Bill of Lading Functions

Journal of Korea Trade, Vol.10, No.2 August 2006, pp.169""' 186

Received : July 10, 2006 Accepted : August 22, 2006

The Bill of Lading Functioning as the

Contract of Carriage in English Law*

Byung-Mun Lee** · Jung-Ho Yang***

Abstract

This study primarily concerns the bill of lading's two distinct contractual roles which rave been

traditionally recognized either as the contract of carriage itself or its mere evidence. It describes

and analyzes the rules on the bill of lading's contractual roles in English law which rmy be helpful

for business people in maritime practice who often deal with such documents. In addition, it

attempts to exnmine the negotiable nature of the bill of lading in relation to its contractual roles

in English law in order to observe their interrelationship and any irifluences on each other.

Furthermore, it provides practiml. advice to people engaged in maritime business who deal with

bills of lading f!OVemed by English law. It argues tint the bill of lading should be treated as the

contract of carriage itself even between the carrier and the shipper and this seems to answer the question of why it should be treated as a fully negotiable im;trument which is in tum classified a.c a forrrr1! contract.

Key Words: Bill of Lading, Negotiability, Transferability, Carriage of Goods by Sea,

L<mtmctual Role of Bill of Lading

* This work was supported by the Soongs1l University Hesearch Fund. ** Assistant Professor, Dept of International Commerce, Soongsil University. · '* Full-time Lecturer, Dept. of Foreign Trade, Sangj1 University.

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Journal of Korea Trade

I . Introduction

The bill of lading is a document issued by a shipowner or his representative once goods

have been shipped on board a vessel. It is an extremely important legal document, both

in the law of the caniage of goods by sea and in maritime practice, because of its three

distinct functions which can be generally summarized as follows. First, it plays two

distinct contractual roles depending upon the question of whether the relationship being

observed is that between the carrier and the original shipper or that between the carrier

and subsequent endorsees of the bill of lading. It amounts merely to evidence of the

contract of carriage in the former relationship, whereas it represents the contract of

carriage itself in the latter relationship. Second, it functions as a document of title which

entitles the holder to take possession of the goods loadcxi aboard the vessel from the

carrier. Third, it constitutes a receipt for the goods by the carrier which certifies three

separate qualities: the quantity or volume of the goods, the leading marks on the goods

and whether or not the goods are in apparently good order and condition.

The concern of this paper is mainly placed in the first function of the bill of lading

which may well be asked from a theoretical point the question of how the mere evidence

of the contract between the carrier and the original shipper can be transforml'Cl into the

contract itself in the hands of the endorsee. It seems true that the contract of carriage

is concluded long before the bill of lading is issued since it would be concluded before

the goods are on board the ship. However, one should note that the captain has the

authority to reduce the contract into writing when the goods are put on board and the

writing intended to be the contract may be given priority over any prior agreement. In

addition, once the bill of lading is classified as the negotiable instrument of the formal

contract, like the bill of exchange, which may be enforced according to its terms

regardless of any underlying contract.1 l One may argue that the bill of lading itself is

treated as the contract of carriage for its every holder, including the original shipper, and

continues to govern the whole process of transport and delivery of the good'.;.

Having said that, the purposes of this paper are threefold. The first is to describe and

I) Characteristic features of negotiability are as follows: first, the document must be freely assignable; second, a transferee who takes one of such documents in good faith and for value must acquire a good title; third, any claim is merged in the document.

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The Bill of Lading Functioning as the Contract of Carriage in English Law

analyze the rules on the bill of lading's contractual role in English law which may be

helpful for business people in maritime practice who deal with such documents. The

second is to examine the negotiable nature of the bill of Jading in relation to its contractual

role in English Jaw in order to observe the interrelationship and any influence they may

have on each other. The third is to provide practical advice to people engaged in the

maritime business who deal with bills of lading governed by English Jaw.

II. Contractual or Evidentiary Nature of the Bill of Lading

1. Between the Carrier and the Shipper

( 1) Evidentiary Nature of the Bill of Lading as the Prevailing View

It has long been generally recognised in English Jaw that the bill of lading is treated

as not only being the evidence of the contract of carriage but as also being the contract

itself. This evolved character is given due recognition and effect under the Carriage of

Goods by Sea Act of 1992 which defines the contract of carriage in section 5(1) as "the

contract contained in or evidenced by" the bill of Jading.2l This binomial character of the

bill of lading is dependent upon with whom the carrier has a relationship: the shipper or

the endorsee.

