II

The Carriage of Goods by Sea Act (COGSA 92) 1992 deals with the

transfer of contractual r ights and the imposit ion of contractual l iabil it ies in

respect of bi l ls of lading, sea waybills and ship’s del ivery orders. Since the

Fourteenth Century Bil ls of Lading have played a vital role in international

trade. From its early days as a mere bailment receipt which was required in

order to obtain receipt of goods in the port of discharge, the role of the Bil l

of Lading has had to develop with the changing requirements of mercantile

custom, into a complex “document of dignity”1, functioning not only as a

receipt for goods but also as evidence of the contract of carriage and as a

document of t it le with which the rights in the goods it represents may be

transferred.

COGSA 92 replaced the Bills of Lading Act (BLA) 1855 , which was

repealed on 16 t h September 1992. Although Britannia no longer ruled the

waves, its commercial laws st i l l formed the basis for much of world trade.

This situat ion was of great commercial value to Britain. However, there were

a number of serious f laws within the BLA, which had threatened London’s

posit ion at the forefront of the shipping market.

In 1991 the Law Commission of England & Wales and the Scottish Law

Commission produced a report enti t led “Rights of Suit in Respect of

Carriage of Goods by Sea”2, in which they looked at the problems either

created by the BLA or areas which it failed to provide for. It is from this

report that the “Carriage of Goods by Sea Bil l” was drafted and enacted in

1992. Therefore, in order to judge the effectiveness of the COGSA 92 , we

must f irst look back to the Nineteenth Century, to the circumstances which

led to the creation of the Bills of Lading Act 1855 and to the perceived

shortcomings of this piece of legislat ion.

1 Italian Importing Co. v. Navigazion ‘The Carso’ [1930] AMC 1743 - Woolsey J. said ;

“A bill of lading is a document of dignity and courts should do everything in their power to

preserve its integrity in international trade, for there, especially, confidence is of the

essence.” 2 Law Commission Report Number 196

III

The BLA was principal ly enacted to protect the r ights of a third party cargo

receiver of goods carried by sea, where the cargo was i) Damaged in Transit,

i i ) Short Delivered and ii i) Lost. These situat ions arose where the goods

were shipped by the ‘Shipper’ on the terms that they were to be delivered to

the agreed port of discharge by the ‘Carrier’, to (or by order of) the

‘Consignee’ (often the buyer). Due to the long transit t ime of marit ime

transport at the t ime, the goods were often sold af loat and in many

occasions resold numerous times before being discharged. Consequently,

the delivery would eventually be made to a party who was often not

envisaged at the time of the creation of the contract between the Shipper

and the Carrier. This could be further complicated in circumstances where

the delivery would be made, either under the terms of the original Bil l of

Lading or by indorsement of the Bil l, to a party who was not the buyer, but a

person such as a banker who had f inanced the transaction by way of pledge

of the goods represented in the Bil l of Lading. At Common Law this caused

problems under the doctrine of privity of contract. If ‘A’ (Carrier) contracts

with ‘B’ (Shipper) to deliver goods to the ‘C’ (Consignee), ‘C’ cannot sue ‘A’

on the contract of carriage as he is not party to it, nor can A bring any

action arising under the contract against ‘C’. It must be noted that although

this is often described as a problem of privity of contract, the rule that a

consignee or a transferee of a Bil l of Lading, could not sue the carrier was

established before the case of Tweddle & Atkinson (1861)3, in which the

doctrine of Privity of Contract was f inally recognised as a legal principle.

This problem of privity of contract was highl ighted in the case of Thompson

v Dominy (1845)4, in casu the Plaint if fs were endorsees of a Bil l of Lading

for 1,303 barrels of oats, on which they made a claim in assumpsit when the

full Bil l of Lading quantity was not discharged. The court held that the

transfer of the Bil l of Lading only transferred the property in the goods and

not the contractual rights.

The Bills of Lading Act 1855 was enacted to al leviate these problems and

f inally afford protection to the consignee or transferee of a Bil l of Lading.

3 (1861) 1 B & S 393

4 (1845) 14 M & W 403

IV

Section 15 of the Act created a statutory exception to the Common Law

doctrine of privity of contract, transferring to the consignee or endorsee the

right of suit ‘as if the contract contained in the bi l l of lading had been made

with himself ’ . This therefore transfered only those rights which were

expressly incorporated in the bi l l of lading or such terms which were implied

in al l contracts for carriage of goods by sea. If the bi l l of lading did not

contain some of the terms in the original contract of carriage between the

Shipper and the Carrier, then those terms could not be binding as between

the Carrier and the Consignee/Transferee of the bil l of lading.

The wording of S.1 BLA t ied the transfer of contractual rights only to

situat ions where the property in the goods passed ‘upon or by reason of

consignment or indorsement’. Unfortunately the Act proved unproductive in

many cases where the property passed otherwise than ‘upon or by reason of

consignment or indorsement’ of the bi l l of lading.

Financing banks were part icularly badly affected by this wording. The House

of Lords, overturning a judgement of the Court of Appeal, ruled on this area

in the case of Sewell v Burdick (1884)6, in casu a shipowner sued the

endorsee (bank) of a bil l of lading for unpaid freight claiming that l iabi l it ies

under the bi l l of lading had been transferred to the endorsee under S.1 BLA.

