A short history of the bill of lading

Chapter 1

A Short History of the Bill of Lading

(A) The origins of the bill of lading

1.1 For the purpose of our consideration, it is safe to say that in the eleventh century the bill of lading was unknown.¹ It was at this time that trade between the ports of the Mediterranean began to grow significantly. Some record of the goods shipped was required, and the most natural way of meeting this need was by means of a ship’s register, compiled by the ship’s mate. Although use of such a register probably began informally, it was soon, in some ports at least, placed upon a statutory footing.² Its accuracy was paramount and, around 1350, a “statute was enacted, which provided that if the register had been in the possession of anyone but the clerk, nothing that it contained should be believed, and that if the clerk stated false matters therein he should lose his right hand, be marked on the forehead with a branding iron, and all his goods be confiscated, whether the entry was made by him or by another”.³ By the fourteenth century, what was later to be accomplished by the receipt function of the bill of lading was being accomplished by an on-board record.⁴ As yet there was no separate record of the goods loaded as it seems that shippers still travelled with their goods and there was accordingly no need for one.⁵ This only changed when trading practices altered and merchants sent goods to their correspondents at the port of destination, informing them by letters of advice of the cargo shipped and how to deal with it. Merchants also began to require from the carrier, and to send to their correspondents, copies of the ship’s register.⁶

1.2 Bensa located two bills of lading from this period, the earliest of which is by far the more important. It reads, in translation:

1.3 In this and the second bill, there is nothing to suggest that it was ever envisaged or intended that these documents would at any point be transferred. They provide that delivery is to be made to a particular person, the correspondent of the shipper, and, in the case of the document quoted above where there was a change in the consignee, it is clear from the facsimile that the final consignee was provided for before the bill was issued and was not a later indorsement thereon.⁸

1.4 It is impossible now to say when exactly the practice of registering the cargo in the ship’s book was superseded by the issuing of bills of lading,⁹ but it is likely that practice differed between ports. All that can safely be said is that rudimentary bills of lading were in existence in the late fourteenth century and that it was not contemplated that they would be transferred. They clearly served some sort of receipt function,¹⁰ but it does not, therefore, follow that possession of document entitled the possessor to the delivery of the cargo.

1.5 Further assertions have been made as to the nature of bills of lading at this time, but they are not supported by the available evidence. Bennett concluded that:

1.6 This goes too far in several ways. First, where the goods were consigned to a correspondent it would be necessary merely that he produce evidence of his identity. As has been mentioned, a letter of advice was sometimes sent without a bill of lading. Secondly, even if the bill were considered as essential to delivery, it need not be an indicium of title, in the sense of ownership. Finally, and most importantly, the last point made by the quotation is wholly without support. There is no evidence that the bill was regarded as in anyway binding the carrier to the terms of shipment. In fact, all the evidence points to the contrary conclusion that it had no contractual effect at all.¹³

Proof of entitlement

1.7 The bill of lading originated purely as a receipt for the goods shipped, a copy of which could be sent to advise the correspondent of the goods sent and the purpose to which they were to be put. There was no need for a document which proved the consignee’s entitlement to the goods since the carrier knew from the register or his own copy of the receipt to whom delivery was to be made. The need for a document that indicated entitlement to the goods would only arise when the goods were despatched before the shipper had finally determined to whom they were to be sent. This might have been because the shipper had not decided whether the goods should be consigned to an agent for sale or should be sold afloat. It is the possibility of the goods being traded whilst at sea that must have given rise to the need for a document that could be transferred, by the shipper at least, and which would evidence entitlement to receive the cargo at the port of destination.

1.8 Bennett’s conclusion that the bill at this stage did evidence entitlement is questionable, given that there is no evidence that the bills of the fourteenth century were transferable and consequently that there is no evidence that bills of this period were traded. It will be recalled that the bill of lading from 1390 provided for delivery to a named consignee and then provided that the carrier would deliver to the agent of the consignee. There is no indication that the document was intended to be traded. Such a conclusion would only follow either from there being an indorsement on the bill showing that it had been transferred to a new holder after it was made out or from bills being made out to order or to bearer.

1.9 Transferability only arises in the second quarter of the sixteenth century when bills of lading made their appearance in the files of libels of the High Court of Admiralty.¹⁴ The majority of the bills contain provisions importing some degree of transferability. They are of two kinds: (1) those that provide for delivery to the shipper (or his agent¹⁵) or their assigns¹⁶; and (2) those that provide for delivery to a third person (presumably a buyer of the goods) or his assigns.¹⁷

1.10 This change in the form of the bill of lading was probably caused by a change in trading practice. Although cargoes do not seem to have been traded many times during transit, as they are today, they were often despatched before the shipper knew for whom they were finally destined. The change in form, therefore, reflects a change in the function of the bill. It was at this point that the bill needed to evidence entitlement to the goods as, unlike the bills of the fourteenth century, neither the bill itself, nor the ship’s register, indicated to the carrier the person to whom the goods should be delivered.

