith but does not prescribe that the transferee must have relied on the statements in the bill when accepting the transfer.
It is considered that these or similar provisions (suitably amended) should be maintained for situations where negotiable bills of lading are issued and that they should be extended to cases where the contract of carriage is covered by a sea waybill so that the conclusive evidence clause would be available to a third party consignee who could show that in good faith he had acted in reliance on the description of the goods set out in the waybill. The position where no transport document is issued requires further study. There could be a case for introducing conclusive evidence rules where no transport document as such has been issued but where the contract of carriage is evidenced by electronic means, provided however that the clause should not operate unless a third party has acted in good faith in reliance on the description of the goods given by the carrier.
Under your national law do the conclusive evidence rules benefit a fob buyer?
The answer to this question depends on whether the fob buyer was the original party to the contract of carriage or the bill has been transferred to him as "a third party acting in good faith" (Art. III Rule 4 of the Hague Visby Rules).
If the fob buyer is named in the transport document as the shipper this will usually be because he was the original party to the contract with the carrier so that the conclusive evidence clause will not benefit him.
If however the fob seller is named as the shipper, it is possible that the bill may have been transferred to the fob buyer on payment of the price of the goods. Under English law an unpaid vendor may take a bill of lading making the goods deliverable to his order and if he takes a bill in this form and not as agent for, or on behalf of, the purchaser, he thereby reserves to himself the power of disposing of the goods (the ius dispondendi); in these circumstances the property in the goods will not pass to the fob buyer on shipment but only when he pays or tenders the price against delivery of an indorsed bill of lading. If therefore the bill is taken to the order of the fob seller and is subsequently indorsed to the fob buyer the latter will probably be able to rely on the conclusive evidence clause in Art. III Rule 4.
If the fob buyer is shown in the bill of lading as the named consignee it may still be possible that the power of disposing of the goods was, on the facts, reserved by the seller so that in these circumstances, too, the fob buyer may be able to show that the bill of lading was transferred to him as a third party acting in good faith. But where the buyer is shown as the named consignee it might be held that the shipper took the bill on behalf of the buyer (the purchaser) or as his agent. This is far less likely if the bill was made out to the order of the seller.
1.3 Delivery of the Goods at Destination
Does the period of the Carrier's responsibility for the goods under your national law end at the same moment as delivery to the buyer under a contract of sale on "delivered" terms?
In English law, the time at which the goods are deemed to have been delivered under the contract of sale and the time at which the carrier is released from responsibility for the goods under the contract of carriage do not necessarily coincide. The contract of sale and the contract of carriage are two quite distinct contracts (which are likely to have been made between different parties), and it is the contract of carriage which determines when the carriers responsibility ends.
The Hague-Visby Rules, as they have been interpreted by the English courts, do not provide an answer to the question, "when does the carriers responsibility for the goods end?" A literal reading of Art. III Rule 2 might suggest that the carrier is under an obligation to discharge the goods from the vessel, such that the carriers responsibility for the goods cannot end before discharge is completed. However, the English courts have rejected the literal construction in favour of the view that the Rules do not define the scope of the carriers obligations, they only determine the manner in which the obligations must be performed: the scope of the carriers obligations (including when they begin and end) is a matter which the parties are free to determine by their own contract. Accordingly, the terms of the sea waybill or bill of lading represent the starting point for determining when the carriers responsibility ends.
Many bills of lading contain clauses which make express provision for when the carriers responsibility for the goods shall end. Consistent with the principle that the parties themselves are free to determine the scope of the carriers obligations, the Court will generally give effect to such a clause according to its terms. Plainly the effect of such a clause (depending upon its terms) may be that the carrier is released from responsibility for the goods before there is any delivery to the buyer or other consignee. But if the clause purports to relieve the carrier from liability for loss of or damage to the goods arising from a negligent act occurring in the course of discharge (as opposed to defining the scope of the carriers obligation to discharge the ship) the clause may be held to be invalidated by Act III Rule 8 of the Hague-Visby Rules.
Absent any express clause, the point at which the carriers responsibility for the goods ends falls to be determined by reference to common law principles governing the bill of lading. At common law, the carriers obligations under the bill of lading are discharged by performance (and thus the carriers responsibility for the goods ends) when the goods are delivered to the consignee entitled to receive them under the bill of lading contract. "Delivery" in this context involves placing the goods completely under the control of the consignee.
The precise moment at which the goods will be taken to have been placed under the control of the consignee will depend on the facts of each case, and, in particular, on how the goods are discharged. Delivery to the consignees agent is equivalent to the consignee itself. Accordingly, in the typical case where the goods are discharged by stevedores, the carrier will be released as the goods are discharged if the stevedores are (as between carrier and consignee) to be treated as the consignees agents. On the other hand, if the goods are discharged by the carriers agents, then there will be no delivery until the goods are released to the consignee.
In determining whether or not the stevedores are the consignees agents, the terms of the sea waybill or bill of lading again represent the starting point. The bill may state expressly that the stevedores are the consignees agents. Alternatively, the stevedores will be treated as the consignees agents if the terms of the bill make the consignee responsible for discharge.
If the bill is silent as to the position of the stevedores or as to responsibility for discharge, it may be necessary to ask whether, on the facts, the stevedores who handled the cargo were the servants or agents of the carrier or of the consignee. Relevant factors would include who appointed and paid the stevedores and whether they acted under a contract made by the carrier or the consignee. In one case, where it was customary for discharge to be effected by the dock companys servants at the quay it was held, in the context of a claim for demurrage, that the stevedores were the carriers agents for the purposes of bringing the cargo out of the hold, but thereafter became the consignees agents for the completion of discharge.
Accordingly, the moment at which delivery takes place under a bill of lading varies depending upon the terms of the bill of lading and the facts of the case. Thus, in any individual case, the moment of delivery will not necessarily coincide with the moment of delivery under a contract of sale on "delivered terms".
Does a FIO clause define the scope of the contract in this respect?