The House of Lords held that a bank which acquired a bi l l of lading as a

mere pledgee only acquired a special security interest in the goods and was

therefore not a person to whom the property passed for the purposes of the

Act. In his rul ing on this case Lord Selbourne stated that;

'It would be strange if the Bills of Lading Act has made a person whose name has

never been upon the bill of lading and who (as between himself and the shipowner) has

never acted upon it, liable to an action by the shipowner upon a contract to which he

was never a party'7

Although this decision was welcomed by the banks as it prevented them

being held automatical ly l iable for unpaid freight under a bil l of lading, it had

5 S.1 BLA 1855 'Every consignee named in a bill of lading, and every indorsee of a bill of lading to whom the property

in the goods mentioned shall pass upon or by reason of such consignment or indorsement, shall have transferred to and

vested in him all rights of suit, and be subject to the same liabilities in respect of such goods as if the contract contained

in the bill of lading had been made with himself’ 6 (1883) 10 App Cas 74

7 Sewell v Burdick (1883) 10 App Cas 74

V

the adverse effect of preventing them using the statutory right to sue under

S.1 BLA. It should be noted however, that should the pledgee-bank pay any

outstanding freight, in an effort to protect its interests, the court could imply

a contract of carriage between the bank and the carrier, thereby entit l ing the

bank to sue on the bil l of lading terms. These so cal led ‘Brandt Contracts’

came about as a result of the ruling in the case of Brandt v Liverpool,

Brazil & River Plate Steam Navigation Co.Ltd [1924]8 , in which the

plaint if f (bank) took possession of the bil ls of lading as security for f inance.

The plaintif f paid unpaid freight on the shipment and as such was able to

sue the carrier for damages where a ‘clean on board’ bil l of lading had been

issued for defective cargo.

The second problem arising from the wording of S.1 BLA was where the

‘property’ of the goods passed before the bil l(s) of lading were endorsed.

This became more of a problem due to the increasingly reduced transit

t imes of marit ime transport, leading to a situat ion where cargoes were

frequently discharged against ‘ letters of indemnity’, due to the unavailabil ity

of the bil l (s) of lading. The receiver of the cargo (usually the buyer)

therefore became the owner of the goods because of the actually del ivery

and not because of ‘upon or by reason of consignment or indorsement ’ of

the bil l of lading as required by S.1 BLA. This became known as the ‘Delf ini

Problem’ fol lowing the decision in the case of The Delfini [1990]9, in casu

the f inal indorsees of a bil l of lading for a cargo of crude oil were not able to

claim for short delivery as the court held that the contract was discharged

when the cargo was unloaded. In the case Mr. Just ice Phil l ips stated that;

`Property in the cargo discharged passed from Vanol ( intermediate

sel ler) Internat ional BV to the second plaint if fs and simultaneously from

the second to the plaint if fs upon discharge. When Delf in i sai led on

complet ion of discharge the contract of carr iage was discharged and the

bi l l of lading ceased to be effect ive as a t ransferable document of t i t le`10

This judgment was upheld, but for dif ferent reasons, in the Court of Appeal,

which held that rights of suit under S.1 BLA could only be transferred to the

8 Brandt v Liverpool, Brazil & River Plate Steam Navigation Co.Ltd [1924] 1 KB 575

9 Enichem Anic Spa v Ampelos Shipping Co.Ltd (The Delfini) [1990] 1 Lloyds Rep. 252

10 [1988] Lloyd’s Rep. 599

VI

indorsee when ‘property ’ in the goods passed ‘upon or by reason of

consignment or indorsement ’ , and because the ‘property ’ had passed before

the indorsement, rather than ‘upon or by reason of.. indorsement ’, their

claim was rejected. Mustil l LJ said:

`. . f inal ly I should mention the continued status of the b/ l after the

goods have arr ived at dest inat ion, and have been discharged f rom the

ship. I t quite c lear.. . . that when the goods have actually been del ivered

at dest inat ion to the person entit led to them, or placed in a posit ion

where the person entit led to immediate possession, the bil l of lading is

exhausted `and wil l not operate at al l to transfer the goods to any

person who is either advanced money or has purchased the bi l l of

lading`11

This problem over the definit ion of the passing of ‘property’ under S.1 BLA

has also arisen under other circumstances, such as The Aliakmon [1986]12,

where ‘property’ did not pass to the indorsee as the bi l l of lading was only

indorsed to the consignees in order that they could obtain delivery of the

goods from the carrier ‘as agents’ on behalf of the shipper ( i.e. the party

indorsing the bil ls of lading did not intend ownership of the goods to pass to

the indorsee as a result of the indorsement). Probably of more signif icance,

due to changes in the nature of marit ime transport since 1855, was the case

of The Aramis [1989]13. The problem here arose when the goods covered in

a bil l of lading were an unidentif iable part of a larger bulk, an increasingly

common situation due to the greater size of vessels. The appeal in this case

concerned two bi l ls of lading, one of 204 metric tons (bi l l no.5) and one of

255 metric tons (bi l l no.6), out of a total cargo of 3,209 metric tons of

l inseed expeller which had been loaded in Necochea, Argentina. The

indorsees (buyers) presented the duly endorsed bi l ls of lading in the

discharge port of Rotterdam, but there was a substantial shortage of cargo

(probably due to over-delivery in the previous port of Rouen). No cargo was

delivered under bi l l no.5 and only 11.55 metric tons under bil l no.6. Had the

bil ls not related to goods which were part of a greater bulk, the plaint if fs

would have had a viable claim against the carrier under S.1 BLA as the

11 Enichem Anic Spa v Ampelos Shipping Co.Ltd (The Delfini) [1990] 1 Lloyds Rep. 252

12 Leigh & Sillivan Ltd v Aliakmon Shipping Co (The Aliakmon) [1986] AC 785

13 Ship Aramis v Aramis Maritime Corp. (The Aramis) [1989] 1 Lloyd’s Rep. 213

VII

‘property’ in the goods, and therefore the rights in the bi l ls of lading, would

have passed to them “upon or by reason of such endorsement”. However,

where goods that were part of a greater bulk were concerned section 16 of

the Sales of Goods Act 1979 (previously S.16 Sales of Goods Act 1893)

came into play, dictating that;

“Where there is a contract for the sale of unascertained goods no

property in the goods is transferred to the buyer unless and unti l the

goods are ascertained”