Therefore, the bill of lading, at least between the carrier and the original shipper,

amounts only to mere evidence of the contract of carriage. In Ardennes SS (Cargo

Owners) v. SS Ardennes (0wners)3l, oranges were shipped from a Spanish port on the

understanding that the ship would sail directly to London, but the ship called at Antwerp

and the consequent delay in anival at London caused loss to the cargo owner. In his claim

against the carrier for such a delay, the carrier relied upon a term contained in the bill

of Jading which would have permitted the ship to call at Antwerp. It was held that the

bill of lading was only evidence of the contract of carriage and any oral evidence was

admissible to establish the original terms of the contract.4l

D F. Heynolds, 'The Carriage of Goods by Sea Act 199211, (1993) LMCLQ 436 at 441.

.1J (1951] 1 KB 55.

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The reason for the bill of lading being treated as mere evidence of the contract between

the carrier and the shipper can be found in two basic propositions of general contract

law. First, bilateral contracts are concluded on the exchange of mutual promises. Second,

contracts generally need no written record for their validity.5l Thus, the contract of

carriage may be, like most other contracts, concluded without any written record

sometime before the issue of the bill of lading, which is commonly issued after the goods

are shipped.6) The true contract may be inf erred from the carrier's sailing announcements,

the advertisements, the booking note, the freight tariff, the mate's receipt, shipping-cards,

placards, certain practices of the carrier known and accepted by the shipper, any

negotiations with loading brokers or other agent of the carrier, etc., as well as the bill

of lading itself all taken together.7>

However, where a bill of lading is issued under a charterparty, and the terms of the

bill conflict with those of the charterparty, the bill of lading may not be even evidence

of the contract of carriage, but be a mere receipt between the shipper-charterer and the

carrier.SJ The terms of the contract of carriage between them are exclusively to be found

in the charterparty.

4) This view is reaffirmed by the recent judgement from the Court of Appeal in G'ho Yang Shipping Co Ltd v. Coral (UK) Ltd [1997] 2 Lloyd's Rep 641.

5) C. Debattista, The Sale of Goods Canied by Sea, 2nd ed., London: Butterworths (1998), at 135.

6) Even though a bill of lading performing other essential functions is issued in most contracts of common carriage, the general contract rule of informality means that 'the issue of the bill of lading does not necessarily mark any stage in the development of the contract'. Pyrene Co Ltd v. Scindia Navigation Co Ltd [1954] 2 QB 402 at 409, per Devlin ].

7) W. Tetley, Maritime Cargo Claims, 3rd ed., Montreal: International Shipping Pub. (1988), at 10, 12, 216; ]. Wilson, Carriage of Goods by Sea, 5th ed., Harlow: Pearson (2004), at 129; A. Mocatta et al., Scrutton on Charterparties and Bills of Lading, 19th ed., London: Sweet & maxwell (1984), at 55; N. Gaskell et al., Bills of Lading: Law and Contracts, London: LLP (2000), at 41.

8) Rodocanachi, Sons & CO. v. Mi/bum Bros. (1886) 18 Q.B.D. 67, at 479: Swell v. Burdick (1884) 10 App.Ca. 74 at 105; President of India v. Metcalfe Shipping Co. Ltd (The Dunelmia) [1970] 1 Q.B. 289 at 305, 308; Trade Star Line Corp. v. Mitsui & Co. Ud (The Arctic Trader) [1996] 2 Lloyd's rep. 449 at 455.

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(2) Contractual Nature of the Bill of Lading as the Minority View

Unlike the prevailing view above, the evidentiary nature of the bill of lading as between

the carrier and the shipper is questioned by a contrary view that the bill of lading should

be the contract of carriage itself.9J The view is based on the following arguments.

First, it is argued that the evidentiary function of a bill of lading goes against the real

expectations of shippers and carriers who often look to the bill of lading for the terms of

the contract of carriage which that document covers, despite the fact that the bill may be

issued several days after the conclusion of the contract,10)

Second, it is contended that there is some doubt on the authority of the decision in

Ardennes SS (Cargo Owners) v. SS Ardennes (Owners)llJ which distinguishes Leduc v.

Ward on the grounds that it was "a case between the shipowner and the endorsee of

the bill of lading, between whom its terms are conclusive by virtue of the Bills of Lading

Acts 1855, so that no evidence was admissible in that case to contradict or vary its

terms".12l When one reexamines Leduc v. Ward, it can be found that the members of the

Court of Appeal deciding Leduc' s case did not intend any such restriction upon their view

that the bill of lading is the contract of carriage itself.13) The leading judgement delivered

hy Lord Esher MH in Leduc v. Ward rather admits to only two situations where the

9) C. Debattista, "The Bill of Lading as the Contract of Carriage - A Reassessment of Leduc v. Ward", (1982) 45 MLR 652; W. Pcxir, Poor on Charterparties and Ocean Bills of Lading, 5th ed. (1968), at 134.

