Instrument of Title
By ABDUL AZIZ ARAIN
M.A., M.COM., A.M.B.I.M.
April 01 - 07, 2002
A Bill of Lading originates when the merchandiser can
not travel with their goods and materials, and do not intend to bear any
risk for the transportation of their commodities from one port to other
port. This international transportation and delivery at foreign
destinations have devised a system for handing over of goods at point of
loading under a proper written receipt and to receive the same at other
foreign port. This documentation is cailed BILL OF LADING. This
commercial document in fact is an instrument which regulate the cargo
•The Shipper/Exporter has a proper documented
receipt of the goods and materials received for shipment abroad and have
been placed on a particular vessel.
•The ship owner (shipping companies and their
Agents) know to whom they have to deliver the cargo and from whom they
have to collect the agreed freight charges and other dues.
•The consignee or shipper can sell and re-sell the
cargo on board, while the goods are still in passage and at high seas.
•The liabilities, responsibilities, rights, and
limitations to the contract of sale of goods on board can be evidenced.
This mercantile document has been subject to many
changes over the passage of time and has been subject to legislative
enactments of national and international laws to regulate the
international trade. Every Bill of Lading in the hands of a consignee or
endorsee for value consideration, represent that the goods have been
shipped on board on the particular vessel. A Bill of Lading is a
convincing evidence of the shipment of goods if signed by the Master or
by the authorized person or by the Shipping Agents of the ship owners,
stating that goods or some part thereof have been so shipped. The holder
of the Bill of Lading is notified at the time of its issue and
quantified the same, if the goods had not been in fact laden on board.
• A Bill of Lading serves three main functions:
(i) Receipt for
the goods shipped.
(ii) Evidence of the terms of the contract of affreightment.
(iii) Document of title to the goods specified in the Bill of
CONTENTS OF A BILL OF LADING
A Bill of Lading is a document which invariably
contains the following particulars.
Shipper/Exporters/Consignor- name and address.
2 Consignee -
Complete name and address/ Non-negotiable unless consigned to order.
3. Notify party
- complete mailing address.
4. Place of
5. Date Bill of
6. Date Bill of
7. Place of Bill
of Lading issued.
8. Bill of
9. Number of
original Bills of Lading signed.
by- if any.
Voyage (Flag) - Name of ship.
12. Port of
13. Port of
Discharge and place of delivery.
14. Booking Nos:,
Document Nos:, Export Declaration.
Agents references, name & address.
17. Country of
origin of the goods.
18. Type of move
- containerized or otherwise.
Nos;, Seal Nos:, Mark Nos:
21. No: of
packages or containers - in Nos. & words.
22. Kind of
packages, description of goods shipped.
23. Total Gross
weight - kg/pounds.
measurement - cbm/cft.
charges, Rate per unit, prepaid or to be collected.
TYPE OF BILLS OF LADING
THERE ARE FOUR TYPES OF BILLS
(1 ) INLAND B/L
(2) OCEAN B/L
(3) THROUGH B/L AND
(4) AIR WAY BILL.
INLAND BILL OF LADING:
This is a contract between a shipper and transportation company used
when transporting goods overland to an exporter's international carrier.
OCEAN BILL OF LADING:
This is a contract between an exporter and an international carrier for
transportation of merchandise to a specific foreign port abroad.
THROUGH BILL OF LADING:
document that establishes the terms between a shipper and a
transportation company covering both the domestic and international
transport of export goods between specified points for a specified
charge. For example, an air shipment can be converted with a through
bill of lading; however, ocean shipments require both an inland bill of
lading (for domestic transport) and an ocean bill of lading (for
AIR WAY BILL: An
air way bill is a bill of lading which covers both domestic and
international flights transporting goods to a specified destination. It
establishes the terms between a shipper and an air transportation
company for the transport of goods. Included in the documents are the
conditions, limitations of liability, shipping instructions description
of commodity, and applicable transportation charges. In addition, the
air way bill is a non-negotiable document which serves as a receipt for
the shipper, indicating that the carrier has accepted the goods listed
and obligates itself to carry the consignment to the airport of
destination according to specified conditions.
