The bill of lading as a contract

Chapter 7

The Bill of Lading as a Contract

(A) Introduction

7.1 One of the key characteristics of a bill of lading is that it embodies or “evidences” a contract of carriage. In the words of Lord Selborne in Glyn Mills Currie & Co. v East and West India Dock Co.:1

The primary office and purpose of a bill of lading, although by mercantile law and usage it is a symbol of the right of property in the goods, is to express the terms of the contract between the shipper and the shipowner.

7.2 It does not follow that the bill always embodies the (or a) contract of carriage, and questions may arise as to (i) where, when and how is any contract contained in or evidenced by the bill (“the bill of lading contract”) concluded?, (ii) do the terms of the bill of lading correspond with the terms of the contract?, (iii) who are the parties to the contract of carriage? and (iv) which if any terms of other documents (typically charterparties) are incorporated into the bill of lading?

Contract contained or evidenced

7.3 One of the most often quoted maxims concerning a bill of lading is that:

A bill of lading is not the contract, but only the evidence of the contract.2

Or in the words of Goddard C.J. in The Ardennes:3

a bill of lading is not in itself the contract between the shipowner and the shipper of goods, though it has been said to be excellent evidence of its terms.4

7.4 These statements5 are, without more, of little practical assistance for two reasons. First, they suggest that a difficulty may exist whereas in practice it rarely does: in the vast majority6 of cases the bill of lading is assumed to reflect exactly the terms of the (or a) contract of carriage without further inquiry.7 Secondly, in those cases where a dispute does arise as to whether the bill of lading contains the terms of the contract of carriage, these general propositions do not help in its resolution: there is no substitute for an analysis of the relevant facts surrounding the issue of the bill.

(B) Formation of “the bill of lading contract”

7.5 The English law of contract formation is based on offer and acceptance. The commonest way of concluding commercial contracts is by signature by all parties of a written instrument. However, the contract contained in or evidenced by a bill of lading is rarely signed by all parties8 and is often not readily susceptible to analysis in terms of offer and acceptance.9 The exact time and place where a contract is concluded is often irrelevant, but it may bear on such matters as knowledge of the parties at the time of contracting, proper law,10 and questions of jurisdiction.11

Antecedent contract

7.6 The traditional analysis is that a contract of carriage is concluded prior to the issue of a bill of lading.12 As Devlin J. said in Pyrene v Scindia:13

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: for the issue of the bill of lading does not necessarily mark any stage in the development of the contract.14

7.7 The first stage of any enquiry as to the contractual status of a bill is therefore to ascertain what if any relevant contract(s) came into existence prior to its issue, and their terms. Documents such as placards or handbills15 are of little relevance today, although even in modern times the parties may make an agreement orally, as in Mayhew Foods v Overseas Containers.16 A booking note17 or exchange of telexes may suffice to constitute a contract.

7.8 The complexity of modern arrangements, with numerous parties involved in effecting or arranging carriage, lend themselves to a wide range of permutations as to the number of contracts, the parties to them and their rights and obligations.18 The contract(s) made prior to the issue of the bill may be contracts of carriage themselves, such as a charter, contracts for carriage,19 contracts to arrange carriage, or “mere” booking notes20 reserving space on a vessel. As discussed below more than one party may be liable for the same obligation21 and different parties may be liable in respect of different obligations under the same contract.22 Thus, apart from the single antecedent contract evidenced by the bill of lading, the analysis may indicate (i) an antecedent contract that is the only operative contract between the parties, such as a charterparty, in which case the bill of lading may have no contractual force,23 (ii) two or more contracts operating in parallel24 and (iii) one contract superseded on the conclusion of a subsequent contract.25

7.9 The general principles of the law of contract will apply if and when there is sufficient consensus to constitute a binding agreement. In The Barranduna and Tarrago26 the Privy Council held that on the facts a particular telex was only a quote for freight rates and carriage terms and did not give rise to a binding contract.27 In contrast in Anglo Overseas Transport v Titan Industrial Corporation28 Barry J. concluded that:

in transactions of this kind, a binding contract is effected when shipping space is offered at a certain freight rate and is accepted by the forwarding agents or by the company, such as the plaintiff company, which is carrying out the transaction.29

7.10 The term “agent” is used widely and loosely in commerce, and especially in the shipping industry. When considering the authority of various types of “agent” to conclude or vary bill of lading contracts, the general rules of agency apply, and for example agents authorised to deal with goods at load or discharge ports will not by reason of such authority also have authority to vary the bill of lading contract.30

7.11 Whether a mate’s receipt31 has any contractual force depends on the circumstances. As a general rule, expressed by Rix J. in The Hector:32

…until the bill of lading is issued and supersedes any pre-existing contract of carriage (other than in a charter-party), the contract of carriage is best evidenced by the mate’s receipt…

7.12 Technology has revolutionised the way much cargo is now carried. The modern systems of booking as described by Gaskell in his article “Bills of Lading in an Electronic Age”33 are very far removed from that in former times where a cargo owner brought his cargo to the quayside, sought a ship to carry it and then had it shipped aboard. However these changes have not required or produced any refinement in the basic contractual principles that still govern the analysis of the contract(s) concerned. What they do is make the factual inquiries different and often more complex than in former times, with consideration needed of the effects of the types of transactions and systems discussed by Gaskell. These include web portals for booking cargo, where the standard terms are those of the carrier’s template, and details entered by the shipper. Theoretically, difficult question may arise as to which click of whose mouse results in a binding contract, but such issues are unlikely to be of much practical significance.34

7.13 One issue that arises in relation to the difference between the bill of lading “contract” and the antecedent contracts is as to quantity shipped, carried and delivered. The conventional analysis of the bill of lading contract is in terms of an obligation to carry the quantity actually shipped, and thus claims (whether by or against a carrier) for short shipment are likely to arise under an antecedent contract rather than bill of lading contract itself.