An FIO clause may be relevant to the question at what moment the carriers responsibility ends but this is very much dependent on the wording of the particular clause. As explained earlier (see the answer to Question 1.1.3) the expression FIO, standing alone, has the limited effect of providing that the shipper or consignee shall pay the cost to the shipowner of loading and discharging the cargo. A clause in that limited form cannot affect the question where the carriers responsibility ends. If the clause goes further and provides that the consignee undertakes the obligation to discharge the cargo, it is possible that the stevedores who perform the discharge may be treated as the consignees agents; if so, delivery may be held to occur when the stevedores take up the cargo in the ships holds.
Is the co-operation of the consignee/bill of lading holder necessary to complete delivery?
There is scant authority on this point in English law.
It may be argued that, conceptually, delivery is a bilateral process: the carrier must release the goods to the consignee, but equally the consignee must receive them, and there can be no delivery (and thus no end to the carriers responsibility) unless and until the consignee does receive them.
Further, it is settled that the carrier does not fulfil the obligation to deliver simply by discharging the goods on arrival at the discharge port and leaving them in a place from which the consignee may collect them. The consignee must be given a reasonable opportunity to collect the goods. If the goods are lost or damaged after arrival but before the consignee has had reasonable opportunity to collect them, then the carrier remains liable.
What happens however if the carrier does afford the consignee a reasonable period to collect the goods, but the consignee refuses or fails to do so? Does the carrier cease to be responsible for the goods at the end of the reasonable period: in other words, is a tender of delivery sufficient to discharge the carriers obligations, whether or not the consignee accepts the tender?
There does not appear to be any English authority directly on point in the context of carriage of goods by sea. However, in a recent decision in a different context, there was held to be an implied term of a contract of bailment that the bailees responsibility for the goods would cease after the expiry of a reasonable time for their collection. A bill of lading contract is a contract of bailment, and application of this decision to bills of lading would suggest that the carrier who tenders goods for collection ceases, by virtue of an implied term, to be responsible for the goods if the consignee fails to collect them within a reasonable time. If so, then the carrier is able, by tendering the goods for delivery, to obtain a release from responsibility without the consignees co-operation.
What are the carriers rights if the consignee (bill of lading holder) does not co-operate or refuses to receive the goods?
Under English law a consignee who is a bill of lading holder only incurs liability under the contract of carriage if he takes or demands delivery of the goods or makes a claim under the contract of carriage; see the answer to Question 2.2.1 (post). Assuming, however, that the consignee eventually takes or demands delivery and thus becomes liable under the contract, his failure to collect the goods within a reasonable period will constitute a breach of contract and render him liable to the carrier for damages. Accordingly, if the carrier keeps the goods aboard the vessel, and as a result the vessel is detained waiting for the consignee to come to collect them, the carrier may be entitled to recover demurrage, if the contract so provides or damages for detention in the absence of any provision for demurrage. But the carrier would be under a duty to mitigate his damages and in practice the cost and inconvenience involved in detaining the vessel may be such that the carriers reasonable course is to discharge the goods and store them ashore. In principle, (subject to the proviso mentioned above) the carriers storage costs should be recoverable from the consignee as damages for breach of contract.
1.4 Delivery of the Goods Without Surrender of the Bill of Lading
Under your national law what are the rights of the holder as regards the goods after delivery to the person entitled to the goods under the contract of sale?
Under English law a bill of lading is a document of title to goods in a rather special sense. It acts as a kind of transferable "key to the warehouse" and is thus a symbol of constructive possession of the goods. A bill of lading may also be used as part of the mechanism whereby the property in goods is transferred from a seller to a buyer or whereby a pledge of the goods is conferred on a lender but in such cases the transfer of the bill passes only such property or title to the goods as was intended to pass under the underlying contract of sale or pledge.
Once the shipowner has delivered the goods to a person entitled to have them delivered to him a bill of lading in respect of those goods is extinguished as a document of title.
In the example given in the Questionnaire, where the Carrier has delivered the goods against a letter of indemnity, the holder of the bill of lading might have a right of suit against the carrier (see the answer to question 1.4.2) but his right to claim the goods from the person to whom they had been delivered, or to recover damages in lieu, would depend on whether he or that person had title to those goods. The mere fact that the holder retained possession of the bill would not constitute proof of title since the holder might have consented to the release of the cargo against the letter of indemnity; indeed he might have ordered it. Since the bill of lading is only a document of title in the limited sense explained above, the rights of the holder as regards the goods after they had been released by the carrier would be dependent on the terms of the relevant contract or contracts of sale and in particular on any terms governing the passing of property and the right to possession.
What are the rights of suit of the holder against the Carrier under the contract of carriage after such delivery?
Delivery of the cargo without presentation of the bill of lading constitutes a breach of the bill of lading contract, even if the shipowner delivers the goods to the person entitled to the goods under the contract of sale.
Consequently the holder of the bill of lading would have rights of suit against the carrier if the latter delivered the goods against a letter of indemnity. Such rights of suit would be transferred to any named consignee identified in the bill and to any indorsee of the bill provided that he became the holder by virtue of a transaction made before the time when the bill of lading was extinguished as a document of title.
There appears to be no reported case where a lawful holder of a bill of lading has requested a carrier to deliver the goods against a letter of indemnity and where the lawful holder has subsequently commenced proceedings against the carrier for damages for breach of contract. It is thought that it would, in those circumstances, constitute a defence to the carrier that the holder consented to the release of the cargo against the letter of indemnity. In any event the holders remedy would be defeated by circuity of action.
In cases where the lawful holder has not consented to delivery of goods against a letter of indemnity he will be entitled to recover damages from the carrier for breach of contract, for breach of the relationship of bailment and/or for conversion of the goods.
Are such rights affected by endorsement of the bill of lading after such delivery and if so how?