10) C. Debattista, "The Bill af Lading as the Contract of Carriage - A Reassessment of Leduc v. Ward", op cit., at 654. This argument is strengthened by Devlin J. saying "When parties enter into a contract of carriage in the expectation that a bill of lading will be issued to cover it, they enter into it upon those terms which they know or expect the bill of lading to contain. Those terms must be in force from the inception of the contract; if it were otherwise the bill of lading would not evidence the contract but would be a variation of it. Moreover, it would be absurd to suppose that the parties intend the terms of the contract to be changed when the bill of lading is issued." Pyrene Co Ltd v. Scindia Navigation Co Ltd [1954] 2 QH 402 at 419.

11) C. Debattista, "The Hill of Lading as the Contract of Carriage - A Reassessment of Leduc v. Ward", op cit.. at 657 et seq.

12) [1951] 1 KB 55, at 60 per Lord Goddard L.J. See also Hain Steamship Company Ltd v. tate and Lyle Ltd [1936] 2 All ER 597 at 607, 608 per Lord Wright.

13) C. Debattista, "The Bill of Lading as the Contract of Carriage - A Reassessment of Leduc v. Ward", op cit., at 658.

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contract of carriage cannot be contained in the bill of lading: first, where a bill is held

by a charterer, and second, where the carrier issues a bill for unloaded goods.14) In

addition, he cited two of the cases in support of his view that the bill of lading contains

the contract of carriage, which were all related to cases against carriers at the suit of

shippers rather than endorsees.15) Furthermore, it is remarkable that he says in his

judgement that, even though "it may be true that the contract of carriage is made before

[the bill of lading] is given, ... parol evidence to alter or qualify the effect of such writing

[as is contained in the bill] is not admissible".16)

Third, the view that since the Bill of Lading Act 1855, the contract of carriage is to

be found exclusively in the bill of lading is arguably based upon the following two fact

s:17) first, that section 1 of bills of lading specifically refer to 'the contract contained in

the bill of lading,' and second, that it was introduced in order to govern the transfer of

the contract of the original parties contained in the bill of lading to a third party.18l

14) (1888) 20 QBD 475 at 479, 480.

15) Fraser v. Telegraph Construction Company 0872) LR 7 QB Sffi; and Chartered Mermntile Bank of India v. Netherlands India Steam Navigation Co. (188.3) 10 QBD 521.

16) (1888) 20 QBD 475 at 480. In this regard, Prof. Wilson argues in his book as follows; "To hold the Ardenness to be wrongly decided and to restore the full vigour of the parol evidence rule at this stage would clearly not confonn to the expectations of the reasonable businessman. It must be remembered that the parol evidence rule has itself been much modified since the decision in 1888 in Leduc v. Ward, while a lea of rectification can be raised where the written document is out of line with the tenns of a prior oral agreement." J. Wilson, op cit., at 132.

17) C. Debattista, "The Bill of Lading as the Contract of Carriage - A Reassessment of Leduc v. Ward", op cit., at 660; G. Zekos, "Comparative Analysis of the Contractual Role of Bills of Lading under Greek, United States and English Law", (2000) 42(1) Managerial Law 1 at 8.

18) H Kidner, "Economic Loss: Anns, Junior Books and Bills of Lading" (1985) 48 MLR 352, at 353. This point was also taken up by Fry LJ in Leduc v Ward, "Here is a plain declaration of the legislature that there is a contract, contained in the bill of lading, and that the benefit of it is to pass to the endorsee under such circumstances as exist in the present case. It seems to me impossible, therefore, now to contend that there is no contract contained in the bill of lading, whatever may have been the case before the statute." (1888) 20 QBD 475 at 483. For the contrary view, see Sewell v. Burdick (1884) 10 App Cas 74 at 105 per Lord Bramwell.

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2. Between the Carrier and the Endorsee

In contrast with the bill of lading's nature conceived in the relationship between the

carrier and the original shipper, the position in English law is clearly different from that

between the carrier and the endorsee. The bill of lading is the contract itself in the sense

that it contains the contractual terms between those parties. Therefore, in Leduc v. War

d,19) the endorsee of a bill of lading sued the carrier for loss to cargo as a result of

deviation. The carrier contended that there was no deviation because the route taken on

the voyage had been expressly and orally agreed to by the shipper in a stipulation not

recorded on the bill. It was held that anything that took place between the carrier and

the shipper, not embodied in the bill of lading, could not affect the endorsee. The carrier

deviated his way out of the exclusion clauses in the bill of lading.20l

The reason for this rule is clear that it may be unjust to an endorsee of a bill of lading,

who has no way of knowing what the terms of the original contract of carriage concluded

between the carrier and the shipper are if he is to be bound to the terms.2U

If a bill of lading, issued under a charterparty, is indorsed to a bona fide purchaser

for value, the bill of lading will become the conclusive evidence of the contract of carriage

so far as the endorsee is concemed.22) The endorsee will only be affected by the

charterparty if its terms are clearly incorporated into the bill of lading.23l The rationale

for this rule corresponds with those explained above in the bill of lading issued in common

--------------

10l (1888) 20 QBD 475.