Air Waybill form is of great benefit to the
international air transport. Air Waybill was developed by the
International Air Transport Association (IATA) according to the Warsaw
Convention in 1986.
The other type of Bill of Lading not in common use
called House Bill of Lading, issued by freight forwarders acting as
Terms and conditions of carriage given on B/L
The shipping companies and their Agents who issue the
Bills of Lading, besides describing the details as described under the
heading "Contents of a bill of lading" above, while certifying
the conditions of the goods do indicate and qualify the Bill of Lading
stating that the carrier (shipping company) has agreed to transport the
goods subject to all the term and conditions appearing on the front as
well as on the reverse of the said Bill of Lading to which the shipper
agrees by accepting the Bill of Lading, notwithstanding any local
privileges and customs. The bill of lading further qualifies that the
particulars given in the B/L are as stated by the shipper and the
weight, measure, quantity, condition, contents and value of the goods
are un-known to the carriers and that the carrier has had no possibility
to check whether these particulars are correct.
The common terms and conditions printed on the front
and back of the Bills of Lading which form part of the contract may,
slightly differ in order and wording, from carrier to carrier are:
(1) JURISDICTION AND LAW
(i) Provision of
The Hague Rules as amended by the protocol signed at Brussels on 23rd
Rules - the United Nations Convention on the carriage of goods by Se~a
1978, signed in Hamburg on 31.03. 1978.
Carriage of Goods by Water Act 1936 of Canada.
(2) CARRIER'S TARIFF.
(4) NEGOTIABILITY AND TITLE OF
(5) CERTAIN RIGHTS AND
IMMUNITIES FOR THE CARRIER AND OTHER PERSONS.
(6) CARRIER'S RESPONSIBILITY.
clause as referred in (1 ) above.
(ii) Port to
(b) Package or
shipping unit limitation.
(c) Ad - Valorem;-
Declared value of package.
of package or shipment unit.
(f) Notice of
loss or damage.
(g) Time bar.
(9) TEMPERATURE CONTROLLED
(10) INSPECTION OF GOODS.
(11 ) MATTERS AFFECTING
(12) METHODS AND ROUTE OF
(13) DECK CARGO.
(14) NOTIFICATION AND
(15) BOTH-TO-CLAIM COLLISION.
(16) NEW JASON CLAUSE.
(17) GENERAL AVERAGE.
(18) FREIGHT & CHARGES.
(20) VARIATION OF THE
(21) PARTIAL INVALIDITY.
BILL OF LADING A DOCUMENT OF
A Bill of Lading is a peculiar document of title
which clearly establishes that the goods contained and mentioned in the
Bill of Lading, and possession of such a document by a lawful holder is
a conclusive evidence of the title holding in law. This is more
particularly important when the sale of goods contract is effected under
Cost, Insurance and Freight (C.I.F) basis.
ENDORSEMENT OF BILL OF LADING
The consignee as mentioned in the Bill of Lading and
the actual receiver of the goods may vary under the conditions in which
the Bill of Lading has been or intended to be, negotiated. Thus the
goods contained in the Bill of Lading may be consigned to:
(i) A named
person or firm. (ii) A named person
or firm or to an order or assign. (iii)
In condition (i),
"A named person or firm" the goods are delivered to the named
person on presentation of the Bill of Lading at the port of discharge.
Whereas in condition (ii)
" A named person or firm or to an order or assign," the simple
endorsement on Bill of Lading or fixing their signature/name on the back
of the Bill of Lading, the goods consigned become deliverable to the
bearer of the Bill of Lading document. This form of endorsement is
called " endorsement in blank", and can convert an
"Order- Bill of Lading" into a "Bearer" Bill, for
the delivery of the property contained in such a bill. If the named
person or firm wishes the goods to be delivered to a certain firm, he
may restrict the transferability of the Bill by inscribing "Deliver
to XYZ" followed by his signature. This endorsement is known as
either a "special endorsement" or an "endorsement in
In case the original consignee adds the words "
or to order" to his inscription " Delivery to XYZ " it
leaves the direction clear for "XYZ" so desire, into a bearer
instrument by simply endorsing his name and fixing his signature on the
back of the Bill of Lading document.