Case law14 tends to suggest that the endorsee of bil l no.6 would have been

able to rely on S.1 BLA as endorsement of the bil l of lading was an

essential part of the process of the passing of ‘property’ to the endorsee

when his goods were ascertained. Hence, it was suggested that the property

would have passed “by reason of” the endorsement and as such under S.1

BLA the contractual r ights of suit would also have passed. However, in this

case both claimants disclaimed this l ine of reasoning and as such the Court

of Appeal did not rule upon it. Instead the two Plaint if fs decided to go down

the route of ‘Brandt Contract’s’15, claiming that implied contracts between

themselves and the carrier came into existence when they presented the

endorsed bi l ls of lading to the carrier’s agents at discharge. This argument,

which negated the use of S.1 BLA, was accepted by Evans J. at f irst

instance16, but was rejected by the Court of Appeal as unlike in the Brandt

case17, the endorsees in the Aramis case18 had not paid any freight or any

other payment which would allow the courts to imply the existence of a

contract between the endorsees and the carrier. Bingham LJ. in casu said:

"There does not, however, appear to have been a case in which a

contract has been impl ied from the mere facts (a) that an endorsee,

ent it led as holder of a bi l l of lading to demand delivery, does so, and (b)

that the shipowner, bound by contract with his shipper (and perhaps his

14 LJ Roskill in The San Nicholas [1976] 1 Lloyd’s Rep 8, Mustill J. in The Elafi [1981] 2 Lloyd’s Rep.679 and

Lloyd J. in The Sevonia Team [1983] 2 Lloyd’s Rep. 640 15 Brandt v Liverpool, Brazil & River Plate Steam Navigation Co.Ltd [1924] 1 KB 575

16 [1987] 2 Lloyd’s Rep.58

17 Brandt v Liverpool, Brazil & River Plate Steam Navigation Co.Ltd [1924] 1 KB 575

18 Ship Aramis v Aramis Maritime Corp. (The Aramis) [1989] 1 Lloyd’s Rep. 213

VIII

charterer) to deliver goods to any party presenting the bi l l of lading, duly

makes such delivery"19

This case failed to answer the question of whether an endorsee for goods

which were part of a greater bulk could rely on S.1 BLA and it is a pity that

the Court of Appeal decided to follow such an orthodox approach, as it

would have been quite easy for them to have implied the existence of a

contract. Such a decision would have had future benefit for both endorsees

and shipowners (having someone in the discharge port, who could be held

l iable for unpaid freight or demurrage). Instead of taking a posit ive stance

on these questions the Court of Appeal stated that Section 16 of the Sale

of Goods Act and S.1 BLA could only be reformed by statute and that the

problems with regards to bulk cargoes should be looked at by the Law

Commission.

Section 3 of the Bills of Lading Act has also been a cause a many

problems. S.3 BLA20was enacted as a result of the ruling in Grant v Norway

(1851)21 which stated that a shipowner could escape l iabi l i ty to a bona f ide

transferee of a bil l of lading for value, if he could establish that the goods

had never been shipped. This ruling was based on the ground that a master

of a vessel had no authority to bind a shipowner by such statements in the

bil l of lading. In the case of Grant v Norway22, the master signed a bi l l of

lading for 12 bales of silk, none of which had been loaded. The court held

that the indorsees of the bil l had no recourse to remedy once it had been

established by the carrier that none of the goods had been shipped. This

rul ing was justif ied by Jervis CJ. on the grounds that “ I t is not contended that

the captain had any real author ity to sign bi l ls of lading unless the goods had

been shipped; nor can we discover any ground upon which a party upon which a

19 ibid

20 S.3 BLA 1855 'Every bill of lading in the hands of a consignee or indorsee for valuable consideration, representing

goods to have been shipped on board a vessel, shall be conclusive evidence of such shipment as against the master or

other person signing same, notwithstanding that such goods or some part thereof may not have been so shipped, unless

such a holder of the bill of lading shall have had actual notice at the time of receiving the same that the goods had not

been in fact laden on board: Provided , that the master or other person so signing may exonerate himself in respect of

such misrepresentation by showing that it was caused without the default on his part, and wholly by the fraud of the

shipper, or of the holder, or some person under whom the holder claims.'

21 Grant v Norway (1851) 10 C.B. 665

22 ibid

IX

party taking a bi l l of lading by indorsement would be just if ied in assuming that he

had authority to s ign such bil ls, whether the goods were on board or not”. This

rul ing was clearly unsatisfactory (although it was confirmed in later cases23)

in that i t defeated the object of requiring the master to acknowledge the

quantity loaded. This led to S.3 BLA which states that statements made in

the bil ls of lading with regards to the goods shipped would be conclusive

evidence of such shipment “as against the Master or other persons signing the

same”. However it is regrettable that the courts decided to adopt a l iteral

approach to this wording, deciding that a statement in the bil l of lading that

goods had been shipped on board was ‘conclusive evidence ’ of shipment in

favour of the consignee or indorsee, but important ly that i t was only ‘as

against the master or other person signing the bi l l ’ and as such did create an

estoppel which could result in a remedy against the shipowner (unless in

rare cases where the bil l was signed by the shipowner in person or by one

of his clerks24) . S.3 BLA was therefore largely ineffective in solving the

problem of the ‘rule in Grant v Norway25’ .

The f inal generally recognised problem with the BLA was that according to

S.1 it applied str ict ly only to bi l ls of lading and not sea waybil ls26 or ship’s

delivery orders. This omission was of particular importance in the latter half

of the twentieth century with the advent of containerisation of cargoes (not

envisaged in 1855), in which trade sea waybil ls were the norm.

Towards the end of the Twentieth century the combined problems of the

Bills of Lading Act 1855 , as out lined above, were reaching serious

proport ions and challenging the pre-emanate role of English Law in

international trade. The Carriage of Goods by Sea Act 1992 was enacted,

23 Russo-Chinese Bank v Li Yam Sam [1910] AC 174, Kleinwort Sons & Co. v Associated Automatic Machines

Corp. Ltd [1935] 151 LT 1, Uxbridge Permanent Building Society v Pickard [1939] 2 KB 248 24 V/O Rasnoimport v Guthrie & Co Ltd [1966] 1 Lloyd’s Rep 1

25 Grant v Norway (1851) 10 C.B. 665

26 A ‘waybill’ is a receipt for goods, frequently incorporating the terms of the contract of carriage but it is not

transferable and is not a document of title. Ownership in the property referred to in the waybill is transferred, if at all, by

separate contracts of sale.