2()) For further examples of the -;amc principle, see The Royal Exchange Shipping Co. Ltd. v. W J Dixon & Co. (1886) 12 App Cas 11. where the endorsee was not affected by the shipper's agreement with the carrier that goods could be stowed on deck; 1he El Amn'a and the El Minia [ 19821 2 Lloyd's Rep 28, where a contract between the shipper and the carrier containing a jurisdiction clause different to that stipulated in the bill of lading was held not to avail the bill of lading holders.

21) R Bradgate. Commercial Law, 3rd ed., London: Butterworths (2000), at 736.

22) Trade Siar Line Corp. v. Mitsui & Co. Ltd (The Arctic Trader! [1996] 2 Lloyd's rep. 449 at 115."i. The same is true between the carrier and a person to whom the bill of lading has been transferred. not as an endorsec. but as consignee. Comp:inia Commercial Naviera San Martin SA. L'. China Nationai Foreign Trade Trarl'1portation Corp. (1he Costanza) [1981] 2 Lloyd's Uep. 118 at 1:10

2:3) 'fhe Merak ll~l !'. 223; The Anfield [1971] P. Jfi8; Garbis Maritime Corporation v. Philippine iVational Oil Co [1982] 2 Lloyd's Rep 283; Ships AIS Nordheim v. Syn'an Petroleum lo Ud One Varenna! [1984] Q.B. 599.

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carnage.

m. Transferability or Negotiability of the Bill of Lading

1. Transferability as the Prevailing View

The success of the use of the bill of lading in international trade is ascribed to its

negotiable character and its features as a document of title.24l Since the voyages in sea

transport were normally lengthy and invariably slow, a document of title was necessary

for the cargo owners to raise credit for an international sale or to take advantage of an

opportunity to sell the goods in transit.2~J However, one must note that a bill will only

operate as a document of title if it is made clear on its face that it is negotiable, i.e. it

must be drafted as an 'order' bill under which the carrier agrees to deliver the goods

at their destination to a named consignee or to his order or assigns' .26J

There is no doubt in that order bills are transferable by endorsement just like bills of

exchange. However, one must treat the order bills with care because they are not

technically negotiable instruments. This is because a bona fide transferee gets no better

title to the goods covered by the bill of lading than was held by the transferor. This

feature of the bill of lading is expressed by the words of Lord Devlin in Kum v. Wah

Tat Bank; 'it is well settled that "Negotiable" when used in relation to a bill of lading,

means simply transferable. A negotiahk hill of lading is not negotiable in the strict sense;

it cannot, as can be done by the negotiation of a negotiable instrument, give to the

24) C. O'Hare, "Shipping Documentation for the Caniage of Goods and Hamburg Rules" 0978) 52 Aust. L. ]. 415 at 419; G. Zekos, "Negotiable Bills of Lading and their Contractual Role under Greek, United States and English Law", (1998) 40(2) Managerial Law 5 at 5.

25) ]. Wilson, op cit., at l:i2. The bill of lading was in use as early as the sixteenth century and it appears to have evolved from a practice that originated in the Adriatic port of Trani in the eleventh century, where local law required ship's masters to keep a book of lading recording details of all cargoes loaded, and to have developed into a negotiable instrument and a document of title. See A. Urbach. "The Electronic Presentation and Transfer of Shipping Documents", in R Goode ed., Electronic Banking - the Legal Implications, London: Financial World Publishing (198,'1), at 111 et seq.

26) Henderson & Co L'. Comptoir d'f~srompte de paris (187:il LB. 5 PC 2;)J

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transferee a better title than the transferor has got.27)

Although the bill of lading is commonly said to be a negotiable docwnent in commercial

circles, it should be clearly distinguished here between negotiability and transferability.