This is a question of some complexity in English law. It has been held that if the shipowner delivers goods against an indemnity to a person entitled at that time to have the goods delivered to him then the bill of lading is at that moment exhausted by delivery to the right person and having obtained the goods the consignee cannot thereafter by endorsement of the bill of lading convey any title to the goods to a third party. Section 2(2) of the Carriage of Goods by Sea Act 1992 provides that a person shall not have any rights of suit transferred to him unless he becomes the holder of the bill of lading by virtue of a transaction effected in pursuance of any contractual or other arrangements made before the time when a right to possession of the goods ceased to attach to possession of the bill.
It would seem to follow that if the goods have been delivered at the request of the lawful holder of the bill of lading against an indemnity to the person entitled to those goods under the contract of sale, then at that moment the bill of lading is exhausted as a document of title and any person to whom the bill may subsequently be endorsed by virtue of a contractual or other arrangement made after such delivery will acquire no rights of suit against the carrier. Consequently the rights of suit, if any, will remain with the person who was the lawful holder of the bill at the time of delivery.
What are the rights of suit against the Carrier under the contract of carriage of the person to whom such delivery has been made?
The person to whom delivery has been made will have a right of suit against the Carrier (e.g. for damages for delivery of the goods in a damaged condition) in the following circumstances:
(1) if he subsequently becomes the lawful holder of the bill of lading (provided he does so by virtue of an agreement made before the time when a right to possession ceased to attach to possession of the bill) he will acquire rights of suit against the carrier under the bill of lading contract;
(2) if delivery was made by the carrier under a ships delivery order which contained an undertaking to deliver the goods to the person to whom in fact the goods were delivered, he will acquire rights of suit against the carrier under the delivery order;
(3) if a new contract can be inferred between the parties by virtue of delivery having been given against presentation of a document such as a ships delivery order;
Moreover, even if the party to whom delivery has been made has no rights of suit under the bill of lading contract, he may be able to bring proceedings against the carrier in tort if he had property in and/or the right to possession of the cargo at the time when the loss or damage occurred.
1.5 Dating and Signature of the Transport Document
Under your national law is it a requirement that the transport document be dated
with the date of receipt by the Carrier of the goods specified therein in the case of a "received for shipment" document
with the date of shipment on board in the case of an "on board" document
with the date of signature
with a date agreed by the shipper and the Carrier?
Under English law it is not essential to the validity of a transport document such as a bill of lading that it must be dated. Thus it has been held that a forged and false date does not render a bill of lading a nullity because dating is not part of the essence of a bill of lading.
On the other hand the practice of dating a transport document is widespread and universal. Since a CIF seller is under a duty to tender a bill of lading on terms and in a form customary in the trade it is thought that an undated bill of lading would not normally be good tender under a CIF contract. Nor would an undated bill of lading be good tender under a letter of credit unless shipment on a named vessel had been indicated by a pre-printed wording on the bill that the goods had been shipped on a named vessel.
Under English law an "on board" transport document such as a bill of lading should only be issued and dated when all of the cargo covered by the document has been loaded. Similarly a "received for shipment" document should only be issued and dated when all the cargo covered by the document has been received by the Carrier.
If a Master or ships agent issues an "on board" bill of lading bearing a date which he knows to be false (since it is earlier than the date of completion of loading), it is reasonably clear that the person so signing together with the carrier would normally be liable in fraud to anyone who suffers loss by relying on the accuracy of the date e.g. by taking up and paying for the bill of lading which he would have rejected if he had known the true date of completion of loading. It would constitute no defence that the shipper colluded with the carrier in issuing a bill of lading bearing a date known to be false.
Is it a requirement that the transport document indicates on the face of the document the name and address of the Carrier/the identity of the Carrier (e.g. "the registered owner of the carrying vessel")?
There is no such requirement in English law. Some bills of lading contain express clauses identifying the carrier; for example most modern bills issued by the more reputable combined transport operators contain clauses identifying the carrier by name. Other bills of lading contain no such clause or are printed on paper headed with the names of vague entities such as "ABC Lines" or entities which are clearly no more than agents. Some bills of lading contain "demise" or "identity of carrier" clauses but these do not always resolve the difficulty of identifying the carrier. Normally, where the charter is not a demise, a bill of lading signed by the master or by the charterer as authorised agent of the master is construed as a contract with the shipowner.
Is it a requirement that the transport document be signed and, if so, by whom and how?
It is an undecided point in English law whether it is essential to the validity of a transport document such as a bill of lading that it must be signed. In practice however bills of lading are always signed (or otherwise authenticated) on behalf of the carrier, though the signature may be indecipherable. What is essential to the validity of a bill of lading is proof that it was issued by or on behalf of a carrier in respect of the goods covered by it. Since bills of lading are always in practice signed there would be difficulties in proving that a particular document had been issued on behalf of the carrier, or that it was more than a draft or provisional document, if it had not been signed. In addition an unsigned bill of lading would not be good tender under most forms of sale contract or under a letter of credit.
2. Rights of the Carrier
Under your national law what are the respective liabilities for payment of freight of the original shipper, the consignee and intermediate holders of the bill of lading? Are such liabilities affected by delivery of the goods to the consignee? Are they subject to any relevant contractual provisions?
In English law, the bill of lading is not itself the contract between the original parties; it is simply evidence of its terms. Therefore the bill of lading may not in all cases establish the identity of the person liable to pay freight to the carrier. It is necessary in each case to establish with whom the carrier contracted; this is because the carriage is for reward and the personal liability to pay the reward is a contractual liability. The terms upon which the goods have been shipped may not be in all respects the same as those set out in the bill of lading. It therefore does not necessarily follow that in any given case, the named shipper is to be under a personal liability for the payment of the freight.
The personal liability is that of the person with whom the performing carrier has contracted to carry the goods. This person will normally be the shipper. But the shipper may be shipping as the agent of the consignee, in which case the contract will be with the consignee. If for example the consignee is the owner of the goods, he is prima facie liable to pay freight for them, as being the person with whom the contract of carriage is presumed to have been made. Where goods have been shipped by a forwarding or shipping agent in the United Kingdom who has booked cargo space on a vessel and is known to be acting for a shipper whose name has not been disclosed, the forwarding or shipping agent incurs personal liability for the freight by reason of a long-established usage in the forwarding industry.