One contract or more

7.14 The approach of looking for terms of one antecedent contract predating but evidenced by the bill of lading may be too simplistic. A straightforward example is where there is short shipment under a contract to carry 20 containers from A to B, but the vessel loads only 19. The short shipment may itself be a breach of the contract of carriage. However the obligations under the bill of lading contract will typically be to deliver 19 containers (the number shipped) even if the bill refers to 20 containers.35

7.15 The parties may intend that an underlying contract is varied or even superseded by the issue or acceptance of a bill of lading. Electrosteel Castings v Scan-Trans Shipping & Chartering Sdn Bhd36 does not establish any novel rule of law but gives a modern illustration of the need for careful consideration of the facts. The respondent (“Scan-Trans”) was a shipping company involved in carriage of Electrosteel’s cargo from Calcutta to Algiers. Scan-Trans concluded first a contract evidenced by a recap telex and secondly a contract, but signed by it as agent only, contained in a booking note on Conline form, in different terms. A bill of lading was subsequently issued. Gross J. held that there were three contracts or sets of contracts relevant to the dispute, one as contained in the recap telex, one “for carriage” containing some of the terms of the booking note and varying or superseding the first contract, and thirdly “separate and subsequent contracts of carriage contained in or evidenced by the bills of lading”. The first contract remained admissible as an aid to construe the second. The judge used the conventional technique of analysis of the intention of the parties to conclude that (i) the first two contracts were not intended to “survive and co-exist alongside each other”, (ii) looking at the arrangements between the parties “in their wider context” the booking note contract did not incorporate or contain all the standard Conline clauses and in particular did not incorporate the demise clause (clause 17) and (iii) thus, although it was envisaged that the bill of lading contract would be with the vessel owners, the “carrier” under the booking note contract signed by Scan-Trans was probably (this point not falling for decision) an associated company of Scan-Trans.37

7.16 The facts of Electrosteel lent themselves to the conclusion that there were three separate contracts. However, there is no reason why only slightly different facts could not lead to the conclusion that an antecedent contract was varied by the issue and acceptance of the bill of lading; thus, the view of Devlin J. that contractual arrangements cannot change on the issue of the bill cannot be applied without qualification.


7.17 Two contracts may also exist where one contract provides expressly for its supercession on issue of a bill of lading.38 Examples of standard forms are the Baltimore Berth Grain Charterparty, and the Conline form of booking note that featured in Electrosteel. That booking note provided for a contract on specified terms “which shall…be superseded (except as to deadfreight and demurrage) by the terms of the bill of lading, the terms of which (in full or extract) are found on the reverse side hereof”. The terms were the Conline bill terms themselves, which included (in the 1978 form) a provision that the bill of lading contract was with the vessel owner. In Electrosteel Gross J. decided that not all of the conditions that would be terms of the bill of lading contract formed part of the initial contract, and in particular terms as to the identity of the carrier and the jurisdiction clause that referred to its principal place of business were not incorporated. Supercession is only effected by issue of a bill of lading in the specified form. If a different form is used this will not have the effect of superseding the original contract.39 In any event the terms of the superseding clause in question need to be considered to ascertain whether the supercession is intended to be entire, or only partial.40

7.18 A contract concluded by a booking note that provides for supercession by issue of a bill of lading including a “demise clause” involves the notion of parties A and B agreeing that their contract will be superseded by a subsequent contract between A and C.41 It is suggested that the preferred analysis is that there are two separate contracts,42 and that the parties to the first agree that it will be discharged or fulfilled by issue of the bill of lading in specified form.43 Whether the owners have authorised the issue of the bills of lading with a demise clause that binds them is a separate matter.44 If they have not the bill of lading may have no contractual effect and the original contract would not be superseded. Where the party signing the booking note is acting as agent for a shipowner the owner may be party to the booking note contract. Attempts to identify a single contract of carriage, driven by the doctrine that the bill of lading is merely evidence of an existing contract, are fraught with difficulty in the context of supercession clauses45 and again it is impossible to state any general principle other than that each case turns on its facts

7.19 Supercession clauses may be contained in the “superseding” document itself, the bill of lading, in which case it is more akin to an “entire agreement” clause.46 The key question that arises in such a case is whether the shipper has consented to its terms.47 This question arises, of course, when considering the contractual status of any bill, but is more acute where the bill purports to vary or supersede, rather than merely evidence, a pre-existing agreement.

No (apparent) antecedent contract

7.20 There may be no basis for identifying any contractual terms prior to the issue of a bill of lading. If the bill of lading is accepted without objection it may be taken to contain the contractual terms, despite there being no obvious offer or acceptance. Thus, in Watkins v Rymill48 it was said that:

if a document in a common form is delivered by one of two contracting parties to and accepted without objection by the other, it is binding upon him, whether he informs himself of its contents or not.

