The Issue of Bills of Lading
3.1 The “issue” of a bill of lading is the first and most fundamental stage in its life, as prior to issue it is devoid of legal significance. The traditional background to the issue of a bill of lading is as follows:1
- (1) A person wishing to have goods carried by sea contracts with a carrier for their carriage, either by concluding a charterparty, or by concluding a more general contract of carriage in a booking note, exchange of correspondence or even by an oral contract.
- (2) The goods are brought to the quay by the shipper or his agent, and received into the custody of the shipowner or his loading broker. A mate’s receipt may be given for the goods.
- (3) A blank bill of lading in the applicable form (usually the standard form of the carrier, who may be a shipowner, a time charterer or another party who is running a “line” in the liner trade) is filled in by the shipper or his agent giving details of the cargo, the shipper, the consignee and other relevant information.
- (4) This is then issued by signature by the master of the vessel or an authorised agent of the carrier (this may be the time charterer or his agent) after all the cargo has been shipped on board, and given to the shipper, generally in exchange for the mate’s receipt if one has been issued.
3.2 As will be apparent from this chapter, there are many variations on this theme, and in more modern times practices differ widely. Bills of lading may be issued days after a vessel has sailed,2 from an office far from the load port and by an agent with little or no connection with the carrier. In The Sagona3 the evidence was that modern masters rarely see, let alone receive presentation of, original bills of lading, at least in the oil trade. Contracts of carriage may not require a bill of lading to be issued. The legal principles that evolved from the old cases need to be considered with some care, and in some cases adapted, when applied to the mechanism of modern commerce. This caveat applies even to “traditional” forms of bills of lading, and all the more so to through or combined transport bills of lading,4 or electronic bills of lading.5
3.3 In its simplest sense the “issue” of a bill is its signature, which turns it from a draft to a document of legal significance. However, the term “issue” is used transitively as well as intransitively, and the process of “issue” includes issue by signature and delivery by the carrier to the person entitled to the bill, generally the shipper.6
3.4 The different sources of rights and obligations arising on or in connection with the issue of bills of lading must be kept in mind. Specifically these may: (a) arise under the contract of carriage contained in/evidenced by the bill and/or under a separate contract such as a charter or; (b) reflect obligations (i) in relation to the terms or form of the bill as presented for signature and/or (ii) in relation to representations made in the bill, independent of any contract.
3.5 It is generally in the interests of all parties concerned that a bill of lading is issued in respect of a shipment of goods to be carried by sea. The shipper or charterer obtains a receipt and a document of title7 that facilitates dealings with the goods. The bill of lading can normally be relied upon by either party as at least a prima facie expression of the terms of the contract of carriage, or evidence of its terms. The carrier knows that if he delivers in good faith against production of the bill of lading he cannot normally be accused of misdelivery.8
3.6 The carriage of goods by sea does not always involve the issue of a bill of lading; such carriage can work effectively without it and sometimes a simpler document such as a seawaybill9 will suffice. A bill of lading may be impractical or unnecessary for coastal or other short voyages, or where the goods carried are not the subject of any sale contract.10 The obvious disadvantage of a bill of lading is that the carrier can only deliver to the receiver in accordance with his contractual obligations if the bill of lading is produced and this may cause delay.
3.7 The carrier may issue a receipt, and in particular a mate’s receipt,11 upon receipt of the goods, either instead of or, more usually prior to, the issue of a bill of lading. It will usually be issued to the bailor of the goods.12 It is also usual for the mate’s receipt later to be exchanged for a bill of lading. He may also issue a ship’s delivery order,13 either instead of a bill, or after a bill has been issued, in order to deal with different deliveries to be made from a bulk cargo.
3.8 The obligation to issue a bill of lading, and the corresponding right to receive one, can only arise if:
- (1) it is expressly provided for by contract. This stipulation may be the contract of carriage which the bill of lading is to evidence (this in itself presupposes that a contract pre-exists the bill of lading), or may be contained in a separate contract between the same or different parties such as a voyage or timecharter;14 or
- (2) the contract of carriage requires the issue of a bill by implication. Such a term would very readily be implied into many contracts of carriage of goods by sea, but custom or express provision may provide that the relevant document to be issued is a sea waybill; or
- (3) the issue of a bill of lading is required by a statute or other regulation. For example, Article III rule 3 of the Hague and Hague-Visby Rules provides that: “After receiving the goods into his charge, the carrier, or the master or agent of the carrier shall, on demand of the shipper, issue to the shipper a bill of lading showing, amongst other things….”15 However, the identity of the “carrier” and the question whether the Hague or Hague-Visby Rules apply at all can only be ascertained by examining agreements made prior to issue of the bill (see Chapter 8) to see whether anyone is obliged to issue a bill of lading and, if so, who. The Hague or Hague-Visby Rules will only apply where there is a contract of carriage of goods by sea in existence, and where that contract of carriage is “covered by a bill of lading”.16 Thus, the enquiry as to whether the Rules require the issue of a bill of lading may become somewhat circular in nature.