A contract to pay the freight will not always be implied from the fact of shipment and the issue of a bill of lading. It is possible for there to be more complex contractual schemes; the performing carrier may be in contractual relations with others as well, as for example where there is a voyage or time charter.
By s. 2(1) of the Carriage of Goods by Sea Act 1992, a person who becomes the lawful holder of a bill of lading has transferred to and vested in him all rights of suit under the contract of carriage as if he had been a party to the contract. By s. 3(1) of the Act, where a person in whom rights of suit are vested by virtue of s. 2(1) takes or demands delivery of any of the goods to which the bill of lading relates, or makes a claim under the contract of carriage against the carrier in respect of any of those goods, or is a person who, at a time before those rights were vested in him, took or demanded delivery from the carrier of any of those goods, that person shall become subject to the same liabilities under that contract (including any liability to pay freight) as if he had been a party to that contract. The liability of that person to the carrier is additional to, and not in substitution for, the liability of the original party to the contract of carriage: s. 3(3) of the Act. Whether the person who falls within s. 3(1) of the Act is liable to the carrier for the freight depends on whether the freight is due and unpaid, which will be determined by construing the terms of the contract of carriage.
Quite apart from the liability imposed by s. 3(1) of the Act, a person may become bound to a contract of carriage and liable to pay freight if a new contract with the carrier may be found as a fact.
When is the freight earned?
Traditionally, freight has been described as "the reward payable to the carrier for the safe carriage and delivery of the goods. At common law, no freight is payable unless the shipowner has substantially performed his obligation under the contract of carriage by tending delivery of the goods at the discharge port, and no freight is payable if the goods are lost on the voyage or if for any reason (other than the fault of the shipper) the goods are not tendered for delivery at the port of destination. If the carrier is able to deliver the goods, albeit in a damaged condition, at the port of destination, he is entitled to his freight in full without deduction for the damage, although he may be liable in damages to those interested in the goods.
The traditional position as to when freight is earned is often varied in practice by the inclusion of special terms in the bill of lading to the effect that freight is deemed earned on loading or on signing the bill of lading. In such circumstances, the carrier will be entitled to his freight even if the goods are lost on the voyage and will be able to recover unpaid freight despite the loss of the goods.
When is the freight payable?
At common law, freight is payable once it has been earned, i.e. on tender of delivery of the cargo. Payment and delivery are concurrent acts. The carrier is entitled to refuse to discharge the cargo unless freight is paid for each portion as delivered.
Again, special provisions in the bill of lading may determine the time of payment. Stipulations as to the time of payment vary considerably in practice, but a common form is one which provides that freight is payable within a specified number of days after completion of discharge. In The Samos Glory, the final part of the freight was payable "after completion of discharge and settlement of demurrage". It was held that the obligation to pay the final part of freight only accrued when the demurrage liability had been determined by agreement or award.
Where the bill of lading provides that freight is deemed earned on signing the bill of lading, and then provides for when the freight shall be payable, the provision as to payment will generally be construed as providing only a mechanism for the determination of the date for payment; in the absence of clear language, the provision will not be construed as a condition precedent to the right to freight. Accordingly, if goods are lost after signature of the bill of lading but before the due date for payment, the carrier will be able to recover freight in full.
To what extent are the Carriers rights affected by frustration of the contract of carriage before the freight is earned/paid, or by the contract being discharged by breach?
Under the doctrine of frustration, circumstances which substantially delay the performance of the contract of carriage or render its performance impossible may discharge the parties to the contract. Frustration occurs whenever the law recognises that supervening and unforeseen circumstances, arising without default on the part of either party, have rendered a contractual obligation incapable of being performed because in such circumstances performance would be something radically different from that which was undertaken by the contract.
The Law Reform (Frustrated Contracts) Act 1943 does not apply to contracts of carriage. Accordingly, the common law determines the consequences of frustration. At common law, the effect of the frustration of a contract is that the parties are discharged from performance of obligations for the future, but because the contract is not dissolved ab initio, obligations which have accrued prior to the date of frustration remain to be performed.
Accordingly, if the vessel sinks with her cargo, then in the absence of special provision in the contract of carriage, the carrier will not be entitled to any freight. If, however, the contract of carriage provides that freight is deemed earned on signing of bills of lading, then the carrier will be able to recover the unpaid freight from the shipper despite the frustration of the contract; this is because the obligation to pay freight accrued before the frustration of the contract. This will be the case, even if the contract of carriage provided that some or all of the freight deemed to be earned on signing of the bill of lading is not to be paid until a date after the frustrating event (e.g. within a certain number of days after completion of discharge), unless such provision is construed to be a condition precedent to the right to freight.
Under English law, the discharge of a contract of carriage for breach operates prospectively; obligations which accrued prior to the date of discharge are unaffected. Accordingly, if freight is deemed earned on signing of the bill of lading, the carrier is entitled to recover freight in full, even if after signature of the bill of lading the carrier commits a repudiatory breach of contract which is accepted as bringing the contract to an end. Again, this will be the case despite a provision as to the date when the freight is to be paid, unless such provision is to be construed as a condition precedent to the right to freight.
What is the effect of an endorsement on the bill of lading reading "freight (pre) paid" or "freight collect"?
Freight is prima facie payable according to the terms of the contract of carriage. A bill of lading marked with the words "freight paid" or "freight prepaid" will serve as a receipt for the freight. The question has been discussed whether the words "freight paid" or "freight prepaid" can operate as an estoppel so as to prevent the carrier claiming freight from a third party who took up the bill without knowledge that in fact the freight had not been paid. Despite some authority to the contrary, the point remains an open one.