7.21 Even if there is no contract concluded prior to the goods being offered or accepted for shipment, if the carrier has made clear in advance49 that he only accepts goods for carriage on specific terms (such as that of standard bills of lading) then the tender or loading of the goods by the shipper may be acceptance by conduct of the offer to carry on those terms,50 and at that stage the contract may be concluded, again prior to issue of any bill of lading.51

7.22 In Armour and Co. v Leopold Walford (London) Ltd.52 the shipper was held bound by an arguably unusual bill of lading term permitting shipment on deck both because the booking note, accepted by the shipper, made reference to the terms and because the shipper accepted the bill of lading itself without protest. It is suggested that either of these grounds might have been sufficient in itself.

Bill of lading of no contractual force

Bill in the hands of the charterer

7.23 An important exception to the rule that a bill of lading contains or evidences the contract of carriage is where the bill of lading is issued to (or indorsed to) the charterer, in respect of goods carried on board the chartered ship. At least where the carrier under the bill of lading is the same party as the “owner” for the purposes of the charterparty, a bill of lading has no contractual force, and constitutes a receipt only in the hands of the charterer, the relevant contract of carriage being contained in the charterparty.53

7.24 Historically this only applied where the charterer was the shipper, and not where he was an indorsee of the bill.54 However, in The Dunelmia55 the charterparty contained an arbitration clause that was not incorporated into the bills of lading that were issued to shippers and indorsed to the charterers. Lord Denning said, in the course of holding that the charter and not the bill of lading was the governing instrument:56

…in a case such as this the relations between shipowner and charterer are governed by the charterparty. Even though the charterer is not the shipper and takes as indorsee of a bill of lading, nevertheless their relations are governed by the charter, at any rate when the master is only authorised to sign bills of lading without prejudice to the charter.57

7.25 The same rule will apply where the underlying contract of carriage is contained not in a charterparty but in a booking note or contract of affreightment.58 There are limits to this principle, particularly where the bill is indorsed to, rather than originally issued to, the charterer. It may not apply where:

  1. (1) the master has unfettered rights in relation to signing bills of lading. It could be argued that in such a situation the issue of the bill varies the charter,59 although this would be unusual; or
  2. (2) where the charterer is a time charterer rather than a voyage charterer or trip charterer, as a time charter is not a normally a contract of carriage;60 or
  3. (3) where the charter contains a cesser clause,61 or a “supercesser” clause that provides for the original contract to be superseded on issue of the bill of lading.62 The analysis is not straightforward as cesser clauses were normally provided in consideration of the carrier having a lien on cargo for demurrage or deadfreight that he would not normally have, and the charterer’s exemption from liability is co-extensive only with the lien granted, in the absence of intention to grant a wider exemption.63 Thus, the charterparty may remain the governing contract despite the cessation of some of the charterer’s liabilities under it.

7.26 The rule negating the contractual status of the bill appears to extend to the situation where the party taking possession of the bill of lading does so as agent for the charterer, typically where that party is a shipper taking the bills as agent for an f.o.b. buyer.64

7.27 Where a bill of lading is issued to a charterer and then indorsed to a third party, it attains contractual status upon indorsement on the basis that “a new contract appears to spring up between the ship and the consignee on the terms of the bill of lading”.65

Bill for goods that have never been shipped

7.28 Another (and commercially less common) instance where a bill of lading has no contractual force is where it is issued in error for goods that have never been shipped, as in Heskell v Continental Express.66


7.29 The doctrine of rectification is rarely invoked in connection with bills of lading,67 but theoretically a party who asserts that a bill of lading is inconsistent with or fails to give effect to an orally agreed term should be able to apply to rectify the bill of lading on the basis that it inaccurately records the contract. Rectification might be refused as a matter of discretion if it would unfairly affect the indorsee, although if, on the basis of the analysis below, the contract “is” that contained in the bill, there is nothing to rectify.

7.30 Two recent cases68 arose out of a problem where the reverse sides of bills of lading were unintentionally blank, instead of containing terms and conditions. In each case the issue was whether, in the absence of the standard conditions on the reverse which would have incorporated an arbitration clause,69 wording on the front of the bill of lading sufficed. In neither case is much light shed on the appropriate analysis70 but the arguments for incorporation were apparently based on construction. It may be that in such a situation an appropriate course is to seek rectification of the bills of lading to have the standard conditions “reinstated” in the written record of the contract. It is hard to see how such an application could be resisted (even in the hands of an indorsee) if the bills of lading were in a standard form.

Contract concluded after issue of the bill

7.31 So far this chapter has considered the contractual effect of a bill of lading as at the time of its issue. As observed above a contract may “spring up” when a bill is endorsed from a charterer. There may also be a contract implied, on bill of lading terms, typically at the end of the voyage and between the carrier and a receiver who presents a bill of lading in exchange for delivery of the goods, under the so-called Brandt v Liverpool doctrine, after the case of that name.71 This doctrine emerged to circumvent the difficulties for receivers in some circumstances in suing on the bill of lading contract under the Bills of Lading Act 1855. The doctrine is now of less practical importance since the coming into force of COGSA 1992, and is dealt with in Chapter 8. A contract will be implied where the parties’ intention is consistent, and consistent only, with an intent to contract in this manner.72

(C) Terms of the bill of lading contract

Which terms are contractually effective?73

Carriers’ standard terms

7.32 There is a strong presumption that goods to be carried by sea are to be carried pursuant to a contract, and there is also universal knowledge and recognition, in commercial and shipping circles, that bills of lading are issued in connection with such carriage and that they contain contractual terms. Where the bill is “filled in” and tendered for signature by or on behalf of the shipper it will thus be difficult for him to deny assent to its terms.