On one hand, the former refers to that feature of docwnents of title, defined by the

Factors Act 1889, whereby certain transferees can, in circwnstances stipulated by the

Sale of Goods Act 1979, obtain title to money or goods better than that of any pretender,

even if the title of their transferor was defective.'.Zlll On the other hand, the latter explains

how the right to claim delivery of the goods from the carrier, granted to a number of

stipulated persons by the Carriage of Goods by Sea Act 1992, can be transferred in

common law from one trader to another without involving the carrier in every transfer.29l

Therefore, when the word "negotiable" is used in relation to the bill of lading, it merely

means "transferable", despite of the fact that the mechanism of negotiability which is

endorsement and delivery is used in the same way as in other negotiable instruments.30>

The bill of lading merely represents the goods and possession of the bill of lading is

treated, no more and no less, as equivalent to possession of the goods covered by it}l l

There are two main reasons for the bill of lading not being treated as a negotiable

instrument in English law and can be summarized as follows. The first is related to the

strength of the title conferred on the holder of the docwnent as against the true owner.:m

Documents of title are generally said to denote rights either to money or to goods and

'.J.7) [HJ71] l Lloyd's Hep \39 at 44fi. See also the words of Lord Campbell in Gurney u. Behrend ( lff-4 ! .9 E & B G22 at G34.

2Sl Id.: R (;onde. Commercial Law. 2nd ed., London: Penguin (1995). at ::icl. n. lc\3 (the narrow sense of the word 'negotiable' is mentioned).

29) C. Dchattista. The Sale of Goods Canied by Sea, op ci.t., at 5.5.

30) Waring v. Cox (1808) 1 Camp. :*19 at 370: Dracachi u. Angro-Egyptian Navigation Co. (18(-JH) LR :1 C.P. 190 at 192; A. Guest ed., Benjamin's Sale of Goods, 5th ed., London: Sweet & Maxwell (1997). at 1027. See also T. Howard, 'The Caniage of Goods Canied by Sea Act 1992". ( 1993) ]. of Maritime Law and Commerce 181 at 183.

31 l See the judgement of Howen LJ in ::ianders !fros. u. Maclean (1883) 11 Q.B.D. 327 at 341. Professor Wilson has described three purposes for which possession of the bill of lading may be rl'garded as equivalent to possession of the goods covered by it: (a) The holder of the bill is entitled to delivery of the gcxx:ls at the port of discharge; (b) The holder can transfer the ownership of the goods during transit merely by endorsing the bill; (c) The hill can be used as security for a debt. J. Wilson, op cit .. at J:)J

3'.Z) A. c;ue:-;t ed., op cit., at 10'.27 et SNJ.: c. Debattista, The Sale of c;oods Canied by Sea, op cit .. at Ci3.

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both of them are readily transferable without assignment. Bills of lading are different

from properly negotiable documents of title, e.g. bills of exchange, or money in that the

latter can pass to a bona fide transferee for value without notice a better title than that

enjoyed by the transferor, whereas the former cannot.33J Therefore, the holder of a bill

of exchange in due course takes the entitlement to payment entirely free of the defects

in title and of the equities of all previous holders. On the other hand, this is not applicable

to the holder of a bill of lading who, in common law, succeeds in a very real sense to

the title enjoyed by his predecessor.34l The second refers to the principle of consideration

whereby the transfer of a bill of lading does not transfer property or title, or bar the right

of stoppage in transit, unless value is given for the transfer.35) This is because, while

the requirements of the common law principle of consideration are relaxed pursuant to

certain provisions of the Bills of Exchange Act 188236) in a way that consideration is

assumed in the holder's favour without it having to be proved in certain cases,37J they

are not relaxed in the case of bills of lading to which such provisions are not applicable.38)

In addition, it is not obvious whether the gratuitous transfer of a bill of lading might

operate as a gift, if so intended)9J If this is right, any attempt to make a gift of goods

in transit by a gratuitous transfer of a bill of lading might faiJ40J and consequently the

gratuitous transferee of a bill of lading in due course from a transferor with a defective

33) Id.

34) Id It is said that the bill of lading gets such a feature as in the bill of exchange where it is transferred in the exceptional circumstances provided for in the Factors Act 1889, ss. 2, 8 and 9 and in the Sale of Goods Act 1979, ss. 24 and 25.

35) Coxe v. Harden ( 1803) 4 East. 211 at 217; Waring v. Cox (1808) I Camp. 369; Rodger v. Comptoir d'Escompte deParis 0869) LR 2 P.C. 393; Burgos v. Nascimento (1909) 100 L.T. 71; A. Guest ed., op cit.. at 1027, 1030.

36) The Bills of Exchange Act 1882 s. 27(2) "Where value has at any time been given for a bill, the holder is deemed to be a holder for value as regards the acceptor and all parties to the bill who became parties prior to such time"; The Bills of Exchange Act 1882 s. 30(]) "Every party whose signature appears on a bill is prima facie deemed to have become a party thereto for value."

37) For example, see R Goode, op cit., at 538 et seq.