"Freight collect" bills of lading may be used under CIF or C&F sale contracts. Under these forms of sale contract, payment of the freight element in the price may be effected in one of two ways. The first way is for the seller to prepay the freight and invoice the buyer for the full CIF price, which is payable by the buyer against the shipping documents. The second way is for the seller to leave the buyer to pay the freight on the delivery of the goods, invoicing him only for the CIF price less freight. When the first method is used, the seller provides freight prepaid bills of lading. When the second method is used he provides so-called freight collect bills of lading, that is to say, bills of lading under which freight is payable by the receiver (who may be the buyer himself or a sub-buyer from the buyer) to the ship at the port of discharge. The shipowner is not obliged to deliver the cargo against the "freight collect" bill of lading before receiving payment of the freight.
What is the effect of a "cesser" clause in the bill of lading purporting to relieve the shipper of all liability on shipment of the goods?
A cesser clause in a bill of lading in a language apparently wide enough to relieve the shipper of all liability upon shipment of the goods will generally not be construed so as to relieve the shipper of all liability unless an alternative remedy is available to owners, e.g. by means of a lien under the terms of the bill of lading.
If the freight is unpaid what are the Carriers rights to lien the goods or to withhold delivery?
There are two sources of a Carriers right to lien the goods or withhold delivery: express agreement, and the common law which applies in the absence of express agreement.
At common law, a Carrier has a possessory lien for unpaid freight. Such a right depends on possession of the goods. Furthermore, such a right only exists at common law if the agreed time for payment of freight is contemporaneous with the time of delivery of the goods. So in the absence of express agreement, there is no lien for unpaid freight which was payable before the delivery of the goods or for freight which is not due when delivery of the goods is sought.
The common law lien for freight applies to all goods coming to the same consignee on the same voyage for the freight due on all or any part of the goods.
The Carrier may do what is reasonable to maintain his lien. He will not lose his lien by warehousing the goods ashore.
The possessory lien at common law does not of itself confer any right to sell goods the subject of the lien to realise the freight due, unless the goods have been abandoned by all persons entitled to them and have thereby become the Carriers property.
Express agreements for a lien for unpaid freight are now common and generally effect will be given to the terms of the express agreement.
2.2 Deadfreight and other charges
Question 2.2.1 (part (i))
Under your national law what are the respective liabilities of the original shipper, the consignee and intermediate holders of the bill of lading for payment of such items as deadfreight demurrage and general average contributions?
The shippers liability for these charges arises as a matter of contract. The liabilities of the original party to the contract of carriage remain unaffected by the transfer of the bill.
By s. 2(1) of the Carriage of Goods by Sea Act 1992, a person who becomes a lawful holder of a bill of lading has transferred to and vested in him all rights of suit under the contract of carriage as if he had been party to that contract. However, as a statutory quid pro quo for this transfer of rights, a person in whom rights of suit are vested and:
(1) who takes or demands delivery from the carrier of any goods to which the bill of lading relates;
(2) who makes a claim under the contract of carriage against the carrier in respect of any of those goods; or
(3) who, at a time before the rights of suit were vested in him, took or demanded delivery from the carrier of any of those goods;
will become subject to the same liabilities under the contract as if he had been a party to that contract (s. 3(1)).
The "lawful holder" includes:
(1) a person in possession of the bill of lading who is the named consignee;
(2) a person in possession of the bill of lading as a result of the completion by delivery of the bill of lading, or any indorsement of the bill of lading or, in the case of a bearer bill, transfer of the bill of lading;
(3) a person with possession of the bill as a result of transactions by virtue of which he would have become a holder within paragraph (a) and (b) above, had not the transaction been effected at a time when the bill no longer gave a right (as against the carrier) to possession of the goods to which the bill of lading related (s. 5(2)). In this last case, a person will only become a lawful holder if he does so by virtue of a transaction effected pursuant to a contractual and other arrangement entered into before the time when the right to possession to the goods ceased to attach to the bill of lading, or as a result of the rejection of the goods or documents delivered to another person in pursuance of any such arrangement.
The words "the same liabilities" are extremely wide. It would appear to have been the intention of the Law Commission, who were responsible for the drafting of the Act, that these should be interpreted widely.
Accordingly, contractual obligations undertaken by the shipper in respect of deadfreight, demurrage and other charges will be assumed by the consignee and intermediate holders in the following circumstances:
(1) where such persons become "lawful holders" of the bill of lading as defined in the paragraph above; and
(2) he either:
(1) takes or demands delivery from the carrier of any goods covered by the bill of lading after becoming a lawful holder; or
(2) he had taken or demanded delivery of the goods from the carrier before becoming the lawful holder; or
(3) he makes a claim under the contract of carriage against the carrier in respect of any of the goods covered by the bill of lading.
If liabilities under the bill of lading are vested in the consignee or an intermediate holder, this does not relieve the shipper of his original liabilities (s. 3(3)). The Act does not state whether an intermediate holder who has taken one of the steps specified above in relation to any goods and afterwards endorses the bill of lading and transfers the goods to a third party is thereby discharged from the liabilities imposed on him by the Act. It has however now been decided that there is a distinction between (a) a claim or demand for delivery of the goods, which may be withdrawn or abandoned and (b) actual delivery of the goods which, once taken, is irreversible. In the case of (a), the intermediate party may withdraw the claim or demand and endorse the bill to a third party purchaser instead. In such circumstances the intermediate party remains liable only until he endorses the bill to a party who fulfills the conditions of liability set out in the Act.
A liability to contribute in general average attaches, apart from contract, to those parties who were the owners of goods at the time the general average act occurred.
Question 2.1.1 (part (ii))
Are such liabilities affected by delivery of the goods to the consignee?
As noted above, the liabilities of the shipper are not affected by delivery to the consignee. An intermediate holder will only become subject to such liabilities if (a) he himself has sought or seeks delivery of the goods, or (b) to exercise the rights of suit vested in him. In case (a), as explained above, it has recently been decided that, if the intermediate holders attempt to obtain delivery of the goods does not succeed, he will remain subject to those liabilities only until such time as he endorses the bill of lading to a party who does obtain delivery of the goods. In case (b), the fact that the consignee has obtained possession of the goods before or after such rights of suit are exercised will not affect the intermediate holders liabilities.