1.11 The presence, in the majority of the bills from this period, of words importing transferability and of the clause, “one accomplished, the others to stand void” or equivalent, suggests that these bills were seen as giving the holder some right against the carrier: such a clause was only necessary to protect the carrier from multiple suits if the bill was, by this time, seen as giving its holder some rights against the carrier. This represents a logical and important step in the document’s development. That said, it is much easier to state that the right existed than to explain from where it came. It is likely that merchants, by course of experience, regarded the bill in this way, rather than regarding it as embodying an agreement which bound the carrier. This follows not only from the fact that merchants are unlikely to analyse the foundations of the right, but also from the fact that, contrary to Bennett’s assertion above, most bills of this period were not regarded as embodying an agreement for carriage.¹⁸

The contract of carriage

1.12 If the earliest bills of lading did not perform a contractual function at all, there is no reason why, given that their function was to act as a separate record of the goods shipped, they should usurp the role of the charterparty. Whilst the number of cargoes per ship remained small, the bill of lading need not perform a contractual function. The bill did, though, adopt this function and it seems to have done so during the course of the sixteenth century. In the fourteenth-century bills discussed above there are no provisions that imply a contractual function. The sixteenth-century bills are of two distinct types, as might be expected in a transitional period. There are still bills that contain no independent terms. The undertakings in these bills all make reference to an existing charterparty. Thus, freight is payable as per charterparty between the shipper and carrier.¹⁹ Two interpretations of these bills are possible: first, that they were intended merely to incorporate the terms of the charterparty into a bill of lading contract, or, secondly, they might equally suggest that the carriage was to be governed by the charterparty alone.²⁰ The latter is inherently more likely given the origins of the bill, and occasionally the bills of lading refer to the fact that the shipper was a party to the charterparty.²¹ There is some evidence, then, that there were bills from this period which were not intended to operate as an agreement for carriage, and this is supported by evidence of mercantile usage in the seventeenth century, which did not regard these bills as separate contracts.

1.13 It would, however, be an over-simplification to assert that no bills from this period performed a contractual function. There were bills that made no reference to another agreement and contained terms that governed the shipment,²² implying that they alone contained the agreement between the parties. This implication is strengthened by the evidence of the bill in The White Angel.²³ It provides that freight is to be paid “…according as it is mentioned by an other chartre partie made in the name of an other merchaunte” and later “Paying hym the freight and avaries as ys abovesayed although the chartre partie be made in the name of an other merchaunte”.²⁴ Further, the bill is also around three times as long as any of the other bills of this period because, unlike the others, it contains a full agreement:

1.14 There then follow clauses giving the master a lien over the goods and stating that the parties submit to the law of the place of shipment or elsewhere and that they renounce any customs that conflict with the agreement. All in all, the document is a very different beast from the others of this period: it was almost certainly intended to act as a contractual document, incorporating by reference the terms of a charterparty made with a different shipper.

1.15 With the increasing number of cargoes per vessel, entering into a charterparty with all the shippers became impracticable, and, in these cases, as today, the carriage contract was embodied in the bill of lading. However, the seventeenth-century works on mercantile law suggest that the number of cases where no charterparty was concluded was still small.

1.16 The first, and best, of these works was the seminal treatise of Gerard Malynes in 1622.²⁵ Chapter 21 of that work deals with the freighting of ships, charterparties and bills of lading. Malynes begins by stating that no ship should be freighted without a charterparty.²⁶ It is clear that he anticipates that all shippers will be party to the charterparty. He says:

1.17 He proceeds to give a precedent for a charterparty which states, inter alia, that the merchant shall:

1.18 He further writes that:

1.19 It is difficult to interpret the phrase “and Bills of lading do declare what goods are laden, and bindeth the Master and the Merchant to deliver them well conditioned to the place of discharge”. It might be that, even given the charterparty, the bill was intended to bind the carrier contractually when in the hands of a transferee (the charterparty being only the contract between the carrier and shipper). Such a view is made unlikely by the fact that Malynes never refers to the bill being transferred and never states expressly that the holder of the bill has an action upon it against the carrier. It is almost inconceivable that, if the bill did give the holder an action against the carrier based upon contract, Malynes would not mention it at all. It is possible, therefore, that the phrase means that the carrier’s obligations are fixed by the charterparty and the bill of lading only “binds” him by virtue of its being evidence against him of the quantity and quality of goods loaded. Substantial support for this proposition lies in the other seventeenth- and eighteenth-century works. It is clear from the wording of these that Malynes’s work was enormously influential upon them, but they clarify his statement about the role of the bill. Four of these works²⁹ all explain the interaction of the bill of lading and charterparty in substantially similar terms to those used by Jacob in 1729 who said:

1.20 The bill of lading, therefore, was not usually conceived of as fulfilling a contractual function because each shipper would be a party to the charterparty made with the carrier.

1.21 These works contain no reference to the bill of lading ever being issued without a charterparty to which the shipper was a party. Read alone, they suggest that every cargo was shipped under a charterparty, and that the practice discussed above, of not entering a charterparty and including the contractual terms in the bill of lading had died out.³¹ Their silence implies that such a course was uncommon, but there is evidence in the comments of Postelthwayt that it was nevertheless followed occasionally. He wrote:

And later:

1.22 The bill of lading is here conceived of as a contract, when there is no charterparty, as it is today.³³

1.23 It is possible to conclude, therefore, that the majority of bills of lading were issued to shippers who were also parties to the charterparty. The practice of issuing bills of lading alone was, however, beginning to develop.

1.24 If the majority of bills were not regarded as embodying a contract of carriage in the hands of the shipper, and there is no evidence to suggest that they were regarded as contracts in the hands of a transferee, it seems that the entitlement to delivery must have arisen from the custom of merchants.

1.25 It was a natural progression that, when bills came to be drawn up before the shipper had determined for whom the cargo was destined, the carrier in practice delivered to the first presenter of a bill³⁴ and that by continued usage the holder came to be thought of as entitled to delivery such that carriers were regarded as under an obligation to compensate holders for their failure to deliver. The document can, therefore, tentatively be said to have entitled the holder to possession as a result of the custom of merchants.³⁵ It is impossible to say whether or not this custom was ever legally recognised, but it was later impliedly rejected by the English common law.

An indicium of title

1.26 It is tempting to conclude that the reason that the bill was regarded as giving the holder a right to delivery was because it was regarded as giving him title to the goods. Though this may have been the case, there is no evidence to permit such a conclusion. None of the works dealing with bills of lading, discussed above, refer to it having this capacity, and it would surely be too important to be overlooked by them all. Further, although little can be hung upon it, when bills of lading came to be considered by the common law courts, they did not, for 80 years at least, consider the bill of lading as possessing a proprietary function.

Conclusions

1.27 It can be concluded that the bill of lading of the fourteenth century was purely a receipt. During the sixteenth and seventeenth centuries, when it ceased to be possible to enter a charterparty with every shipper, some bills were issued that contained the contract of carriage, although these do not seem to have been prevalent. Further, during this period, bills came to represent the holder’s entitlement to delivery of the goods by virtue of the custom of merchants.

(B) The eighteenth century and Lickbarrow v Mason

1.28 The modern history of the bill of lading begins at the end of the eighteenth century with the landmark decision in Lickbarrow v Mason.³⁶ In 1786, Turing & Sons shipped goods from Middlebourg in the province of Zealand aboard the Endeavour destined for Liverpool. The goods were shipped by the direction and to the account of Freeman. Holmes, the master of the ship, signed four copies of the bill of lading in the usual form. By these the goods were made deliverable “unto order or assigns”. The master retained one of the bills, two were indorsed by Turing & Sons in blank and sent to Freeman, the final one being retained by Turing themselves. Three days after the shipment Turing drew four bills of exchange on Freeman for the price of the goods. These were duly accepted by Freeman. Freeman sent the bills of lading to the plaintiff so that he might sell the goods on Freeman’s behalf, but, as was common at the time, although the plaintiff was ostensibly a factor for sale, Freeman drew bills upon the plaintiff for a total sum in excess of the value of the cargo. The plaintiff accepted the bills and paid them. Freeman, however, became bankrupt before the bills drawn by Turing became due. They were accordingly unpaid vendors and sought to stop the goods in transit by sending the bill of lading that they had retained to their agent, the defendant, and instructing him to take possession of the goods on their behalf. This the defendant did, and the plaintiff successfully sued them in trover.³⁷

1.29 At first instance Buller J. held that the bill of lading passed the property in the goods to the transferee. He relied upon Wiseman v Vandeputt,³⁸ Evans v Martell,³⁹Wright v Campbell