In various foreign countries "Order" bills
of Lading are prohibited by law.
In case of condition (iii), " This Bearer "
when the form of Bill of Lading only shows the consignees as "to
bearer" property passes just by delivery. The actual holder of the
Bill of Lading being entitled to the goods.
Commonly Bills of Lading are consigned and made out
as in condition (i) and (ii) described above. The "bearer"
Bill of Lading is purely an academic and is included solely to
illustrate the transferability of this commercial document.
Conditions to pass property of goods contained in a
bill of lading by assignment
There are four conditions which must be met before
the property of goods contained in a bill of lading may be passed on by
endorsement of the bill of lading is essentially required.
(2) That the
goods are in transit, i.e. handed over to the custody of the ship owner
or their Agents and not yet delivered to any person with a claim under
the bill of lading.
(3) That there is
an intension to transfer the property in the goods.
(4) That the bill
of lading should have been put into circulation by some one with a good
title to the goods.
The last, 4th condition is the most important of all,
and before analyzing its importance it is highly desirable, and
necessary to differentiate between three closely associated terms,
" assign-ability," transferability" and
"negotiability." This will bring out the difference between a
quasi- negotiable document such as a bill of lading and a truly
negotiable document such as a bill of exchange.
There are many instruments which may be passed from
one hand to another in exchange for value so that the property as per
Bill of Lading is transferred. These are known as transferable
instruments, and if every thing is in order, the transferee obtains a
good title to the property contained therein. When negotiability is not
present, the right of the transferee may be defected by any prior fault
of title or any other means by a prior holder.
The above description enables to assess and determine
how far a bill of lading is a negotiable instrument:
(i) When the bill
of lading is made out to a specified person or firm, and without the
addition of the words " or order" or " or assigns",
it would appear not to be negotiate in any condition of the term.
(ii) Where the
bill of lading is drawn to order or assigns, than it is negotiable by
delivery and endorsement for value, so long as the property contained in
the bill of lading has been shipped, still in transit, and not been
Where a bill of lading, which is an assignable
document of title of the goods stated therein, even when drawn to order
or assigns, does not reach the standard of a truly negotiable
instrument, for the transferee, who has obtained the document, bonafide
and can not obtain a good title from a transferor, whose title is
defective. The Latin maxim being, Nemo dat quod non habit ( no one can
give what he has not got). A bonafide transferee for value is in a
better position than the transferor for the lien of an unpaid vendor and
also defeat his right to stop in transits, thus leaving the original
seller to claim against the transferor.
Transferability of the property contained in the
bills of lading
Through mercantile usage endorsement and delivery of
a bill of lading while the goods are in transit passes over to the
" Endorsee" such property as it was the intension of the
parties to transfer. This intension in regard to the transference of the
(i) It can pass
the property absolutely.
(ii) It can pass
no property at all, when an unpaid seller takes out a Bill of Lading in
his agent's name as the consignee. Thus the seller's Agent retains the
bill of lading until the buyer of the goods pay for it.
(iii) It can pass
the property conditionally.
This happens when an unpaid seller passes the bill of
lading over to the buyer, accompanied and coupled with a Bill of
Exchange drawn on the endorsee of the bill of lading for the price of
the goods. This is, of course, a bit dangerous procedure, in the event
of the buyer not accepting the bill of exchange and having transferred
the bill of lading to another person, "XYZ" for value, than
because the original transferee, was given a document of title to the
goods, with the consent of the original seller and as such person/firm
obtains a valid title of the goods.
SETS OF BILLS LADING
The minimum number of bills of lading for a set is
three copies, however, any number of bills of lading of a set varies
according to the requirements of the trade - and the consignees. The
actual number of bills of lading issue is inserted at the face of the
bill of lading itself, which reads and more or less states, alike.