3.9 The form of the bill of lading to be issued will depend on the terms of any underlying contract of carriage. In practice the bill of lading is often the first, if not the only, expression of the terms of the contract of carriage. A distinction should be drawn between the “contractual” terms of the bill of lading, which are usually contained in a standard printed form, with or without amendments, and the particulars for the specific cargo and voyage in question. The latter are almost invariably added by, or using information from, the shipper and are not generally of contractual force.17 This section deals with the “form” of bill in terms of its contractual content. Section G below deals with issues arising from the insertion of particulars of the cargo.
3.10 In general the propriety or otherwise of a bill of lading must be considered in accordance with its proper law.18 In the absence of express provision, the contract of carriage to be evidenced by the bill may by implication be on the carrier’s standard or usual terms. Frequently these are the terms of a time charter, such as a shipping line19 but these terms may include a “demise” clause thus making them contracts of carriage with the shipowner. In such cases, the shipowner has, by the terms of the time charter, authorised the use of these bills.
3.11 In this situation the main concern of the master and the shipper is to ensure that the terms of the bill reflect, or are at least not inconsistent with, any pre-existing contract for the carriage of the goods by sea. In addition the bill must meet the requirements of any underlying sale contract, the terms of which will generally be known to the shipper but not to the carrier. This may provide expressly for the requirements of bills of lading, for example, specifying that these shall be “clean” or “freight prepaid”, or that there is shipment by a specified date.
3.12 The relevant charter may provide expressly for the form of bills, either in specific terms or in more general terms, for example, requiring signature of bills “as presented”. It may also provide for who is to sign the bills.
3.13 There are a number of separate considerations arising where there is presentation for signature of a bill of lading that does not conform to the requirements set out in the charterparty. These are (i) whether such presentation is a breach of the charter and thus whether it entitles the master to refuse to sign the bills of lading as presented by the shipper or agent, (ii) whether the term(s) of the charter oblige(s) the master to refuse to sign, on the basis that he is not authorised to do so, and (iii) whether the owners are entitled to an indemnity from the person presenting the bill if the bill is signed and that results in liability to the shipowner under the terms of the bill of lading as signed.
3.14 If the shipper is not the charterer, he cannot be bound by the charter in terms of the form of bill to be presented. Where the charterer performs his obligations in relation to presentation of bills of lading through the shipper he will generally be liable for any defaults of the shipper.20
Express charter provisions
3.15 Many voyage and time charters21 make express provision for signature of bills of lading and, for example, may require the master to sign bills of lading “as presented” and/or “without prejudice to the charter” and contain an express indemnity against the consequences of signing.
3.16 Clause 8 of the NYPE (1946 form) provides: “…Charterers are to load, stow and trim the cargo at their expense under the supervision of the Captain, who is to sign Bills of Lading for cargo as presented, in conformity with the Mate’s or Tally Clerk’s receipts.” Clause 30(a) of the 1993 version of the NYPE form is more elaborate, although along similar lines.
3.17 Clause 10 of Gencon 1994 provides: “Bills of Lading shall be presented and signed by the Master as per the ‘Congenbill’ Bill of Lading form, Edition 1994, without prejudice to this Charterparty…” and goes on to provides an express right of indemnity.22 The requirement to use a specific form, in this case one drafted for use with the Gencon charter, reflects the difference in nature between a time and voyage charterparty. Use of an incorrect form may raise questions as to authority to contract (see below) or, as in The Jocelyne,23 mean that a supercession clause in the charterparty does not operate.
Signature of bills “as presented”
3.18 The general rule is that if a charterparty provides that a master shall sign bills “as presented”, then he is bound to sign, regardless of whether the terms of the bills reflect that of the charter, unless the bills “contain extraordinary terms or terms manifestly inconsistent with the charter-party”: The Berkshire,24 where the charterparty was on NYPE form and thus required the master to sign bills of lading “as presented”.25 In the Anwar Al Sabar26 this principle was applied by the court in concluding that the master was not entitled to insert a lien clause drafted by the owners in a bill as a pre-condition of signing it.27
3.19 An omission of terms contained in the charter will not justify a refusal to sign, even if those terms are “germane” to the contract contained in the bill, unless the charter expressly provides for their insertion in bills, in which case it would appear that refusal to sign is justified (see Time Charters28 and The Nanfri29).