Question 2.1.1 (part (iii))
Are they subject to any relevant contractual provisions?
The effect of the statutory vesting of liability is to make the intermediate holder or consignee in the relevant circumstances subject to liabilities "as if he had been a party to the contract". Accordingly the terms of the relevant liability will be subject to any relevant contractual provisions.
If the items are unpaid, what are the Carriers rights to lien the goods or to withhold delivery?
At common law (that is to say in the absence of a relevant contractual possession), a Carrier will have a lien for general average contributions, freight and for expenses incurred in protecting and preserving the goods. However, in the absence of contract he will have no lien for deadfreight, demurrage or other charges.
The bill of lading may give contractual rights to lien in respect of deadfreight, demurrage and for any other charge which may be due to the Carrier under the bill of lading. The precise charges covered by any lien clause in the bill of lading will be a matter of construction of the bill. Such clauses will be strictly construed.
In addition to any lien clause appearing on the bill of lading itself, it is possible that such a clause may be incorporated by reference into the bill of lading from a charterparty to which the Carrier is party. Whether or not such a clause is incorporated by reference into the bill of lading depends upon the words of incorporation used. A clause providing "freight and all other conditions as per charter" will incorporate any lien stipulated for in the charterparty for loading and discharge port demurrage and deadfreight. The English courts are generally more ready to hold that lien clauses in a charterparty become terms of a bill of lading by words of incorporation than other terms such as arbitration clauses.
Do any such rights of lien extend to a general lien for any sums due from "the merchant" in respect of other goods?
No such lien is granted by common law, and accordingly if a Carrier wishes to obtain such a lien it is necessary for him to secure its inclusion in the bill of lading. However a Carrier may create a lien by contract to cover sums due in respect of other goods. Clear words would be required for a lien to cover sums due in respect of other goods, because of the restrictive approach to the construction of liens referred to above.
May any such rights of lien be exercised after delivery of the goods to the consignee or after the goods have passed out of his hands?
A lien arising at common law is a possessory lien, and the continuation of such a lien depends upon the Carrier or his agent maintaining possession of the goods. A Carrier will not lose his lien by consenting to hold as agent of the consignee by warehousing the goods ashore provided they are held to his order.
A contractual lien will also generally require the continuation of the Carriers possession in one of the manners just described to be effective. However, some contractual lien clauses do seek to provide for a lien which continues after the Carrier has parted with possession of the goods.
Such a clause may operate so as to qualify any delivery to the charterer or bill of lading holder so that the goods are still held on behalf of the Carrier and to his order.
After the goods have passed from the possession of the consignee, it is difficult to see on what basis such a clause could continue to operate, unless the consignee passed possession on terms which expressly sought to preserve the Carriers lien. Moreover it is difficult to envisage that the clause can operate once a bulk cargo has been mixed in a shore tank with other cargo.
3. Obligations to the Carrier of the Shipper, intermediate bill of lading holder and consignee
How is "the shipper" defined in your national law? Is there a distinction between "the shipper" and a supplier of goods to be shipped who is not a party to the contract of carriage?
The term "shipper" is not defined in the Carriage of Goods by Sea Act 1992 ("the Act"), which is the statute which governs the transfer of rights and liabilities under shipping documents in English law. The term "shipper" would however generally (but not invariably) be understood to mean the party by whom a contract for the carriage of goods by sea has been concluded with a carrier as opposed to the supplier of goods to be shipped who is not a party to the contract of carriage. See further below.
Is there any presumption that the person named in the bill of lading as the shipper is liable as the contractual counterpart of the Carrier?
It is not clear whether there is any such presumption. It is probably a rebuttable inference of fact that the shipper named in the bill of lading is the contractual counterpart of the carrier because, albeit the bill of lading is not a contract (for that is made before the bill of lading is signed and delivered), it is excellent evidence of the contract i.e. it is evidence that there is a contract between the shipper named in the bill of lading and the carrier on the terms set out in the bill of lading (but there may be no such contract, for example where the shipper is acting as an agent for a disclosed principal).
In cases where the charterer is himself the shipper, the bill of lading is to be taken only as acknowledgement of receipt of the goods, but there will of course be a contract of affreightment between the shipper and the carrier on the terms of the charterparty.
What rights and liabilities are rights and liabilities exclusively of the consignee?
The consignee has no rights and liabilities merely by being the consignee named in the bill of lading. The carrier is not entitled to deliver the goods to the consignee named in the bill of lading, without the production of the bill of lading, and does so at his risk if the consignee is not in fact entitled to the goods.
To what extent do rights and liabilities pass from the shipper to intermediate holders of the bill of lading and thence to the consignee, and to what extent are such rights and liabilities ultimately the exclusive rights and liabilities of the consignee?
It is proposed to deal separately with (a) the transfer of rights of suit under the contract of carriage and (b) the question of liabilities.
(a) The transfer of rights of suit
By virtue of s. 2(1) of the Carriage of Goods by Sea Act 1992 a person who becomes the lawful holder of a bill of lading shall have transferred to and vested in him all rights of suit under the contract of carriage as if he had been a party to that contract (this is subject to the provisos stated below).
As stated in the answer to question 2.2.1 the "lawful holder" includes a person who is in possession of the bill of lading and who by virtue of being identified in the bill is the consignee of the goods to which the bill relates. It also includes a person with possession of the bill as a result of the completion, by delivery of the bill, of any indorsement of the bill or, in the case of a bearer bill, of any other transfer of the bill.
The effect of the transfer of rights to the lawful holder of a bill is to extinguish any entitlement to those rights of the original party to the contract of carriage and of any previous holder from whom those rights have been transferred. Thus the shipper ceases to have contractual rights once someone else becomes the lawful holder of the bill of lading and the intermediate holder ceases to have contractual rights once someone else becomes the lawful holder.