7.33 In British Crane Hire v Ipswich Plant Hire74 the Court of Appeal held that standard terms and conditions were incorporated into a contract between commercial parties for hire of a crane. Lord Denning stated:75

I would not put it so much on the course of dealing, but rather on the common understanding which is to be derived from the conduct of the parties, namely, that the hiring was to be on the terms of the plaintiffs’ usual conditions.

7.34 Such a “common understanding” would readily apply to the notion that goods to be carried by sea would, in the absence of contrary indications, be carried on the carrier’s standard bill of lading terms, provided that these contain no particularly unusual or onerous terms. It will generally be contemplated by commercial parties that if the contract of carriage is known to be part of, or pursuant to, a commercial sale concerning the goods a bill of lading will be required (as a document of title) and that this will contain contractual terms.76 The legal basis for such implied incorporation is thus the presumed intention of the parties either by virtue of previous course of dealing or the British Crane Hire doctrine outlined above.77 The implication is, however, fact sensitive.78

Which terms

7.35 Bills of lading contain a huge variety of clauses, some purporting to restrict dramatically the liability of the carrier, and questions may arise as to whether a particular clause is to be characterised as unusual or onerous and if so whether it is incorporated into the contract of carriage. The first question is one of fact depending on the term in question and the background to the contract, including the nature of the trade concerned. The second involves the application of what might be termed the “red hand” principle,79 whereby unusual or onerous terms in standard documents are of contractual force only if notice of their existence has been given to an extent sufficient to infer consent to them.80 This issue may arise not only in the context of establishing the terms of the bill of lading contract, the topic under consideration here, but also in connection with (i) whether a master is obliged to sign a bill of lading presented if it contains unusual or onerous terms,81 or (ii) whether a bill of lading is good tender under a sale contract.82

7.36 Various factors may be relevant in the inquiry into sufficient notice, but one that has incurred comment on a number of occasions is the size of print of the term in question. Despite expressions of judicial displeasure at small print,83 this seems to have been a factor in the decision only on rare occasions.84

Inconsistency between terms of bill and other terms

7.37 A related problem arises where a term in the bill of lading is said to be inconsistent with or contrary to a term (whether oral or written) of the “underlying” contract of carriage. This occurred in The Ardennes85 where exporters of mandarin oranges shipped a cargo of them in the vessel in reliance on an oral promise by the shipowners’ agent that the vessel would go straight to London. In fact, she went first to Antwerp, causing loss to the cargo owners. In rejecting an argument by the shipowners based on the parol evidence rule and the presence of a liberty clause in the bill of lading, the court upheld the validity of the oral agreement, stating:

[the cargo owner is not] prevented from giving evidence that there was in fact a contract entered into before the bill of lading was signed different from that which is found in the bill of lading or containing some additional term…86

7.38 Similarly in Evans v Merzario87 the Court of Appeal refused to allow the carrier to rely on printed terms (albeit not in a bill of lading) on the basis that they were repugnant to an express oral term of the contract of carriage that the cargo would be carried under deck. The Court of Appeal reached a similar result in The Green Island88 in holding that a contract concluded prior to the bill of lading and that was contained in a booking note and providing for under deck carriage precluded reliance by the carriers on a clause in the bill of lading giving liberty to ship on deck. It appears that an antecedent oral agreement permitting carriage on deck was also considered valid and effective by the arbitrator in The Kerman.89

7.39 Thus, the court is willing in appropriate circumstances to look behind the terms of the bill of lading for the terms of the contract, at least where the issue is between the carrier and the original counterparty to the contract, typically the shipper.

Contractual content of bill in the hands of the indorsee

7.40 Where the oral term or promise is sought to be relied upon by (or against) an indorsee of the bill of lading as opposed to the original party, the application of the approach above leads to a conflict with the important principle that in the hands of an indorsee the terms of the contract of carriage are to be found, and found exclusively, in the terms of the bill of lading.90 It was this principle which was applied in the leading case of Leduc v Ward,91 the unusual feature of which was that it was the shipowner who sought (unsuccessfully) to rely as against the indorsee on the alleged fact that the shipper “knew, at the time when the goods were shipped, that the vessel was intended to proceed to Dunkirk via Glasgow, and in substance agreed to her so proceeding”, although the written terms of the bill did not permit proceeding to Glasgow. Whilst such a principle is commercially sensible, to prevent indorsees being affected by terms of which they are likely to be ignorant, the legal rationale for it is unclear. Lord Esher and Lopes L.J. founded the decision on the parol evidence rule which precluded admission of evidence to alter or qualify the terms of the contract as expressed in writing, but Fry L.J. rested his judgment on the terms of the Bills of Lading Act 1855,92 stating that:

the provision of the statute making the contract contained in the bill of lading assignable is inconsistent with the idea that anything that took place between the shipper and the shipowner, not embodied in the bill of lading, could affect the contract.