3.20 Even a requirement to sign bills in a particular form will not oblige a master to sign a bill whose “blank spaces” for specifying the date of, and parties to, the charter have not been completed:30 the form contemplates that (at least where the information is available) the relevant details should be inserted; if this is not done, it cannot be said that the bill of lading is in the specified form – all that will have been tendered for signature will have been a document which is, under this contract, incomplete.31
3.21 Similarly in The Ikariada32 the owners alleged that charterers were in breach of an implied term of the charter, which provided for signature of bills “at such a rate of freight as presented without prejudice to this charterparty” by presenting bills without the “blank” for the date of the relevant charter being filled in, the complaint being that as a matter of Greek law this prevented incorporation of the charter terms in to the bill. The factual and legal elements of this argument were rejected, but it is clear from this case and from The Garbis33 that where a charterer is obliged to present bills in a particular form, that subsumes an obligation to fill in any (applicable) blanks in that form including the identity of any relevant charterparty. These decisions are, it is suggested, correct, even if as a matter of language it might be said that such a matter does not go to “form” because, unlike the details of the cargo, details of the identity of the charterparty will affect what contractual terms may be incorporated, by reference, from the charter.
3.22 Examples of a bill that contained “manifestly inconsistent” terms would include one naming a discharge port outside the trading limits specified in the charter,34 or one specifying an excluded cargo.
3.23 A common form of charter wording simply requires the master to sign clean bills of lading. Whilst this cannot require the master to sign such bills for cargo whose apparent order and condition does not justify it, it is not clearly established what the consequences are in terms of any duty on the charterer only to load “clean” cargo or rights and obligations of the carrier to reject unclean cargo.35
3.24 The rights and duties of the master or carrier in relation to signature of a bill where the accuracy of the particulars in the bill is doubted are discussed in section (H) below, but a master is never bound to sign a bill that “stated a falsehood”36 and where the contract expressly or impliedly requires presentation of bills by the charterer or shipper, it is a breach of contract to present and insist on signature of a bill that the master is bound or entitled to refuse to sign.37
Signature of bills “without prejudice to the charterparty”
3.25 There are suggestions in some of the older cases38 that where the requirement in the charterparty is for presentation or signature of bills “without prejudice to the charter”, a charterer who presents a bill for signature that is not in accordance with the charterparty, in the sense of exposing the owner to liabilities wider than those provided for in the charter, is in breach of the terms of the charterparty by presenting such a bill.39 Despite the apparently clear opinions to this effect by several of their Lordships in Kruger v Moel Tryvan,40 there is, as Cooke41 suggests, a modern disinclination to regard the presentation of such bills of lading as a breach of the charter, as opposed to a basis for the granting of an indemnity.42
3.26 It is suggested that the correct analysis is to ask whether the terms of the charterparty limit the authority of the master with regard to the terms of the bill of lading that he is entitled to sign if presented. If the terms of the charterparty expressly limit his authority,43 then he is entitled to refuse to sign a non-conforming bill of lading; if he does sign it he does so without actual authority, although probably with ostensible authority so as to bind the shipowner. If there is no express limit to his authority, then it would seem that he is entitled, indeed probably obliged, to sign bills of lading that do not conform with the charterparty terms, unless the terms of the bill are extraordinary or manifestly inconsistent with the charterparty terms.44 But, unless the act of the master in doing so is manifestly unlawful in itself,45 then there will be an implied right of indemnity from the charterer for the consequences of signing the bill of lading, if there is not an express one in the charterparty.46
The Interclub Agreement
3.27 In The Holstencruiser,47 an issue arose as to the application of the Interclub Agreement48 incorporated into an NYPE time charter. Hobhouse J. held that it could only apply to claims arising under “authorised” bills of lading, and thus suggested that it was necessary for charterers claiming under the agreement to produce the relevant mate’s receipt or tally clerk’s receipt and show that the document was issued with the authority of the master. Whilst logically correct, this approach may be perceived as unduly exacting from a commercial perspective. In The Hawk49 similar issues arose, as to the validity for the purposes of the application of the agreement of the bills issued. Judge Diamond Q.C. confirmed that there could be no authority invested in charterers to issue a bill of lading for goods that had not been received, and that in other “exceptional” circumstances bills of lading may be “unauthorised”, but said:50
I would not regard a bill as unauthorised merely because there is no exact correspondence between every representation in the bill and the corresponding notation on the mate’s or tally clerk’s receipts.