"In witness whereof the Master or Agent of the
ship has affirmed to (Nos.) Bills of lading, all of this tenor and date,
one of which being accomplished, the other to stand void."
SOME SHIPPING COMPANIES
STATES ON THE B/L:
"In witness whereof one(1
) original Bill of lading has been signed, if not other-wise
stated below, the same being accomplished the other(s), if any, to be
The additional bill of lading (not included in the
set) marked "NOT Negotiable, Master's copy," is retained by
the Master of the ship. When the carrying vessel arrives at the port of
destination with the cargo, it is the duty of the Master for shipping
company or their agents to compare the bill of lading presented to them
by the consignee's copy of B/L with the " Not Negotiable Master,
copy" and if satisfied, to sign and date the consignee's copy of
bill of lading, thus releasing the cargo from his charge and custody.
This procedure is known as "Sighting of Bill."
It is the responsibility of the Master to deliver the
cargo mentioned in the bill of lading to the consignor, upon payment of
freight and production of the bill of lading, or to the holder of the
bill of lading, properly endorsed and assigned. There is no
justifications for the Master to deliver cargo without production of the
bill of lading.
The practice and the legal position on the issue of
the delivery order against the presentation of B/L is as follows:
(1) In the event
of several parts of the bill getting into different hands, the first
transferee for value is entitle to the goods.
(2) If the Master
delivers the goods to a holder of a bill of lading, and acts bonafide
and without notice of any conflicting claims, then no claim for damages
can rise against him, or the ship-owner, if it is subsequently known
that delivery has been made to a person not entitled to the cargo.
A CLEAN BILL OF LADING
Bill of lading is an admission as to the condition of
the goods when shipped, and it is also a document which indicate the
description of good contained therein. Most of the B/L commence with
phrase " shipped in apparent good order and condition " and if
this statement is not qualified by some reference to any defective
condition of the goods then the bill is said to be " A clean
B/L." when there is a rotation stating, such as, "Casks in
leaky condition" "bales badly stained," "some bags
torn" etc. etc., such bill of ladings said to be a qualified B/L.
Banks and financial companies prefer to have a clean
bill of ladings, defect free, upon which they advance credit. It is,
therefore beneficial to the shipper to obtain clean bills of lading. The
shipper urge and pursue that the Master or the shipping Agents not to
qualify the bills of Lading as to any defective condition in lieu of the
shipper giving a letter of indenting or undertaking, sometimes referred
to as "back letter".
The practice of issuing letter of indenting is
practiced, especially in the case of general cargo trade. Some printed
forms are used and many carriers and shippers give support to this
practice, although it is costly to bankers and underwriters, on four
1- That out of
the lot many Letter of Indemnity issued only very small percentage come
up before the court.
2- That their
issue expedites shipment and avoids unnecessary delay.
3- That it is
generally cheaper to re-condition at destination than in the country of
origin, but depends upon the nature of good.
individuals ship owners feel the necessity of accepting these "
back Letters", since if they refused to accept the cargo, other
owners would accept the cargo and they may lose freight revenue.
The fact remains, that the courts have held their
Letter as contrary to Law and acceptance can prove costly.
Some check points in regard to preparation of bills
1- Do Check that
bill of lading is properly dated. This is the date on which the vessel
completes the loading of the Cargo described in the bill.
2- Do check that
Cargo is actually shipped before signing.
3- Do check that
the amount of demurrages incurred at port of loading is endorsed on the
face of the bill.
4- Do see that
the bill of Lading incorporates both the conditions and exceptions of
the charter party.
5- Do check, when
lay-days are reversible, that time taken to load is endorsed on the face
of the bill.
6- Do not part
with cargo before signing the bill of lading.
7- Do not sign a
bill of lading known to contain a false description of the goods.
8- Do not omit to
insert the amount of freight, which may be due under the terms of the
9- Do not accept
any verbal or within assurances of the shipper at variances with the
actual condition of the goods.
10- Do not fail
to include relevant entry regarding advance of freight.