X

according to the recommendations of the Law Commission27, in order to try

to address these issues and placate the dissat isf ied mercantile community.

In a signif icant move away from the BLA, COGSA 92 separates the transfer

of rights28 f rom the transfer of obligat ions29. In Section.1 it also extends the

statutory provisions to the use of sea waybills and ship’s delivery orders,

thereby solving one of the recognised problems of the BLA. However, it

must be noted that for the purpose of the Act a non-negotiable bil l of lading

(i.e. consigned to a named consignee without the wording “to order”) is to be

treated as a sea waybil l, as it is more akin to a sea waybil l in that it is non-

negotiable. This is of signif icance as the Act deals with bil ls of lading and

sea waybil ls dif ferently, as wil l be discussed below.

The more signif icant sections of the new act, in respect to solving the

problems created by the BLA or areas which it fai led to provide for, are

COGSA 92 SS.2, 4 & 5 . As mentioned above S.1 only identif ies the types of

documents the Act applies to; S.5 merely contains def init ions for terms used

in the Act and S.6 deals with the short t it le, repeal of the BLA,

commencement and extent of the Act.

Section 2(1)30 is an important development in that it removes the l ink

between the passing of ‘property’ and the transfer of contractual r ights.

According to this section the right to sue is now vested in the ‘lawful holder

of a bil l of lading’(as defined in S.5(2)31), the consignee of a sea waybil l or

27 “Rights of Suit in Respect of Carriage of Goods by Sea” - Law Commission Report Number 196

28 S.2 COGSA 92

29 S.3 COGSA 92

30 S.2(1) provides that;

Subject to the following provisions of this section, a person who becomes—

(a) the lawful holder of a bill of lading;

(b) the person who (without being an original party to the contract of carriage) is the person to whom delivery of the

goods to which a sea waybill relates is to be made by the carrier in accordance with that contract; or

(c) the person to whom delivery of the goods to which a ship's delivery order relates is to be made in accordance

with the undertaking contained in the order,

shall (by virtue of becoming the holder of the bill or, as the case may be, the person to whom delivery is to be made)

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. 31 COGSA 92 S.5(2) References in this Act to the holder of a bill of lading are references to any of the following

persons, that is to say—

XI

the person entit led to delivery under a ship’s del ivery order, regardless of

whether or not the ‘property’ in the goods has passed to them. This

therefore removes the offending provision of the BLA, which st ipulated that

the rights of suit could only be transferred if ‘property ’ passed ‘upon or by

reason of the consignment or endorsement ’ , solving the problems for

f inancing banks which were created by the ruling in Sewell v Burdick32.

Section 2(1) would also appear to solve the problem of consignees or

endorsees of cargoes which form part of a greater bulk33 and other

situat ions, such as that in ‘The Aliakmon ’34, for which the BLA 1855 would

have offered no remedy as the ‘property’ in the goods would not have been

deemed to have passed ‘upon or by reason of the consignment or

endorsement ’ .

As mentioned above the role of S.2(1) is to transfer the rights of suit to the

‘lawful holder’ of a bil l of lading. S.2(5)35 dictates that where rights have

been transferred under S.2(1), the transfer removes any entit lement to those

rights from the bil l of lading shipper and any intermediate parties entit led

under the bi l l of lading. Sl ightly dif ferent rules apply under sea waybil ls and

ship’s del ivery orders as it was felt that it was inappropriate to exclude the

rights of the original shipper under documents which were not negotiable

documents of t it le, as is the case for bil ls of lading. However, in some cases

(a) a person with possession of the bill who, by virtue of being the person identified in the bill, is the consignee of

the goods to which the bill relates;

(b) 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;

(c) a person with possession of the bill as a result of any transaction by virtue of which he would have become a

hold r falling within paragraph (a) or (b) above had not the transaction been effected at a time when possession of

the bill no longer gave a right (as against the carrier) to possession of the goods to which the bill relates;

and a person shall be regarded for the purposes of this Act as having become the lawful holder of a bill of lading

wherever he has become the holder of the bill in good faith. 32 Sewell v Burdick (1883) 10 App Cas 74

33 see Ship Aramis v Aramis Maritime Corp. (The Aramis) [1989] 1 Lloyd’s Rep. 213

34 Leigh & Sillivan Ltd v Aliakmon Shipping Co (The Aliakmon) [1986] AC 785

35 S.2(5) Where rights are transferred by virtue of the operation of subsection (1) above in relation to any document, the

transfer for which that subsection provides shall extinguish any entitlement to those rights which derives—

(a) where that document is a bill of lading, from a person's having been an original party to the contract of carriage;

or

(b) in the case of any document to which this Act applies, from the previous operation of that subsection in relation

to that document;

but the operation of that subsection shall be without prejudice to any rights which derive from a person's having been an

original party to the contract contained in, or evidenced by, a sea waybill and, in relation to a ship's delivery order, shall

be without prejudice to any rights deriving otherwise than from the previous operation of that subsection in relation to

that order

XII

the party who holds the right of suit under COGSA 92 wi l l not be the party

which has suffered an actual loss. Consequently S.2(4)36 was enacted to

allow the ‘ lawful holder’ of the bil l to exercise his rights of suit for the

benefit of the party suffering the actual loss. Unfortunately, although this

section allows the holder to sue on behalf of another, it does not put any

obligat ions on him to do so. At the moment it is not known what would

happen were he to refuse to do so and this question has yet to be answered

by the courts. This uncertainty will probably mean that banks who are using

bil ls of lading for security will probably, in the future, seek to be named as

consignee, rather than rely on the ‘ lawful holder’ to sue on their behalf .

S.2(2) COGSA 9237deals with circumstances where the consignee or

endorsee only becomes the ‘lawful holder’ of the bi l l of lading after the

goods have been discharged (the ‘Delf ini Problem’38) .