7.41 Both analyses are in some respects unsatisfactory (at least from a modern standpoint) although the result is understandable from a policy perspective. The parol evidence rule is now much reduced in scope in relation to the construction of commercial documents, and evidence of “factual matrix” as well as that of oral terms varying or contradicting the written ones is generally admitted. Furthermore, at common law, prior to the enactment of the Bills of Lading Act 1855, there was no transfer of rights under the contract and the problem of the indorsee being affected by contractual terms did not arise. The Act, however, is premised on the basis that the contract of carriage is the bill, which is not strictly correct.93

7.42 The principle enunciated in Leduc v Ward may have been modified under COGSA 1992, where “the contract of carriage” is defined as “the contract contained in or evidenced by that bill”. This point is discussed in Chapter 8.94

Principles of construction of the bill of lading contract

7.43 The basic rules of construction for bill of lading contracts are no different95 from those applicable to other contracts governed by English law.96 The starting point is that a bill of lading is typically97 a document in a standard form as drawn up by the carrier, with a number of printed clauses on the face of the document and on the reverse, as well as other non-standard typed clauses. Certain aspects of the approach to the construction of a bill of lading were considered more recently by the House of Lords in The Starsin.98 Although the issue there was not the nature of the obligations but the identity of the contracting carrier their Lordships treated this as a matter of construction to which general principles applied.99 For a detailed treatment of those principles the reader is referred to general works on contract.100

7.44 The following principles may particularly apply to bills of lading:

  1. (1) The contract must be construed in accordance with its proper law, as ascertained by the relevant conflict of law provisions, although systems of law other than the proper law may be relevant.101
  2. (2) The terms of a bill are to be construed in the light of the nature and details of the adventure contemplated by them.102
  3. (3) The bill of lading, as with any written contract, should be construed as a whole. This principle does not, however, mean that all parts of the bill of lading are to be given equal prominence. A bill of lading is typically a single piece of paper. Provisions on the front face of the bill of lading are often said to be of greater weight than those on the reverse and, although it is suggested that there is little logical or commercial justification for this rule, it has been given express House of Lords’ approval in The Starsin.103
  4. (4) Further:

    1. greater weight should attach to terms which the particular contracting parties have chosen to include in the contract than to pre-printed terms…104
    2.  Thus, where there is a contradiction between “standard” printed terms and stamped105 or typed106 clauses, these will generally prevail. The relevance of the size of print in terms of “notice” has been discussed above. The relative size of print of different clauses is unlikely to be a relevant consideration for purposes of construction.107

  5. (5) The principle that “factual matrix” is relevant applies to bills of lading, but with some necessary modification, as explained by Andrew Smith J. in Glencore v MSC108 in the context of a submission that the previous course of dealing between parties was relevant to the construction of a bill of lading:

    1. First, although in principle the factual background can sometimes inform the interpretation of a negotiable document of title, there is an obvious difficulty about a document having “different meanings for different people according to the knowledge of the background” (to use the words of Lord Hoffmann in Mannai Ltd v Eagle Star Assurance Co Ltd [1997] 749, 779C/D). The proper approach to using the background knowledge to inform the interpretation of bills of lading was explained by Lord Hoffmann in Homburg Houtimport BV v Agrosin Private Ltd (The ‘Starsin’) [2003] UKHL 12 at paras. 73ff: it is to be recognised that negotiable bills of lading, being documents of title, are “addressed” to and might need to be understood by various persons other that the original parties, and therefore the original parties are taken to have intended that they should be given the meaning conveyed by their wording in light of knowledge available to the range of persons to whom they are addressed. Thus, “As it is common knowledge that a bill of lading is addressed to merchants and bankers as well as lawyers, the meaning which it would be given by such persons will usually also determine the meaning it would be given by any other reasonable person, including the court. The reasonable reader would not think that the bill of lading could have been intended to means one thing to the merchant or banker and something different to the lawyer or judge” (at para. 76). The parties making the contract in the B/L would not have expected the range of addressees described by Lord Hoffmann to know of their own previous dealings, and are not to be taken to have intended that it should inform the interpretation of the B/L.”

  6. (6) Effect will in principle be given to clauses incorporating provisions of other documents, such as charterparties, or of the provisions of the Hague Rules or legislation enacting them. The rules concerning such incorporation are complex and are dealt with in detail below.109 The issue of the effect of an incorporated provision cannot always be considered in isolation from the issue as to whether it is incorporated, but:

    1. It is a well-accepted principle that when one has a written contract which incorporates other terms by reference and the incorporated document contains provisions which conflict with provisions of written documents, then the terms of the written document will, in the ordinary way prevail.110

  7. (7) A particular instance of this rule is that where the Hague Rules are contractually incorporated:

    1. the essential rule is to treat the rules as set out in the body of the contract in extenso, but rejecting provisions which are insensible, because inconsistent with the incorporating document.111

  8. (8) The contra proferentem doctrine states, in a contractual context, that ambiguity in a document is to be resolved against the party putting forward or “proferring” the document (the “proferens”).112 This principle is often invoked against a party seeking to rely on its standard terms and conditions, such as those found in a particular standard form of bill of lading. In The Starsin113 Lord Hobhouse said:

    1. If a party, otherwise liable, is to exclude or limit his liability or to rely on an exemption, he must do so in clear words. Unclear words do not suffice…the “Standard Conditions” of bills of lading are not the subject of negotiation or amendment by the shipper; they are printed conditions which the shipper is required to accept (i.e. a contract of adhesion); the wording is chosen by the issuer of the bill of lading.
    Whilst this principle is of general application, clauses which purport to exempt from liability for misdelivery, are worthy of particular note, as such a clause will only be upheld if “it is apt to excuse a shipowner from performance of that obligation [to deliver against a bill] of fundamental importance and also if the clause would be without adequate content if it were not given that construction”.114
  9. (9) It is common that bills of lading, or charterparties whose terms are incorporated into them, have parts of the standard form struck out. Whilst there is no consensus in the authorities about the extent to which words deleted from drafts can be used as an aid to construction,115 the general view is that where the deleted words are those of a standard or printed form, reference can be made to such deletions116. It is suggested that this approach is correct, given the modern tendency to take a broader view of the nature of matters which are legitimate aids to construction.