There are three provisos. First the Act does not apply to what is commonly called a "straight" bill, i.e. one which is "incapable of transfer either by indorsement of, as a bearer bill, by delivery without indorsement". But such a bill may nevertheless be a sea waybill within the meaning of the Act.
Second, the transfer of rights of suit effected by the Act is of rights under the contract of carriage "contained in or evidenced by" the bill of lading. These words probably exclude terms or incidents of the contract which are not evidenced by the document itself and of which the transferee consignee has no notice.
Third, there is no transfer of rights of suit where a bill of lading is transferred after the goods have been completely delivered to the person having a right under the bill of lading to claim them (i.e. after the time when the bill is extinguished as a document of title conferring constructive possession of the goods), unless the transferee becomes the holder by virtue of a transaction effected pursuant to any contractual or other arrangements made before the time at which the right to possession of the goods ceased to attach to possession of the bill, or as a result of the rejection of goods or documents delivered to another person in pursuance of any such arrangements. (This exception has been referred to in the answer to Question 1.4.3).
The provisions of the 1992 Act have been set out and discussed in the answer to Question 2.2.1.
Liabilities do not pass under the Act from the shipper to intermediate holders of the bill of lading and thence to the consignee. The liabilities of the original party to the contract of carriage remain unaffected by the transfer of the bill. However the transferee of a bill of lading may become subject to the same liabilities as if he had been a party to the contract. This will occur only if he becomes the "lawful holder" and if he enforces his rights under the Act by taking or demanding delivery from the Carrier of any of the goods to which the bill relates (whether before or after the rights of suit are vested in him) or makes a claim under the contract of carriage against the carrier in respect of any of those goods. Accordingly liabilities under the bill are not exclusive to the consignee.
It should be added that it seems probable that there is a category of liabilities which fall only on the shipper and which are not assumed by a transferee of the bill of lading even if he enforces his rights under the Act. It is doubtful whether a transferee who becomes a "lawful holder" and exercises his rights under the Act will become subject to the liability of the shipper under Art. III rule 5 of the Hague Visby Rules (guarantee of accuracy of particulars); under Art. IV rule 3 (responsibility for loss sustained by the carrier); or under Art. IV rule 6 (liability for shipping dangerous goods).
To what extent are rights and liabilities retained by the shipper after he has ceased to hold the bill of lading, and to what extent are such rights and liabilities exclusively the rights and liabilities of the shipper?
This question has been answered in the course of dealing with the previous question.
3.2 Receipt of the Goods
Is it an obligation of the consignee to receive the goods timeously and to co-operate with the Carrier to enable the Carrier to fulfil his obligations as to delivery?
In short, the answer to this question is "yes":
The general duties of the consignee (as always, subject to specific contractual or customary provisions) commence with his obligation to use due and reasonable diligence to discover when the ship carrying his cargo arrives at the discharge port. The master is under no general duty to give notice of his arrival or readiness to unload, although the consignees duty to receive the cargo from the vessel commences only when she is actually ready to discharge the particular consignees cargo (regardless of the consignees ignorance of her arrival).
The discharge of the consignees cargo is a joint act of both the shipowner and the consignee: the shipowner must get the cargo out of the holds and "deliver" it to the consignee, and it is the consignees duty to take delivery of it. When the consignment is put at the consignees disposal by the shipowner, the consignee must actually take delivery within the time (if any) stipulated by the contract. This duty is strict and unconditional, such that a consignee who fails to ensure that the cargo is discharged within that time is liable to pay demurrage or damages for detention in respect of the period during which the ship is thereby delayed, except where the delay is caused by the negligence or default of the shipowner, or where the delay is covered by an exception in the contract.
Where a bill of lading requires a consignee to take delivery of the cargo "immediately" or "directly" the vessel is ready to discharge, he must do so promptly, without further delay than is reasonably required.
Where no time for discharge is fixed by the contract, the consignees duty is to take delivery of the cargo within a reasonable time, taking into account all of the prevailing circumstances. In this regard, the consignee must use reasonable diligence in receiving the cargo and must do everything which he could reasonably be expected to do in the circumstances.
Whilst the master of the vessel must give the consignee a reasonable time to appear or give orders as to the discharge, if the consignee fails to come forward to take delivery as required, the master may land and warehouse the cargo at the consignees risk and expense (whether by virtue of contractual or customary power, or as part of the masters duty to deal with the cargo in a reasonable manner).
Is such an obligation affected by the goods being tendered for delivery in a damaged condition, or damaged to such an extent that they have lost their commercial identity?
On principle, it would seem that the duty of the consignee to take delivery of the goods should be unaffected by the fact that they are merely damaged to some extent. At the time of delivery by the carrier, it may be impossible to determine the cause and extent of the damage, and it will not therefore be clear whether the consignee has any right of action in relation to the damage at all (and if so, whether rights would lie against the carrier itself, i.e. the person to whom the consignee generally owes the duty to take delivery).
The effect on the consignees obligation where the goods have lost their commercial identity naturally depends upon the meaning of "commercial identity". Again on principle it would seem that where goods are destroyed on the voyage (for example, where cotton bales have been turned to ashes by fire), it can readily be said that there are in fact no "goods" of which the consignee can take delivery, and therefore that there can be no duty upon him to do so. The difficulty arises where the goods are damaged such that they cease to be useful for their intended purpose (or to comply with their description), but are not destroyed nor lose their general character as goods of a particular type. Thus, where oil is contaminated with seawater to such an extent that it cannot be used for its intended purpose as fuel, but nonetheless is still "oil", it is a matter of conjecture whether it has "lost its commercial identity". Insofar as it is simply not worth as much by virtue of the damage, the position would seem to be no different from that above, where the goods could nonetheless still be called "the goods" (and hence delivery should be taken), but where the consignee may have a cause of action to recover the difference in value between the cargo as it should have been delivered, and the cargo as it was actually delivered.