38) A. Guest ed., np cit .. at 1030.

39) Id, n. 74.

40) This failure is based on the rule that actual delivery is required to perfect a gift of a chattel not made by deed of gift. Cochrane v. Aloore (]890) 25 Q.B.D. 57.

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title could be defeated.41)

2. Negotiability as the Minority View

There is a strong contrary view as to the meaning of negotiability in relation to the

bill of lading.42J It is contended that bills of lading listed as "documents of title" in section

1(4) of the Factors Act 1889,43) are negotiable in that the title of the holder of the bill

in due course takes precedence over that of the true owner in so far as the requirements

of the Sale of Goods Act 1979 are fulfilled.44)

In relation to the first reason presented for the bill of lading not being treated as a

negotiable instrument, this view argues that when one says that the transferee of a bill

of lading gets a better title than that of his transferor where certain sections of the

Factors Act 1889 and others of the Sale of Goods Act 1979 apply, it simply means that

the negotiability of the document is not denied.45) If a bill of lading is not treated as a

negotiable instrument, it would be hard to comprehend the purpose and effect of sections

24, 25, 47 and 61(1) of the Sale of Goods Act 1979 and section 1(4) of the Factors Act

which are intended to allow the transferee of a bill of lading to get a better title.46>

Therefore, it is asserted that both bills of lading and bills of exchange may give the

transferee a better title to goods or money in so far as certain conditions are satisfied,

which means to make both of them negotiable in the strict sense.47)

41) A. Guest ed., op cit .. at 1030, n. 74.

42) C. Debattista. The Sale of Goods Carried by Sea, op cit., at 62 et seq.; A. Tettenbom, "Transferable and Negotiable Documents of Title: a Redefinition?", (1991) LMCLQ 5.38.

43) Documents listed as 'documents of title' in section 1(4) of the Factors Act 1889 are 'any bill of lading, dock warrant, warehouse-keeper's certificate, and warrant or order for the delivery of goods. and any other document used in the ordinary course of business as proof of the possession or control of goods, or authorizing or purporting to authorize, either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented.'

44) The Sale of Goods Act 1979 ss. 24, 25; C. Debattista, The Sale of Goods Carried by Sea, op cit.. at 62 et seq.

45) Id, ill 64.

16> Id. at 63, 64.

47 I Id., at 64. However, this does not mean that both documents are negotiable in identical circumstances. Prof. Debattista says that "Thus, while a holder in due course may defeat the real creditor even 1f the holder received the bill of exchange from a thief. an endorsee of a

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As to the second reason for the bill of lading not being treated as a negotiable

instrument, the contrary view contends that the cases cited as authorities for the

proposition that a bill of lading is not negotiable because it transfers no title to a voluntary

transferee would be judged differently by virtue of specific statutory provisions.48) The

main issue in such cases was whether the seller's agent at the port of destination, an

endorsee of the bill of lading, could claim possession of the goods in his own name in

order to protect his principal' s interests against the buyer's insolvency.49! This issue may

be clearly solved now either by section 38(2) of the Sale of Goods Act 1979, which

extends the unpaid seller's rights over the goods to the seller's agent, or by sections

2(1)(a), 1 (2)(a) and 5(2)(b) of the Carriage of Goods by Sea Act 1992, which allow an

endorsee lawfully holding a bill of lading to claim the goods from the carrier.:j)J In

addition, the view says that it is questionable whether the gratuitous transfer of a bill

of lading is really ineffective. This is because although the general rule is that actual

delivery is required to perfect a gift in the absence of a deed or a declaration of trust,

there are recognized exceptions to the rule, among which is the transfer of a bill of Jadin

g.5])

N. Critiques and Practical Advice

1. Critiques

As examined above, the bill of lading in English law has a binomial character in terms

bill of lading in a similar position cannot prevail over the real owner because that circumstance lies outside the cases envisaged by sections 24 and 24 of the Sale of Goods Act 1979. But this is simply to say that two documents are negotiable in different, if sometimes overlapping, circumstances; not that one is negotiable while the other is not." Id.

48) Id, at ffi.

49) Coxe v. Harden 0803) 4 East. 211 at 217: Waring v. Cox (1808) 1 Camp. 369; Rodger v. Comptoir d'Escompte deParis (1&19) L.R 2 P.C. 393; Burgos\. Nascimento (1909) 100 L.T. 71

50) C. Debattista, The Sale of Goods Carried oy Sea, op cit., at 65.

51) E. Tyler, ]. Vaines and N. Palmer, Crossley Vaines' Personal Property, London: Butterworths, (1973), at 305 et seq.; C. Debattista, The Sale of (ill<:xls Carried by Sea, op cit., at 66.