S.2(2)(a) dictates that an endorsee can acquire contractual r ights against

the carrier even though the bil l has been spent. This posit ion would arise

where the cargo has been sold prior to or after shipment and the goods are

delivered to the buyer before the bi l l (s) of lading have come into his

possession through the chain of intermediate buyers and sellers. However,

he would not acquire such contractual rights should he purchase the goods

after the cargo had been delivered to a person entit led to such delivery.

36 S.2(4) Where, in the case of any document to which this Act applies—

(a) a person with any interest or right in or in relation to goods to which the document relates sustains loss or

damage in consequence of a breach of the contract of carriage; but

(b) subsection (1) above operates in relation to that document so that rights of suit in respect of that breach are

vested in another person,

the other person shall be entitled to exercise those rights for the benefit of the person who sustained the loss or damage

to the same extent as they could have been exercised if they had been vested in the person for whose benefit they are

exercised. 37 S.2(2) provides that;

2(2) Where, when a person becomes the lawful holder of a bill of lading, possession of the bill no longer gives a right

(as against the carrier) to possession of the goods to which the bill relates, that person shall not have any rights

transferred to him by virtue of subsection (1) above unless he becomes the holder of the bill—

(a) by virtue of a transaction effected in pursuance of any contractual or other arrangements made before the time

when such a right to possession ceased to attach to possession of the bill; or

(b) as a result of the rejection to that person by another person of goods or documents delivered to the other person

in pursuance of any such arrangements. 38 Enichem Anic Spa v Ampelos Shipping Co.Ltd (The Delfini) [1990] 1 Lloyds Rep. 252

XIII

S.2(b) of the Act deals with the rights of suit of the seller upon reacquisit ion

of the cargo in circumstances where the buyer rejects the goods or

documents. This provision does appear to f inal ly bring an end to the “Delf ini

Problem” and it also has an important role in preventing a possible

undesirable trade in l it igation claims which could arise due to the provisions

in S.2(1). Any attempt to sell the claim after the discharge of the cargo

would fail as the contractual arrangements between the buyer and seller of

the bil l of lading would occur after the bil l had ceased to be an effective

document of t it le. As with S.2(1), S.2(2) would add force to the argument

that the decision in ‘The Aliakmon ’39 would be decided dif ferently under

COGSA 92 than it was under the BLA. The new provisions would st i l l not

empower the agents in that case with the rights of suit as there was no

intention when the bil l(s) were endorsed to them that those rights should

pass to the agents. The bil l(s) were merely endorsed to them in order that

they could obtain delivery of the goods ‘as agents’ to the cargo owners.

However, under S.2(2) the r ights of suit would st i l l be transferable to cargo

owners by endorsement of the bil l(s) of lading after the cargo had been

delivered to their agents, as they would be ‘ in pursuance of any contractual or

other arrangements made before the t ime when such a r ight to possession ceased

to attach to possession of the bil l ’

As mentioned above COGSA 92 separates the transfer of rights under a bil l

of lading from the transfer of obligations. S.3 COGSA 9240 deals with the

transfer of obligat ions under a bil l of lading (or sea waybil l or Ship’s del ivery

order), an area over which the provisions in the BLA had been unclear. The

39 Leigh & Sillivan Ltd v Aliakmon Shipping Co (The Aliakmon) [1986] AC 785

40 S.3 COGSA 92 .—(1) Where subsection (1) of section 2 of this Act operates in relation to any document to which

this Act applies and the person in whom rights are vested by virtue of that subsection—

(a) takes or demands delivery from the carrier of any of the goods to which the document relates;

(b) makes a claim under the contract of carriage against the carrier in respect of any of those goods; or

(c) 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 (by virtue of taking or demanding delivery or making the claim or, in a case falling within paragraph (c)

above, of having the rights vested in him) become subject to the same liabilities under that contract as if he had been a

party to that contract.

(2) Where the goods to which a ship's delivery order relates form a part only of the goods to which the contract of

carriage relates, the liabilities to which any person is subject by virtue of the operation of this section in relation to that

order shall exclude liabilities in respect of any goods to which the order does not relate.

(3) This section, so far as it imposes liabilities under any contract on any person, shall be without prejudice to the

liabilities under the contract of any person as an original party to the contract.

XIV

main provision of S.3 is that any person who acquires r ights from a bil l of

lading (or sea waybil l or ship’s delivery order) under S.2 , also assumes any

liabil it ies under the same document as if he had been party to the original

contract of carriage. However, he is only subject to such liabil it ies (e.g.

freight, demurrage and breach of warranty for the shipment of dangerous

goods) in the event that he demands delivery of the goods or seeks to make

a claim in respect of those rights. This proviso was specif ical ly added to the

Act for the protection of banks holding bil ls of lading as pledgees. The Law

Commission felt it necessary to do so in order to avoid the disastrous effect

the automatic imposit ion of l iabi l i t ies could have had on the role played by

bil ls of lading in the f inancing of international trade. The proviso effectively

allows banks to examine their possible l iabil it ies before trying to enforce

security against the customer. The Law Commission felt that should a bank

then chose to enforce its r ights, then there was no reason why they should

be able to avoid their l iabil it ies in doing so. It must be noted that unlike in

the transfer of rights41, the transfer of obligat ions does not extinguish the

liabil ity of the shipper, whether under a bil l of lading, sea waybil l or ship’s

delivery order. It is presumed that the liabil it ies of intermediate holders of

the bil l wi l l be extinguished by the transfer.