Support for the foregoing analysis (and assistance for the test of "commercial identity") can be derived from the authorities which govern the question of when liability to pay freight is extinguished by virtue of damage to or loss of the goods. In many ways this is a logical corollary to the consignees obligation to take the goods. The general rule in that context is that freight remains payable in full for the carriage of the goods notwithstanding that the goods are delivered in a damaged or deteriorated condition, even if the damage arises owing to the fault of the master and crew, or is so great that the goods are no longer even worth the freight payable. Thus, although the consignee may have a claim for the damage, the freight is nonetheless due in full to the shipowner unless the goods have in fact lost their merchantable character (or "commercial identity").
The test of the stage of damage or deterioration at which this identity is lost was stated by Lord Esher to be whether "the nature of the thing has been altered, and it becomes for business purposes something else, so that it is not dealt with by business people as the thing it originally was." It is thus a test of degree, which will inevitably vary from case to case. Nonetheless, it would appear that whenever this "commercial identity" is lost, the duty to pay freight would also cease. It is thought that similar principles would be held to apply to the consignees duty to take delivery.
4. Rights to give instructions to the Carrier
Questions 4.1.1 and 4.1.2
Who is the person entitled to give instructions to the Carrier, and is the right to give such instructions transferable under a negotiable bill of lading, under a sea waybill and if no contractual document is issued?
Is the Carrier obliged to accept such instructions as to matters affecting the goods themselves and as to other matters arising under the contract of carriage?
These questions are considered shortly and together since it is difficult to generalise on a matter which depends entirely on the particular terms of the particular contract of carriage and the circumstances in which the instructions are given.
It is proposed to discuss in turn (a) instructions as to the delivery of the goods and (b) other instructions.
(a) Instructions as to delivery
Where a transferable bill of lading is issued, the Carrier is obliged to deliver the goods to the holder of the bill of lading upon presentation of an original bill. It is for this reason that the bill of lading has been described in the classic 19th century authorities as the "key of the warehouse" which confers constructive possession of the goods upon the holder. It follows that only the holder of the bill (whether he be the original shipper or a transferee) is entitled to demand delivery and he may do so only upon presentation of an original bill. The right to demand the goods, or a delivery order, from the carrier is thus transferable by transfer of the bill.
Even where the bill is made out to the order of a named consignee, the shipper may, nevertheless be entitled to redirect the carrier to deliver the goods to another person. The shipper may if he has retained the right of disposal of the goods, delete the name of the consignee and either leave the bill deliverable to a name left blank or insert the name of another consignee. This right is however lost once the bill of lading has been delivered to the consignee so that the consignee has become the lawful holder of the bill of lading. The shippers right to redirect the goods to someone other than the originally named consignee may be compared with the "right of disposition" or the "right to modify the contract of carriage" given to a consignor under conventions for the international carriage of goods by air, road and rail.
Where the goods are shipped on terms that a sea waybill will be issued, the waybill may name the consignee or it may entitle the shipper to nominate the consignee after shipment and in either of these cases it may make provision for his identify to be varied. Under such a shipment the shipper retains the right to direct the carrier to deliver the goods to someone other than the named consignee. Accordingly such a contract would normally be construed as one to deliver the to the named consignee or to such other person as the shipper might direct. The shipper cannot exercise the right to redirect (as in the case of an order bill) merely be endorsing the document and delivering it to the newly designated consignee; he must notify the carrier that delivery is to be made to that consignee.
Some waybills contain provisions for the right to redirect the goods to be transferred to the named consignee at a particular stage of the transit or in defined circumstances. So far, such provisions have not required to be considered by the Courts.
Where the shipper has exercised his power to redirect the goods by substituting C for B as consignee, C becomes "the person to whom delivery..... is to be made by the carrier" under Section 2(1) of the Carriage of Goods by Sea Act 1992 so that rights under the contract of carriage are vested in C and any rights which were previously vested in B become extinct under Section 2(5). The effect would appear to be that if the Carrier does not deliver the goods to C, then C will be entitled to bring an action against the carrier for non-delivery.
Where no contractual document is issued at the time of shipment the Carriers obligation will normally be to deliver the goods at the contractual destination either to the shipper or to someone nominated by him. There will be no transfer of the right to give instructions and no transfer of rights of suit save that, where electronic commerce is used to effect the transaction, the Secretary of State has power to make Regulations modifying the provisions of the 1992 Act so as to make it apply to such shipments. No Regulations have to date been made.
(b) Other instructions
It is common for charterparties to contain provisions entitling the charterer to give instructions to the shipowner in the course of performance of the contract. It is not usual for such provisions to be included in other types of contract for carriage by sea.
Where a shipper wishes to give instructions to the carrier as to such matters as the time of delivery or the conditions under which the goods are to be carried, it is normal for the shipper and the carrier to negotiate and reach agreement upon the terms of the carriage and for those terms to be recorded in the carriage document. If the terms are so recorded then, in the event of breach, the right of suit will be transferred to the holder of the bill of lading or consignee under the relevant sea waybill. If there is an oral agreement between the shipper and the Carrier but the relevant term is not evidenced by the bill of lading or sea waybill, it is unlikely that the 1992 will effect a transfer of the right to sue for breach of that term to the holder of the bill of lading or consignee under the sea waybill.
Finally, English maritime law recognises that unforeseen and extraordinary circumstances (such as a casualty) may arise in the course of a marine adventure and that if they do, the master, before dealing with the cargo in a manner not contemplated in the contract must, if possible, communicate with the owners of the cargo as to what should be done and obtain their instructions. If it is not possible to communicate with cargo and obtain instructions in time, the master has authority to act as agent of necessity. If the master communicates with cargo and obtains instructions he is bound to follow them unless the instructions are inconsistent with his duty to the shipowner. These rights and obligations are incidents of a contract of affreightment and may perhaps be regarded as implied terms of such a contract. The question whether, in the event of any breach, a right of suit is transferred to the bill of lading holder or consignee under a sea waybill could well be a matter for academic debate. In practice, proprietary rights are likely to be affected and the owners of cargo will have rights of suit if, through any conduct of the master, their proprietary rights are infringed.