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of its contractual roles which is primarily reliant on the relationship with the carrier. The

bill of lading is itself the contract of carriage as between the carrier and the endorsee,

whereas the bill of lading is not itself the contract, but mere evidence of the contract

as between the carrier and the ship~r. This position does not seem to raise any problem

in so far as the relationship between the carrier and the endorsee is concerned. However,

it is submitted that as concerns the relationship between the carrier and the shipper, there

are several further questions than those raised by the minority view. They are as follows:

First, it is argued that the bill of lading has been introduced to play the role of the

contract in maritime transport in terms of mercantile custom and usage. In addition, it

has been evolved to make certain the terms of the contract of carriage in the maritime

business field and to disallow carriers to insert new contractual terms in their favour.52)

So far as the bill of lading is treatlxl as mere evidence of the contract of carriage, its

terms are always uncertain because they may be modified by any means of evidence at

any time by the shipper or the carrier.531

Second, as in Fry L.J.'s judgement, section 1 of the Bills of Lading Act 18.55 was

intended to transfer the contract of the original parties contained in the bill of lading to

a third party rather than to create a new contract.541 Nevertheless, if one admits the bill

of lading does not perform any contractual function at the time of its issue, then it is

doubted how its transfer can pass the contract of the original parties where none exists.~£)

That is, one may well ask how the bill of lading, treated as a mere evidentiary document,

can be all of a sudden converted into a contract of carriage upon the endorsement and

transfer to a third party.5til

Third, where a third party derives his rights of suit against the carrier through being

52) It is commonly said in this field that the bill of lading is the contractual document which contains many of the terms and conditions of carriage having been fixed through mercantile practice. G Zekos, "Comparative Analysis of the Contractual Role of Bills of Lading under Greek, United States and English Law", op cit .. at 22. See also C. Debattista, "The Bill of Lading as the Contract of Carriage - A Reassessment of Leduc v. Ward", op cit., at 654. Cf. Contra: J. Wilson. op cit., at 132.

53) Id., at 21; G. Zekos, 'The Contractual Hole of Documents Issued under the CMI Draft Instrument on Transport Law 2001". (2004) 35 J. of Maritime Law and Commerce 99 at 104.

54) Leduc t' Ward (1888) 20 QBD !\75 at 483.

55) Id. at 106, n. 32

;J{)) Id.

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the lawful holder of a bill of lading, he 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' _57J

The phrase of 'contract of carriage' is defined in the relevant part of section 5(1) of the

Carriage of Goods by Sea Act 1992 as 'the contract contained in or evidenced by that

bill [of lading] or [sea]waybill' which seems to reflect the binomial character of the bill

of lading in English law. The binomial character of the bill of lading seems to raise the

questions of whether only terms of which the third party takes the benefit through section

2(1) of the Carriage of Goods be Sea Act 1992 are the terms in the bill of lading and

whether the third party could take the benefit of all the original terms agreed between

the carrier and the shipper regardless of such terms being written into the bilJ.58J These

problems cannot be helpful at all for the third party who ultimately becomes a party to

a contract which must be stated in a single way in order to be identified.59J In addition,

assuming that a contract of carriage is contained in a bill of lading different from original

contractual terms agreed between a shipper and a carrier, it should be explained why

there are two different contracts concluded simultaneously for the same transaction.

Thus, unless this is clearly justified, it is submitted that the contract of carriage should

remain the same throughout the time the goods are in transit.60J

As to the matter of the negotiable character of the bill of lading, one should note that

the bill of lading stands as a negotiable document of title on the basis of the existence

of a valid contract of carriage.61J In addition, as asserted above, the contract of carriage

under which the whole process of transport and delivery of the goods takes part is the

bill of lading.62) The bill of lading itself is treated as the contract of carriage for every

holder in due course and on that basis as a negotiable document of title and 'this

interrelationship stands for the whole legal life of the bill of lading as a negotiable

57) The Carriage of Goods by Sea Act 1992 s. 2(1 )(a).

58) C. Debattista, 'The Sale of Goods Carried by Sea, op cit., at 135; N. Gaskell et al., op cit., at 45.

59) F. Reynolds, op cit., at 441.

60) G. Zekos, "Comparative Analysis of the Contractual Role of Bills of Lading under Greek, United States and English Law", op cit., at 17.

61) Heskell v. Continental Express [1950] I All ER 1033 at 1044.

62) Lord Bowen in Sanders Brothers v. Maclean points out that "The bill of lading ... remains in force as a symbol, and carries with it not only the full ownership of the goods, but also all rights created by the contract of carriage between the shipper and the shipowner." [18831 11 QBD 327 at 341.