The f inal important Section of COGSA 92 is S.4 42 which deals with the old

problem of the ‘rule in Grant v Norway’43. This provision, on the face of it,

appears to f inal ly abolish the ‘rule in Grant v Norway’44 by creating a

statutory estoppel in favour of the bi l l of lading holder where the bi l l of

lading ‘has been signed by the master of the vessel or by a person who was not

the master but had the express, impl ied or apparent author ity of the carr ier to s ign

bi l ls of lading’. However, in practice there remains a question over whether

41 S.2 COGSA 92

42 S.4 COGSA 92 provides that;

A bill of lading which—

(a) represents goods to have been shipped on board a vessel or to have been received for shipment on board a vessel;

and

(b) has been signed by the master of the vessel or by a person who was not the master but had the express, implied

or apparent authority of the carrier to sign bills of lading,

shall, in favour of a person who has become the lawful holder of the bill, be conclusive evidence against the carrier of

the shipment of the goods or, as the case may be, of their receipt for shipment. 43 Grant v Norway (1851) 10 C.B. 665

44 ibid

XV

the Master’s (or Agent’s) signature represents a confirmation of the

statements in the bil l(s) of lading, or whether the signature is merely a

confirmation of the contractual terms contained in the document binding the

carrier to its terms, but retaining an implied non-admission as to any

description of the goods inserted in the document by the shipper. As such it

is l ikely that shipowners wil l maintain the pract ice of insisting that wording

such as “said to weigh” or “said to be” are added to any description in the

documents. This is of particular importance in the bulk trades where the

exact quantity of cargo is often disputed. It is also regrettable that the Law

Commission did not extend this provision to situations where sea waybills

and ship’s del ivery orders are used.

Due to the comparatively recent passing of the legislat ion, most of the

provisions of the new Act have yet to be challenged in court. The most

signif icant cases post-COGSA 92 have probably been those in connection

with the transfer of l iabil it ies under the provisions of S.3 . In the case of The

Aegean Sea45 the court was asked to rule, inter alia , on whether or not, for

the purposes of S.3 , the issuance of a letter of indemnity by a cargo

receiver for the delivery of cargo without the production of the bil ls of lading,

could be capable of passing the l iabi l i t ies the carrier could incur for such

delivery, to the cargo receiver. The court held (obiter) that the letter of

indemnity did not constitute a demand for delivery and as such the liabil it ies

were not transferred to the cargo receiver. The letter of indemnity was

merely an undertaking to indemnify the carrier against certain claims; the

carrier remained under an obligation to discharge the cargo to the ‘lawful

holder’ of the bil l of lading and was not bound to deliver the cargo under the

indemnity.

In the more recent case of The Berge Sisar46 an interim holder of a bi l l of

lading was not deemed to have assumed liabil it ies under a bil l of lading by

taking routine samples of the cargo before clearing the vessel for discharge.

Borealis, the interim holder, rejected the cargo on the grounds that the

45 Agean Sea Traders Corp. v Repsol Petroleo SA (The Agean Sea)[1998] 2 Lloyds Rep. 39

46 Borealis AB v Stargas Ltd (The Berge Sisar) [1999] QB 863

XVI

samples were not of the contractual quality and sold the cargo to Dow

Europe before the cargo delivery was effected. Borealis brought a claim

against the shipper and the shipowner as co-defendants, to which the

shipowner made a counterclaim for al leged damage caused by the corrosive

nature of the cargo. The court was asked to rule on whether the taking of

samples in the discharge port const ituted “taking or demanding delivery” of

the cargo for the purposes of S.3 and thereby transferred liabil it ies under

the bil l of lading. Millett L.J., giving the principal majority judgment, held

that the demand for del ivery, by Borealis before endorsing the bil ls of lading,

had not become irrevocable.

" Intermediate holders of a bi l l of lading remain potent ially l iable under

the contract of carr iage, and become actual ly l iable if they take any of

the steps ment ioned in s.3(1). But unless and unt i l they take actual

del ivery of the goods their posit ion is not irreversible.. . . I f he then

demands or takes delivery of the goods it is appropriate that he should

become subject to the l iabi l i t ies under the contract of carr iage. But there

is no good reason why his l iabi l i ty should be addit ional to instead of in

substitut ion for the l iabi l i ty of the previous holder of the bi l l ; or why the

latter should remain l iable merely because he made a claim or demand

which he has since withdrawn”.47

As the bi l ls of lading had been endorsed to the f inal holder, who

subsequently fulf i l led the steps required under S.3 , Borealis were not

subject to the l iabi l it ies under the terms of the bil l of lading. It was noted in

this case that the BLA 1855 had never included intermediate holders, who

drop out when a later holder takes delivery, in the class of people who could

be subject to l iabi l i ty under the contract of carriage and it was not the

intention of the Law Commission to extend this class. This was a view

confirmed by the House of Lords in The Giannis NK48.

.

The Carriage of Goods by Sea Act 1992 does seem in general to have

been effective in solving many of the problems of “t it le to sue” caused by

the Bills of Lading Act 1855 or contentious areas which that Act failed to

deal with. The Act has solved many of the problems of privity of contract 47 Borealis AB v Stargas Ltd (The Berge Sisar) [1999] QB 863

48 Effort Shipping Co. v Linden Management Co (The Giannis NK) [1998] 1 Lloyd’s Rep. 337

XVII

and providing that they understand the new provisions, offers a far more

attract ive regime for the banks. The “rule in Grant v Norway”49 appears to

have been consigned to this history books, although as mentioned earl ier, i t

is a pity that the provisions in this regard were l imited to the use of bil ls of

lading. However, the fact that many of the provisions of the new Act have

been extended to the use of sea waybil ls and ship’s del ivery orders, shows

that the Law Commission have really taken into account the changing nature

of marit ime trade and should al low for a smooth progression into the age of

electronic documentation. Probably the most important aspect of this

legislat ion is that i t has shown to the international mercantile community

that legislators are prepared to work f lexibly in order to enhance the

attract iveness of English Law to foreign traders. However, l ike most pieces

of new legislation, i ts true worth wil l only be seen years down the road when

the courts have had time to apply its provisions to the facts of specif ic cases.

In the mean-time it does appear that the shipping and banking communit ies

have welcomed this long overdue Act.

49 Grant v Norway (1851) 10 C.B. 665

XVIII

Bibliography “Carriage of Goods by Sea” – John F Wilson – Longman Press – 4

th Ed.

“Scrutton on Charterparties” – Stuart Boyd et al – Sweet & Maxwell – 20

th Ed.