He went on to reject a contention that the absence of a mate’s receipt rendered the bill of lading unauthorised. It is suggested that Judge Diamond’s approach accords more closely with the expectations of commercial parties than the very strict approach in The Holstencruiser.51
3.28 Whilst the “contractual” terms of the bill of lading are often those of the carrier or the charterer, the document will contain a number of “blanks” and these, including particulars for the specific cargo and voyage, are usually inserted by the shipper or his agent, who will generally have the best knowledge of them.52 The matters within the shipper’s province will generally include particulars of (i) the shipper, the consignee and the notify party, (ii) the quantity and description of the cargo, including any marks and the number/nature of packages or containers, and (iii) the name of the vessel and the identity of the load port and discharge port.53
3.29 The shipper is also entitled to decide the apportionment of the cargo between one or more bills. In Oriental SS. Co. v Tylor,54 a case where the carrier was obliged under the charter to sign bills as presented, Lord Esher M.R. said:
It is for [the charterer] to name the consignee under the bill of lading. Under this charterparty he seems to have the liberty to present one bill of lading for the whole cargo, or several bills of lading respecting parts of the cargo. That is his choice; he is to determine that, and if he presents bills of lading which, taken altogether, amount to the cargo which is on board, the captain is bound to sign them. Therefore, the choice of the consignee and the choice of whether it should be one bill of lading or several, being both of them in favour of the charterer and to be determined by him, would shew that he has to present the bills of lading.
3.30 The person named as shipper or consignee can only be bound as such if the person completing the bill of lading has authority to denominate him as such.
3.31 There may be an implied term in a charter or other contract of carriage that the particulars of the condition of the cargo as specified in the bill presented by the charterer or shipper are accurate, if but only if the relevant facts are “uniquely within the knowledge of the charterer”.55 No such duty arises when “the [true] facts are within the scope of a reasonable investigation on the part of the shipowners’ servants”56 and “the authorities do not establish that there is invariably an implied term that the bill as presented shall correctly state the apparent condition of the cargo”.57
3.32 There is, however, an implied requirement, at least where the obligation is to sign bills “as presented”, that the bills of lading as presented shall relate to the goods actually shipped and that they shall not contain a misdescription of the goods which is known to be incorrect.58 It has been suggested that there is an implied warranty by charterers that the quantity that is stated on the bill of lading is accurate,59 but it was held in The Nogar Marin that there is no such warranty of accuracy upon the charterer in relation to mate’s receipts.60
3.33 Where the Hague or Hague-Visby Rules apply, the shipper is deemed, by Article III rule 5, to guarantee to the carrier “the accuracy at the time of shipment of the marks, number, quantity and weight, as furnished by him…”.61
3.34 Bills of lading are usually issued in sets of three originals. This practice dates from the earliest use of bills of lading as receipts for the goods.62 The consequence, that three identical and equal ranking documents of title to one consignment of cargo are put into circulation, might be thought to be a recipe for disaster. In fact, the number of instances of fraud or other problems arising from this practice is very small (an example is in Barber v Meyerstein63). The practice has been severely criticised as outdated and dangerous for over a hundred years64 but still persists. The traditional provision in bills of lading issued in sets is “one of which being accomplished, the others to stand void”, the “accomplishment” being the delivery of the cargo.
3.35 One reason for the absence of problems from this practice is that frequently the three bills are all kept and dealt with together. Tender of one original is good tender under a c.i.f. contract at common law,65 but the contract may require presentation of all in a set, and Article 20(a)(iv) of UCP 600 makes provision to that effect for documentary credits governed by its terms.
3.36 The bill of lading was traditionally issued by the master at the load port. Under modern trading this will not necessarily occur: rather the bill of lading may be issued at the place of business of the person entitled to issue it, such as the shipowner or charterer or his agents. Subject to any contrary contractual term, the person authorised to issue the bill of lading may do so where he wishes. The place of issue may, however, have one important consequence, namely the application of the Hague-Visby Rules to the contract of carriage. Article X(a) of the Hague-Visby Rules provides that the Rules shall apply to a bill of lading if “the bill of lading is issued in a contracting State…”.