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document of title' .63> In this regard, it is submitted that the rxisition in English law which

forms the binomial character of the bill of lading creates inconsistency in terms of that

an endorsement of a bill of lading transforms a mere evidence of the contract of carriage

to the whole contract of carriage which is used as the basis for the valid existence of

the bill of lading as a negotiable document of title.64>

Meanwhile, English law clearly distinguishes between transferability and negotiability

and denies its negotiable character in strict sense that it does not provide a bona fide

transferee of the bill of lading a better title to the goods covered by the bill than was

held by the transferor. However, it is submitted that, as was argued by the minority view,

a fully negotiable character of the bill of lading just like the bill of exchange should not

be denied. Once the bill of lading is treated as a fully negotiable instrument, it is classified

as a formal contract like the bill of exchange. Namely, all negotiable instruments are

contracts in writing and the law referring to written contracts applies to them.6.5> This

may lead in line with the prorxisition presented above that the bill of lading itself is

regarded as the contract of carriage throughout the whole process of the transrxirt and

delivery of the goods.

2. Practical Advice

In terms of the real expectations of shippers and carriers who often look to the bill

of lading for the terms of the contract of carriage, the rxisition in English law seems quite

unique in that as between the carrier and the shipper, the bill of lading is not the contract

of carriage but only the evidence of its terms. This position may result in that one who

accepts the bill of lading which the carrier hands to him does not necessarily, and without

regard to the circumstances, bind himself to abide by all its stipulations. That is, if the

bill of lading is handed over after the conclusion of the contract of carriage and contains

a clause not originally agreed on, that clause might not form part of the contract.

Thus, where one wants to avoid this awkward situation, he should make sure and

63) G. Zekos. "Negotiable Bills of Lading and their Contractual Role under Greek, United States and English Law". op cit.. at 14.

()4 l Id.

ffi 1 The rights under this contract are simply enforceable by whoever has lawful possession of the document which represents it.

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check out the following questions which may help to insure such clauses remain valid:

whether the original contract was concluded "subject to the exceptions of our bills of

lading",66) whether the clause was incorporated by course of dealing between the partie

s67l or by trade custom or usage,68) and whether the parties intended their original

contract to be superseded by one on the terms of the bill of lading.

Another unique position in English law is that the bill of lading is not a negotiable

instrument in the sense that the transferee of a bill of lading does not get a better title

than his transferor's. The position as to the negotiable character of the bill of lading

seems to vary depending upon national laws. Thus, one should be cautious when dealing

with a bill of lading governed by English law especially if, unlike English law, his law

treats it as a fully negotiable instrument just like the bill of exchange.

V. Conclusion

In accordance with the purposes of this study, it has investigated the rules on the

contractual role and negotiable nature of the bill of lading. The primary question in this

investigation was focused upon the binomial contractual character of the bill of lading

in English law which is reliant on the relationship with the carrier. The bill of lading is

itself the contract of carriage as between the carrier and the endorsee, whereas the bill

of lading is not itself the contract, but mere evidence of the contract as between the

carrier and the shipper.

In addition to introducing the minority view which contends that the bill of Jading is

itself the contract of carriage even between the carrier and the shipper, this study raised

further issues to justify why the bill of Jading should be treated as the contract of carriage

regardless of the relationship with the carrier. First, it could be justified by mercantile

custom and usage in the maritime business which introduced the bill of lading to make

certain the terms of the contract of carriage. Second, another justification could be found

by asking how the bill of lading, treated as an evidentiary document, can be all of a

66) Armour & Co Ltd u. Leopold Walford (London) Ltd [19'.21] 3 KB 473.

67) Hardwick Game Farm v. Suffolk Agricultural, etc., Association [1969] AC 31.

68) British Crane Hire Corp u. Ipswich Plant Hire [1975] QB 303.

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sudden converted into a contract of carriage upon the endorsement and transfer to a third

party. Third, it showed not only the fact that section 5(1) of the Carriage of Goods by

Sea Act 1992, which reflects the binomial character of the bill of lading, is unhelpful for

a third party to define contractual terms, but there is also an unreasonable likelihood that

there be two different contracts concluded simultaneously for the same transaction.

Furthermore, when considering the matter of the negotiable character of the bill of

lading, the study proved that the binomial character of the bill of lading creates

inconsistency in terms of that an endorsement of a bill of lading transforms a mere

evidence of the contract of carriage to the whole contract of carriage basis for the valid

existence of the bill of lading as a negotiable document of title.

It finally argued that all these points raised above seem to explain why the bill of lading

should be treated as a fully negotiable instrument which is in tum classified as a formal

contract like the bill of exchange.

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