Terms and representations distinguished

7.45 Whilst the bill of lading evidences a contract, not all the contents of the bill of lading are of contractual force. As discussed elsewhere,117 there is an important distinction between contractual terms of the bill of lading, usually of a standard nature and set out on the reverse of the bill of lading, and statements or representations as to the cargo and the circumstances of its receipt.118 Thus, statements as to actual or apparent order and condition of the cargo are not of contractual force although they will constitute representations.119 As Channell J. stated in the leading case of Compania Naviera Vasconzada v Churchill & Sim:120

The words “shipped in good order and condition” are not words of contract in the sense of a promise or undertaking.

7.46 The same reasoning would apply to statements that freight is prepaid121 and as to the quantity of cargo, and the date of shipment.122 As Phillips L.J. stated in The River Gurara123:

Statements in a bill of lading describing the cargo shipped do not constitute an agreement between the parties as to the identity of that cargo.

7.47 A statement as to the description of the vessel might be thought to fall into the same category and not to be of contractual force. However, in Fraser v Telegraph Construction Co.124 goods were shipped by the plaintiffs on board the defendants’ vessel, under a bill of lading which provided “shipped on board the steamship Hibernia…from Singapore to London” and it was held that the contractual obligation of the defendants was that the goods should be carried on board a ship in which the principal motive power during the voyage should be steam. Where the description of the ship evidences an antecedent agreement for carriage aboard a ship of given identity or description, these statement will, of course, have contractual force.

7.48 A more difficult question is whether words such as the description of the load port or disport are mere representations of fact as to the load port and intended disport or evidence of the terms of the contract. This cannot be answered without reference to the underlying facts. Goods may be shipped from Marseilles, pursuant to a charter providing for shipment from one safe port Mediterranean. If the load port is specified in the bill as Ravenna this is a misrepresentation but does not in itself create or evidence a contract to carry from Ravenna. It is possible that some of the wording in a bill fulfils both functions and that other wording, such as the stamping of “non-negotiable”, falls into neither category.

Implied terms in a bill of lading contract

7.49 The express terms of a bill of lading may be extremely limited in scope, or even non-existent except to incorporate terms of a relevant charter, or they may be very numerous and detailed. A consideration of the various express terms used in common standard forms is beyond the scope of this book.125 The extent to which any terms will be implied into a bill of lading contract will again be governed by standard contractual principles126 and by the nature of any express terms, including where applicable those incorporating the Hague, Hague-Visby or Hamburg Rules, or a charterparty.127 Certain generic terms will, however, readily be implied into a contract for the carriage of goods by sea, as a matter of common law based historically on commercial practice and usage.128 The starting point is that such a contract is one for bailment for reward, and for carriage. Historically the shipowner had in certain circumstances the liability of a common carrier,129 rendering him “strictly” liable for loss of or damage to cargo except in very limited circumstances.130

7.50 Basic terms implied by common law into a simple contract where A agrees with B to carry goods by sea from Port X to Port Y include (i) the obligations of the carrier as to seaworthiness,131 (ii) the obligations of the carrier as to care of cargo,132 (iii) the obligation of the carrier to proceed without deviation,133 (iv) the obligation of the carrier to proceed with reasonable despatch,134 (v) the obligations of the shipper as to the shipment of dangerous cargo135 and (vi) obligations of the shipper to load and discharge in a reasonable (if not fixed) time.

7.51 Of these, all except those reflecting an obligation to act with reasonable despatch are reflected in or modified by the provisions of the Hague Rules. Thus, a detailed discussion of these terms is contained in Chapter 10, alongside the relevant provision of those rules.

Classification of terms

7.52 The “classification” of terms into conditions, warranties and intermediate terms is of perhaps less importance in contracts for carriage of goods by sea than in other contracts. It was established in Hong Kong Fir Shipping v Kawasaki Kisen Kaisha (The Hong Kong Fir)136 that seaworthiness is one of many obligations that are “intermediate” terms,137 and it is suggested that the same analysis applies to all the others listed above, with the exception of the duty not to deviate, to which special rules may still apply despite the modern disaffection with the doctrine,138 and, possibly, the obligation not to ship dangerous cargo.139

Statutory control of bill of lading contracts

7.53 Due to the special and international nature of bill of lading contracts, they are excluded from the operation of much of the general domestic legislation that impacts upon common law freedom of contract, although they are, of course, subject to the important international regimes of the Hague and Hague-Visby Rules.

7.54 The Unfair Contract Terms Act 1977 has only very limited application, at least to ocean bills of lading. Paragraph 2 of Schedule 1, section 2(1) of the Act, which prohibits the exclusion of liability for death or personal injury, applies to a contract for the carriage of goods by ship, but otherwise sections 2, 3, 4 and 7 do not apply to such contracts except in favour of a person dealing as a consumer. The class of persons who are parties to a bill of lading contract and dealing as a consumer is likely to be limited mainly to individuals shipping personal effects, usually in containers.