3.37 It is in principle improper for the carrier to issue a bill of lading before the relevant goods have been received or shipped (as the case may be) and it may be impractical to issue one immediately after such an event. Thus, the date shown on the bill must not be earlier than the date on which the shipment of the cargo to which the bill of lading relates is completed, even if the bill of lading is in respect of a part of an undivided bulk cargo the vast majority of which was shipped by an earlier date.66 In considering the significance of the date shown on a bill, a distinction must be drawn between the date of shipment and date of issue, which may be later. The former is generally of most significance, in particular for purposes of presentation of the bill to obtain payment in relation to an underlying sale contract that frequently will provide for shipment by a specific date.67 In recognition of the potential for confusion, the standard Congenbill, which in its 1994 form provides a box only for “Place and date of issue”, has been amended so that in the 2007 form there is also a box for “Date shipped on board”.
3.38 Where a charterer or shipper is obliged to present bills of lading for signature he must do so within a reasonable time of the completion of loading and this obligation is not altered by the loss of the vessel or goods after sailing.68
3.39 The carrier is also obliged to act with expedition. In Halcyon Steamship Co. Ltd. v Continental Grain Co.69 it was held that the requirement was to sign bills of lading within a reasonable time of presentation.70 The master was not entitled to delay signature until the whole cargo was shipped, but had to sign on completion of loading of each parcel in respect of which a bill was to be issued. The case appears to involve a bulk shipment of grain, but it is suggested that its reasoning could not apply to undivided bulk shipments given the comments by Hobhouse J. in The Wilomi Tanana71 about the impropriety of signing bills of lading prior to completion of loading.
3.40 Dilatory conduct by the carrier in signing the bill of lading may give rise to a liability for delay, but will not generally affect the contractual relations between the parties to it. However, sale contracts frequently provide for shipment by a particular date, and thus bills evidencing shipment after such a date will not be acceptable tender under the sale contract or a letter of credit established to finance the sale. This not only puts pressure on shippers to load on time, but also results in pressure from them on carriers/shipowners to issue ante-dated bills where the shippers fail to do so.
3.41 Even if there is no issue concerning the shipment date, a delay between completion of loading and issue of the bill may prevent the bill from complying with the terms of the underlying sale contract. In Hansson v Hamel and Horley72 the bill was issued 13 days after shipment and when the vessel concerned was in another country. This was held not to be good tender under the terms of a c.i.f sale contract, under which the general rule is that a contract of carriage must be procured “on shipment”.73 Lord Sumner described that as “an expression of some latitude” but “referable to both time and place”. However, he also observed in the case74 that “Bills of lading are constantly signed after the loading is complete and, in some cases, after the ship has sailed.”
3.42 Pyrene v Scindia75 established two propositions relevant to the present discussion. First, if the parties are entitled to demand or obliged to issue a bill of lading, the fact that it is not issued either by the time of the relevant event or at all will not prevent the terms of the bill of lading that would have been issued from applying.76 Secondly, where the bill of lading terms govern a stage of the performance of the contract of carriage that will inevitably be performed before a bill of lading is issued (the prime example being the loading operation) the terms of the bill of lading may still apply.77
3.43 Issuing the bill requires not only its drawing up and signature but its delivery to the person entitled to it. An attempt to withhold the bill from the shipper (for example, in an attempt to compel payment of sums due on previous transactions) will be wrongful unless authorised by express agreement or previous course of dealing.78 A bill retained by the carrier would still have contractual status, but the carrier could be sued for breach of the contract for failing to deliver the bill to the shipper. Even if the shipowner has a lien on the cargo for freight payable on shipment and not paid,79 there is no suggestion in the authorities that he will have such a lien on a bill of lading issued.