“Carver on Bills of Lading” - Sir Guenter Trietel & F.M.B. Reynolds – Sweet & Maxwell – 1

st Ed.

“Casebook on Carriage of Goods by Sea” – A.D.Hughes – Blackstone Press – 2

nd Ed.

“Title to sue under bills of lading: The Carriage of Goods by Sea Act 1992” – John Bassindale – J.I.B.L. 1992, 7(10), 414-417. “An overview of the implications of the Carriage of Goods by Sea Act 1992” – Gordon Humphreys & Andrew Higgs – J.B.L 1993, Jan, 61-66. “Carriage of Goods by Sea Act 1992” – Collin Ferris – I.C.C.L.R. 1992, 3(12), 432-434. “Carriage of Goods by Sea Act 1992” – M.G. Bridge – J.B.L 1993, JUL, 379-383. “Defining the frontiers of the bill of lading holder’s liability – The Berge Sisar & The Aegean Sea” -Natalie Campbell – J.B.L 2000, MAR, 196-2002.

XIX

XX

Bills of Lading Act 1855

1855

An Act to amend the Law relating to Bills of Lading.{1} [14th August 1855]

WHEREAS, by the custom of merchants, a bill of lading of goods being transferable by

endorsement, the property in the goods may thereby pass to the endorsee, but nevertheless all rights

in respect of the contract contained in the bill of lading continue in the original shipper or owner;

and it is expedient that such rights should pass with the property: And whereas it frequently happens

that the goods in respect of which bills of lading purport to be signed have not been laden on board,

and it is proper that such bills of lading in the hands of a bona fide holder for value should not be

questioned by the master or other person signing the same on the ground of the goods not having

been laden as aforesaid:

1. Consignees, and endorsees of bills of lading empowered to sue. - Every consignee of goods

named in a bill of lading and every endorsee of a bill of lading of a bill of lading to whom the

property in the goods therein mentioned shall pass, upon or by reason of such consignment or

endorsement, shall have transferred and vested in him all rights of suit, and be subject to the same

liabilities in respect of such goods, as if the contract contained in the bill of lading had been made

with himself.

2. Saving as to stoppage in transitu, and claims for freight, etc. -Nothing herein contained shall

prejudice or affect any right of stoppage in transitu, or any right to claim freight against the original

shipper or owner, or any liability of the consignee or endorsee by reason or in consequence of his

being such consignee or endorsee, or of his receipt of the goods by reason or in consequence of

such consignment or endorsement.

3. Bill of lading in hands of consignee, etc., conclusive evidence of shipment as against master,

etc. - Every bill of lading in the hands of a consignee or endorsee for valuable consideration,

representing goods to have been shipped on board a vessel, shall be conclusive evidence of such

shipment as against the master or other person signing the same, notwithstanding that such goods or

some part thereof may not have been so shipped, unless such holder of the bill of lading shall have

had actual notice at the time of receiving the same that the goods had not been in fact laden on

board: Provided, that the master or other person so signing may exonerate himself in respect of such

misrepresentation by showing that it was caused without any default on his part, and wholly by the

fraud of the shipper, or of the holder, or some person under whom the holder claims.

XXI

XXII

Carriage of Goods by Sea Act

1992 (c. 50) 1992 c. 50

Crown Copyright 1992

An Act to replace the Bills of Lading Act 1855 with new provision

with respect to bills of lading and certain other shipping

documents.

[16th July 1992]

Be it enacted by the Queen's most Excellent Majesty, by and

with the advice and consent of the Lords Spiritual and Temporal,

and Commons, in this present Parliament assembled, and by the

authority of the same, as follows:—

Shipping documents etc. to

which Act applies.

1.—(1) This Act applies to the following documents, that is

to say—

(a) any bill of lading;

(b) any sea waybill; and

(c) any ship's delivery order.

(2) References in this Act to a bill of lading—

(a) do not include references to a document which is

incapable of transfer either by indorsement or, as a bearer

bill, by delivery without indorsement; but

(b) subject to that, do include references to a received for

shipment bill of lading.

(3) References in this Act to a sea waybill are references to any

document which is not a bill of lading but—

(a) is such a receipt for goods as contains or evidences a

contract for the carriage of goods by sea; and

(b) identifies the person to whom delivery of the goods is

to be made by the carrier in accordance with that contract.

(4) References in this Act to a ship's delivery order are

references to any document which is neither a bill of lading nor a

sea waybill but contains an undertaking which—

(a) is given under or for the purposes of a contract for the

carriage by sea of the goods to which the document relates,

or of goods which include those goods; and

(b) is an undertaking by the carrier to a person identified

in the document to deliver the goods to which the

XXIII

document relates to that person.

(5) The Secretary of State may by regulations make provision

for the application of this Act to cases where a telecommunication

system or any other information technology is used for effecting

transactions corresponding to—

(a) the issue of a document to which this Act applies;

(b) the indorsement, delivery or other transfer of such a

document; or

(c) the doing of anything else in relation to such a

document.

(6) Regulations under subsection (5) above may—

(a) make such modifications of the following provisions

of this Act as the Secretary of State considers appropriate

in connection with the application of this Act to any case

mentioned in that subsection; and

(b) contain supplemental, incidental, consequential and

transitional provision;

and the power to make regulations under that subsection shall be

exercisable by statutory instrument subject to annulment in

pursuance of a resolution of either House of Parliament.

Rights under shipping

documents.

2.—(1) Subject to the following provisions of this section, a

person who becomes—

(a) the lawful holder of a bill of lading;

(b) the person who (without being an original party to the

contract of carriage) is the person to whom delivery of the

goods to which a sea waybill relates is to be made by the

carrier in accordance with that contract; or

(c) the person to whom delivery of the goods to which a

ship's delivery order relates is to be made in accordance

with the undertaking contained in the order,

shall (by virtue of becoming the holder of the bill or, as the case

may be, the person to whom delivery is to be made) 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.