7.55 However, paragraph 3 of Schedule 1 refers to carriage of goods “by ship” “in pursuance of a contract which either (a) specifies that [i.e. ship] as the means of carriage over part of the journey to be covered, or (b) makes no provision as to the means of carriage and does not exclude that means” drawing a distinction with a “pure” contract for carriage of goods by ship, as referred to in paragraph 2 of the Schedule. In such a case as specified in paragraph 3, sections 2(2), 3 and 4 do not extend (subject to the consumer exception) “to the contract as it operates for and in relation to the carriage of the goods by that means”.

7.56 The wording of the schedule begs a question as to the ambit of a “contract for the carriage of goods by ship”. The terms of such a contract will, even where dealing with liability prior to loading or after discharge, be unaffected by the statute for commercial parties as opposed to those dealing as consumers.140 Where, however, the contract concerns a “journey”, part of which is not by ship, then the Act will potentially apply to the parts of the carriage that are not “in relation to” sea carriage.141

7.57 The provision of Part II of the Supply of Goods and Services Act 1982, and particularly the obligations imposed by sections 13 (implied term that the supplier will carry out the service with reasonable care and skill) and 14 (implied term that the supplier will carry out the service within a reasonable time) do apply to bill of lading contracts, which are within the definition of service contracts in section 12. However, it is suggested that the general obligation as to reasonable care and skill will not override specific provisions as to standard of care, such as those contained in the Hague or Hague-Visby Rules, whether these apply contractually or by force of law.142

7.58 The Contracts (Rights of Third Parties Act) 1999 does not (by virtue of section 6(5)) confer rights on a third party in the case of a contract for carriage of goods by sea, except that a third party may, in reliance on that section, avail himself of an exclusion or limitation of liability in such a contract and this has potentially relevant consequences for “Himalaya” clauses, as discussed in Chapter 10.

7.59 By virtue of section 2(5) of the Law Reform (Frustrated Contracts) Act 1943, the Act does not apply to any contract for the carriage of goods by sea, although it does apply to time charterparties.

(D) Identity of parties to the bill of lading contract

7.60 Questions frequently arise as to the identity of the parties to a bill of lading contract. In other commercial contracts the identity of the contracting parties is almost invariably expressly specified as one of the first and primary stipulations. A combination of the nature of a bill of lading and historical factors has meant that this is not so. Although a layman and many lawyers would find this state of affairs astonishing, there remains considerable scope for arguments of fact and law on this issue.

Who is the contracting carrier?

7.61 The point usually in issue is whether the contractual carrier is the shipowner or the charterer. One or both of two basic and related sub-issues may arise: (i) the construction of the contract terms so as to identify the carrier; and (ii) whether that person so identified authorised the issue of the bill on their behalf.143 Recourse may be necessary, on both issues, but particularly the second, to the “matrix” of fact.144 For some years both the relevant legal principles and the effect of their application have been in a state of uncertainty,145 although the position has been clarified in part by the House of Lords decision in The Starsin.146

7.62 Traditionally the master signed a bill of lading as the employee of and on behalf of the shipowner, and it is only since the advent of time charters that the concept of the charterer as contractual carrier has become commonplace, and with it the attendant disputes as to whether the owner147 or charterer is carrier. This development is of more than academic interest. Where the contractual carrier is the shipowner, arrest of the ship will often provide security for a cargo claim. Proceeding against charterers who may have no assets or not be amenable to convenient jurisdictions is frequently problematic. Thus, if one is concerned with actual or presumed intention of the parties it may be said that cargo interests (or at least their insurers) are often not willing to contract with a time charterer, whose identity and status may be unknown and sometimes unascertainable. A contract between X as shipper and Y as carrier involves not only Y’s assent to contract as carrier (or grant of authority by Y to an agent to contract on his behalf), but also the agreement of X to contract with Y. The presumed intention of cargo interests not to contract with a man of straw might be invoked by a shipper seeking to argue that a bill was not a charterer’s bill.

7.63 The classic bill of lading provides a “signature box” as well as printed and typed terms that may provide for the identity of the carrier, and the cases illustrate the difficulties where different provisions point towards different conclusions.

7.64 A line of authority148 culminating in The Rewia149 has established that a bill of lading signed by or on behalf of a master cannot be a charterers’ bill unless the contract was made with the charterers alone and the person signing had authority to sign and did sign on behalf of the charterers and not the owners. The master may be held to be acting on behalf of the owners for purposes of signature of bills of lading despite a provision in the charter specifying that he signed bills as agent of the charterer.150 Whilst the terms of a charter may confer actual authority on a charterer to sign bills on the owner’s behalf, they cannot generally create apparent authority vis-à-vis a third party independent of the charterer, as the charter cannot constitute “holding out” to that party.151

7.65 A factor of importance in any analysis is the significance accorded to the capacity in which a party signs a bill of lading. In Universal Steam Navigation Co. v James Mckelvie & Co.152 the House of Lords had to consider a charterparty where the respondents were described as charterers but the charter was signed by them “as agents”. It was found as a fact that the shipowners knew that, in fact, the respondents were acting on behalf of others. In holding that the respondents were not liable as charterers despite their designation as such in the body of the charter, Lord Shaw said:153

…in my opinion the appending of the word ‘agents’ to the signature of a party to a mercantile contract is, in all cases, the dominating factor in the solution of the problem of principal or agent.

