Law of The carriage of Goods by Sea, The bill of lading contract and functions

Bill of lading as a receipt

April 27, 2022July 25, 2022By Tan Pui Yen
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Bill of lading as a receipt

1. Apparent condition of the goods

Printed forms of bills of lading typically state: ‘SHIPPED at the Port of Loading in apparent good order and condition…’ (CONGENBILL, Edition 1994). It has been established since Silver v Ocean SS that the carrier is estopped, in favour of a transferee of the bill of lading, from asserting that the goods were not in fact apparently and externally in good condition on shipment. Reliance on representations made in bills of lading by the transferees of bills of lading is presumed. 

In that case the estoppel did not extend to mere pinholes in the metal cases that would not have been apparent in the conditions of rapid handling under which the cargo was loaded by floodlight.

The estoppel does not apply in relation to the original shipper. In such cases, the representations contained in the bill of lading can only give rise to prima facie evidence against the carrier (Smith v Bedouin Steam Navigation).

It will also not apply in favour of a transferee of the bill of lading, if a representation made in the bill of lading has been qualified by another representation made in the bill: see Canada and Dominion Sugar v Canadian National, where the bill for a cargo of sugar was endorsed ‘signed under guarantee to produce ship’s clean receipt’ and the ship’s receipt noted that many bags were stained, torn and resewn.

The same result will not follow if the bill of lading states ‘condition unknown’ (Compania Naviera Vasconzada v Churchill). Since a bill of lading claused in this way will probably not satisfy the terms of the documentary credit under which the seller is to be paid, pressure may be put on the shipowner to issue a clean bill even where there is external and apparent damage to the goods on shipment. Such indemnities have been held to be unenforceable if they go beyond minor defects or bona fide disputes (Brown Jenkinson v Percy Dalton).

If a clean bill of lading is issued for an apparently damaged cargo, the carrier will be liable in damages for the tort of deceit (Standard Chartered Bank v Pakistan National Shipping Corp (No 2)).

A statement of ‘good’ condition has to be understood in the context of the description of the goods. It means that the goods are in a proper condition to satisfy the description under which they were shipped and it is not appropriate for the bill to be claused. (Sea Success v African Maritime Carriers, where there is a useful account of the practicalities of the issue of bills of lading and the parts played by shippers, time charterers and masters). The master must use their judgment as a reasonably careful master but they are not an expert surveyor (The David Agmashenebeli).

In the wake of the decision in The Saga Explorer, it would appear that the master’s duty to state the apparent condition of the cargo is not as easy as it might at first seem. There, the bill of lading contained a pre-printed RETLA clause, which provided:

“If the Goods as described by the Merchant are iron, steel, metal or timber products, the phrase ‘apparent good order and condition’ set out in the preceding paragraph does not mean the Goods were received in the case of iron, steel or metal products, free from visible rust or moisture or in the case of timber products free from warpage, breakage, chipping, moisture, split or broken ends, stains, decay or discoloration. Nor does the Carrier warrant the accuracy of any piece count provided by the Merchant or the adequacy of any banding or securing. If the Merchant so requests, a substitute Bill of Lading will be issued omitting this definition and setting forth any notations which may appear on the mate’s or tally clerk’s receipt.” 

It was decided that the RETLA clause had a very limited effect. The master is expected to clause the bill of lading whether or not it contains a RETLA clause, if the defect in the goods is more than superficial.

3. Statements as to quantity

Grant v Norway decided that the master has no authority to sign bills of lading for goods that have not been shipped, so that at common law there is no estoppel in favour of transferees of bills of lading as to the quantity shipped.

If carriers could show by other evidence that the stated quantity was not shipped, they were not liable for the short delivery, notwithstanding the statement in the bill of lading. The more careful the tally at loading, the less likely it would be that the carriers could avoid the inference that the stated quantity had indeed been loaded (Smith v Bedouin Steam Navigation).The anomalous rule in Grant v Norway was finally abolished by COGSA 92, section 4: in favour of a person who has become the lawful holder of a bill of lading in good faith (section 5(2)), a representation that goods have been shipped, or received for shipment, on board a vessel is conclusive evidence against the carrier. Section 4 only applies to representations made in the transport documents that are bills of lading within the meaning of COGSA 92. For the definition of bills of lading, see COGSA 92, section 1(2). Hence, the decision may still apply in the case of representations made in other types of transport document (such as a straight bill of lading).

The common practice, however, is for carriers to include in bills of lading words which indicate that the shipped quantity is not known to them and therefore not guaranteed by them. The effectiveness of this device was confirmed by the Court of Appeal in New Chinese Antimony v Ocean SS. The bill of lading for a shipment of antimony oxide ore in bulk contained a printed clause stating ‘weight, measurement, contents and value (except for the purpose of estimating freight) unknown’ and a marginal note ‘quantity said to be 937 tons’. On this wording, the bill of lading was not even prima facie evidence of the quantity shipped, so that the carriers were not liable for shortage on delivery.

It has been held that a ‘weight unknown’ clause also excludes the operation of section 4 of COGSA 92, as no representation is made (The Mata K).

3. Statements as to leading marks

Where the bill of lading specifies the marks placed on the goods, difficulties arise if the goods tendered on delivery do not bear the same marks. In Cox v Bruce the marks included a figure – 1, 2 or 3 – that indicated the quality or grade of the jute in the bales. Relying on Grant v Norway, the Court of Appeal held that the master had no authority to make statements about the quality of the goods and that the owners were not liable to an endorsee of the bill of lading when some of the bales delivered were of a lower quality than stated in the bill of lading. 

The issue was evaded in Parsons v NZ Shipping by holding that the incorrect marks on the lamb carcases had no commercial significance: they went to the identification of the goods only, not their identity, and the tender of incorrectly marked carcases was no different from a tender of carcases from which the marks had rubbed off.

The problem remains, however, of marks that both identify the goods and indicate grade or quality. Can the endorsee of the bill of lading really be compelled to accept goods of a different grade? It is noteworthy that A.L. Smith MR dissented on this issue in Parsons v NZ Shipping. His example of the cases of champagne marked ABC shows that the real test is whether the marks form part of the description of the goods. If cases marked XYZ are tendered, it is beside the point that cases marked XYZ are just as good (or even better) than ABC; the contract is for ABC and nothing else.

It is also noteworthy that Grant v Norway was not extended to statements about date of shipment. The master has ostensible authority to sign backdated or incorrectly dated bills of lading and the owners (or charterers, if they are charterers’ bills) will be bound (see Alimport v Soubert and The Saudi Crown). See also The Nea Tyhi: owners bound by bills of lading which stated that the cargo of plywood was ‘shipped under deck’ and liable when it was in fact carried on deck and suffered serious rainwater damage. It is well recognised that date of shipment can be part of the description of the goods in the law of sale and that the question whether the goods satisfy the contract description is entirely separate from any enquiry as to whether they are of the quality called for by the contract.

If that distinction were to be applied to statements in bills of lading, it would be difficult to support the decision in Cox v Bruce, or the reasoning of the majority in Parsons v NZ Shipping.

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