(2) Where, when a person becomes the lawful holder of a bill of

lading, possession of the bill no longer gives a right (as against the

carrier) to possession of the goods to which the bill relates, that

person shall not have any rights transferred to him by virtue of

subsection (1) above unless he becomes the holder of the bill—

(a) by virtue of a transaction effected in pursuance of any

contractual or other arrangements made before the time

when such a right to possession ceased to attach to

possession of the bill; or

(b) as a result of the rejection to that person by another

person of goods or documents delivered to the other person

in pursuance of any such arrangements.

(3) The rights vested in any person by virtue of the operation of

XXIV

subsection (1) above in relation to a ship's delivery order—

(a) shall be so vested subject to the terms of the order; and

(b) where the goods to which the order relates form a part

only of the goods to which the contract of carriage relates,

shall be confined to rights in respect of the goods to which

the order relates.

(4) Where, in the case of any document to which this Act

applies—

(a) a person with any interest or right in or in relation to

goods to which the document relates sustains loss or

damage in consequence of a breach of the contract of

carriage; but

(b) subsection (1) above operates in relation to that

document so that rights of suit in respect of that breach are

vested in another person,

the other person shall be entitled to exercise those rights for the

benefit of the person who sustained the loss or damage to the same

extent as they could have been exercised if they had been vested in

the person for whose benefit they are exercised.

(5) Where rights are transferred by virtue of the operation of

subsection (1) above in relation to any document, the transfer for

which that subsection provides shall extinguish any entitlement to

those rights which derives—

(a) where that document is a bill of lading, from a person's

having been an original party to the contract of carriage; or

(b) in the case of any document to which this Act applies,

from the previous operation of that subsection in relation

to that document;

but the operation of that subsection shall be without prejudice to

any rights which derive from a person's having been an original

party to the contract contained in, or evidenced by, a sea waybill

and, in relation to a ship's delivery order, shall be without

prejudice to any rights deriving otherwise than from the previous

operation of that subsection in relation to that order.

Liabilities under shipping

documents.

3.—(1) Where subsection (1) of section 2 of this Act operates

in relation to any document to which this Act applies and the

person in whom rights are vested by virtue of that subsection—

(a) takes or demands delivery from the carrier of any of

the goods to which the document relates;

(b) makes a claim under the contract of carriage against

the carrier in respect of any of those goods; or

(c) 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 (by virtue of taking or demanding delivery or

making the claim or, in a case falling within paragraph (c) above,

of having the rights vested in him) become subject to the same

XXV

liabilities under that contract as if he had been a party to that

contract.

(2) Where the goods to which a ship's delivery order relates

form a part only of the goods to which the contract of carriage

relates, the liabilities to which any person is subject by virtue of

the operation of this section in relation to that order shall exclude

liabilities in respect of any goods to which the order does not

relate.

(3) This section, so far as it imposes liabilities under any

contract on any person, shall be without prejudice to the liabilities

under the contract of any person as an original party to the

contract.

Representations in bills of

lading.

4. A bill of lading which—

(a) represents goods to have been shipped on board a

vessel or to have been received for shipment on board a

vessel; and

(b) has been signed by the master of the vessel or by a

person who was not the master but had the express,

implied or apparent authority of the carrier to sign bills of

lading,

shall, in favour of a person who has become the lawful holder of

the bill, be conclusive evidence against the carrier of the shipment

of the goods or, as the case may be, of their receipt for shipment.

Interpretation etc.

5.—(1) In this Act—

"bill of lading", "sea waybill" and "ship's delivery order"

shall be construed in accordance with section 1 above;

"the contract of carriage"—

(a) in relation to a bill of lading or sea waybill,

means the contract contained in or evidenced by

that bill or waybill; and

(b) in relation to a ship's delivery order, means the

contract under or for the purposes of which the

undertaking contained in the order is given;

"holder", in relation to a bill of lading, shall be construed

in accordance with subsection (2) below;

"information technology" includes any computer or other

technology by means of which information or other matter

may be recorded or communicated without being reduced

to documentary form; and

"telecommunication system" has the same meaning as in

the [1984 c. 12.] Telecommunications Act 1984.

(2) References in this Act to the holder of a bill of lading are

references to any of the following persons, that is to say—

(a) a person with possession of the bill who, by virtue of

being the person identified in the bill, is the consignee of

XXVI

the goods to which the bill relates;

(b) 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;

(c) a person with possession of the bill as a result of any

transaction by virtue of which he would have become a

holder falling within paragraph (a) or (b) above had not the

transaction been effected at a time when possession of the

bill no longer gave a right (as against the carrier) to

possession of the goods to which the bill relates;

and a person shall be regarded for the purposes of this Act as

having become the lawful holder of a bill of lading wherever he

has become the holder of the bill in good faith.

(3) References in this Act to a person's being identified in a

document include references to his being identified by a

description which allows for the identity of the person in question

to be varied, in accordance with the terms of the document, after

its issue; and the reference in section 1(3)(b) of this Act to a

document's identifying a person shall be construed accordingly.

(4) Without prejudice to sections 2(2) and 4 above, nothing in

this Act shall preclude its operation in relation to a case where the

goods to which a document relates—

(a) cease to exist after the issue of the document; or

(b) cannot be identified (whether because they are mixed

with other goods or for any other reason);

and references in this Act to the goods to which a document

relates shall be construed accordingly.

(5) The preceding provisions of this Act shall have effect

without prejudice to the application, in relation to any case, of the

rules (the Hague-Visby Rules) which for the time being have the

force of law by virtue of section 1 of the [1971 c. 19.] Carriage of

Goods by Sea Act 1971.

Short title, repeal,

commencement and extent.

6.—(1) This Act may be cited as the Carriage of Goods by

Sea Act 1992.

(2) The [1855 c. 111.] Bills of Lading Act 1855 is hereby

repealed.

(3) This Act shall come into force at the end of the period of

two months beginning with the day on which it is passed; but

nothing in this Act shall have effect in relation to any document

issued before the coming into force of this Act.

(4) This Act extends to Northern Ireland.