This principle was expounded as an application of the general principle of construction that specific typed or handwritten words usually prevail over inconsistent printed of standard terms.154

7.66 A number of first instance decisions in the 1980s and 1990s155 each involved a resolution of conflicting indicators in the bill, the indicators typically including a stamped or printed designation of a party as “carrier”, a demise clause and the mode of signature. These cases all turn on their own facts but in each of them the prevailing factor was a specific indicator as to the identity of the carrier rather than the form of the signature.

7.67 For example in The Venezuela156 the relevant bill of lading described the carrier as “C.A.V.N.” who were, in fact, the charterers although there was nothing in the bill of lading to indicate this, but the bill of lading was signed on behalf of the master.157 In rejecting the submission that this latter factor made the bill of lading an owner’s bill Sheen J. referred to the proposition that each case turned on its particular facts and said:

It seems to me that if C.A.V.N. did not wish to contract as “the carrier”, then the bill of lading issued by C.A.V.N. should at least have made it clear with which company the shipper was entering into the contract of carriage. Until the shipper or holder of the bill of lading was told that Samjohn Governor was on time charter for the voyage in question there was nothing on either side of the bill of lading which indicated that anyone other than C.A.V.N. was contracting as carrier.

7.68 The problem in The Hector158 was the apparent conflict between a demise clause declaring that the owners were the contracting party and a typed provision on the face of the bill of lading stating “CARRIER: US EXPRESS LINES”. US Express Lines (USEL) were in fact the time charterers. In holding that the bill of lading was a charterer’s bill of lading notwithstanding the signature of the bill of lading “for and on behalf of the Master…” and the presence of the demise clause, Rix J. said:

In my judgment, therefore, the matter can be looked at in two ways. Either the three elements of the bill – the USEL stipulation, the signature and [the demise clause] – can be regarded as being consistent with one another, on the basis that because it is stipulated that USEL are the carrier, it must therefore follow that they are owners too; or the typed stipulation of USEL as carrier on the face of the bill must be regarded as superseding the printed provisions of [the demise clause].

7.69 In these and other cases159 the point that the bill of lading generally evidences a contract that predates its issue is skated over. Whilst an owner may well, by time chartering his vessel, confer authority on the charterers or his agents to bind him in bill of lading contracts, it is less clear how agents authorised to sign on behalf of the master have authority to bind the charterer. In commercial terms it is, of course, desirable that the bill of lading holders can ascertain easily with whom they are contracting. This question is often difficult enough even when only issues of construction are involved. If a factual investigation into authority is necessary to resolve it, the situation becomes still more unsatisfactory.

7.70 The most recent and important authority on this point is the decision in The Starsin.160 The essential facts were that the bills of lading were signed by port agents for CPS (the time charterers) and CPS were identified in the signature box as carriers. However, the bill contained on the “reverse” side identity of carrier and demise clauses (in the same form as the bills of lading in The Flecha) suggesting that the owners were the contracting party. The definitions section of the bill said that the carrier was the party on behalf of whom the bill was signed. In the Court of Appeal the majority (Rix L.J. dissenting) held that the bills were owners’ bills, giving greater weight to the clauses on the reverse of the bills than to the provisions of the signature box. Sir Andrew Morritt V.-C. concluded161 that:

The signature box is part of the bill of lading. The normal rule whereby greater importance is attributed to specific provisions, including the signature box, put into a standard form is qualified by and to the extent that cl. 35 of the standard conditions is applicable.162

7.71 The House of Lords unanimously reversed this decision, although the judgments do not display uniformity of approach. Their Lordships repeatedly emphasised the importance of the courts taking a commercial approach to the construction of commercial documents. The ratio of the decision is essentially that greater weight should be given to the provisions on the front of the bill of lading, including particularly the contents of the signature box, than to the printed clauses on the reverse, because that was how “a reasonable person, versed in the shipping trade, would read the bill”163 and that was “the meaning it would convey to a reasonable person having all the background knowledge that is reasonably available to the person or class of person to whom the document is addressed”164 and that thus the indicia as to identity of carrier to be found on the front of the bill of lading prevailed over those on the reverse.

7.72 There are aspects of the speeches in The Starsin on this issue165 that may not meet with universal approval and it is suggested that the only analysis that proceeds on conventional lines is that of Lord Hobhouse, who emphasised that great weight was to be given to the content of the signature on the bill. For example:

 (1) Reference was rightly made to the need for certainty166 but it is questionable how far the underlying theme of the judgments promotes this. On the contrary it might be said to invite expert evidence as to market understanding on an issue where, as was pointed out in the case, the parties want to be able to ascertain quickly and easily what the position is.

 (2) Despite the repeated deference paid to the needs of the commercial community, it is doubtful whether the judgments167 do reflect real commercial concerns. There was no evidence of market practice (or factual matrix) before the courts,168 and Lords of Appeal in Ordinary are perhaps not best placed to take judicial notice of it.169

 (3) The emphasis on the “front” of a bill of lading is arguably overstated. Commercial men with even an elementary knowledge of bills of lading know that these will contain contractual terms of importance that cannot be fitted on the front. The distinction between the two sides of a piece of paper is in modern times perhaps artificial. However in The Golden Endurance

Only gold members can continue reading. Log In or Register to continue