3.44 Just as a failure to sign bills within the time specified or a reasonable time is likely to be a breach of contract by the carrier, so is a refusal to sign altogether or a refusal to sign unless a clause to which the carrier is not entitled is inserted in the bill.80 If serious enough a breach, a refusal by the master or owners to sign bills of lading as presented or ordered may constitute a repudiation by the shipowners of the underlying charterparty.81
3.45 In Jones v Hough82 the defendant shipowners agreed to carry a cargo of coke to Bilbao. After shipment the master refused to sign a bill unless a clause exempting the carrier from certain consequences of late arrival was inserted. The Court of Appeal held that his action was a breach of the charterparty contract. But only nominal damages were awarded, either because the charterers had suffered no damage83 or because the clause in the charterparty prescribing liquidated damages for delay in signature was inapplicable in the circumstances of the case.84
3.46 If a master refuses to issue a bill of lading to a shipper of cargo loaded on board, then sails with the cargo, this may amount to a conversion of the cargo. Where the party entitled to the bill is not party to the contract of carriage, an action in conversion may be his only remedy. In Falk v Fletcher85 the plaintiff had habitually shipped cargoes of salt, destined for one de Mattos, aboard the defendant’s vessel which had been chartered by de Mattos. On one shipment, after 1,007 tons had been shipped, and a mate’s receipt given to the plaintiff in his own name, the plaintiff learned that de Mattos had stopped payment on the cargo, so the plaintiff stopped loading, and demanded a bill of lading in his own name. The defendant refused, and the vessel sailed with the salt on board. The court found as a fact that the plaintiff had not intended, in shipping the salt, to pass property in it to de Mattos, and that he was, although shipping the salt as agent for de Mattos, in the position of an unpaid vendor, and that in sailing without giving to the plaintiff a bill of lading the defendant was guilty of conversion.86
3.47 If a shipper is offered or issued with a bill of lading which is unsatisfactory to him or contrary to the terms of a pre-existing contract, he is not bound by it, at least if he has not by conduct or otherwise accepted its terms.87 In practice this means that the shipper must promptly protest at the terms of the bill of lading and, if practical, ask for his goods back. This is unlikely to occur in practice under modern commercial practices. Thus, in Allan v Armstrong,88 the shipper sent barrels of linseed oil for shipment under cover of a note stating that “no goods to be received on board unless a clean receipt can be given”. The shipowner received the goods on board but would only give a receipt claused “old casks”. The shipper demanded redelivery of the goods which was refused, and they were carried to their destination. Wills J., having found that there was no justification for clausing as required by the shipowners, said:89
It seems to me that the owner of goods has a perfect right to impose his own conditions when he delivers to the shipowner and the latter has a perfect right to say “I will not take them”. But when he assents to such a condition, and then refuses to give a clean receipt, the owner may say “Non haec in foedera veni: give me my goods”.90
3.48 The shipper is in principle entitled to refuse to proceed with the carriage of the goods if the bill of lading proffered contains terms with which he is not content, or which are inconsistent with terms agreed. So, in The Ardennes91 Lord Goddard said, in the context of a pre-existing contract of carriage:
No doubt if the shipper finds that the bill contains terms for which he is not content, or does not contain some term for which he has stipulated, he might, if there were time, demand his goods back.
3.49 There are limits to this doctrine. It is clear from the judgment in Allan v Armstrong that the situation might be different if there had been a defect, not apparent until after shipment, which required clausing of the bill.92 It is also likely that in most cases shipment without any reservation would be an assent to carriage on usual terms. The contrary proposition would be quite unworkable, especially if a shipper could demand redelivery of his goods at will,93 an exercise that involves the shipowner in expense and inconvenience, particularly where the goods have been overstowed.
3.50 As discussed above, where there is a charter in existence between a shipowner and charterer, this may provide for the form or terms of any bill of lading to be issued. However, a shipper is not bound by the terms of a charter to which he is not party, and of which he has no notice. In Peek v Larsen,94 the defendant was a shipowner who had chartered his vessel to C, who in turn had agreed to carry the plaintiff’s goods on board the vessel at a specific rate of freight. After the goods had been shipped the master refused to sign a bill of lading except at the (higher) charter rate, or to return the goods, but carried them to their destination. The defendant argued that the plaintiff had notice of the charter and that in shipping the goods he was assenting to its terms. He claimed a lien for freight at the higher rate. This argument was rejected, the court finding as a fact that the plaintiff was not aware of the charter, nor under any duty to inquire as to its existence. It was held that the shipper was entitled to have the goods returned to him.
3.51 The position is less clear where the shipper is aware of the existence of a charterparty. In Peek v Larsen Lord Romilly also stated95 that “every person is bound by the contents of a charterparty of which he has notice”. This implies that notwithstanding an agreement between the shipper and charterer for carriage aboard the vessel at a specified rate, the shipment with notice of the charter would have been consent to carriage at the higher charter rate. Support for this proposition can be derived from Ralli Brothers v Paddington Steamship Co. Ltd.,96 where the shipper did have notice of the charterparty, although no knowledge of its terms, and Peek v Larsen was distinguished, allowing the shipowner to recover a charter freight rate higher than that agreed between the shipper and the charterer. The rationale for such a doctrine is that a shipper who ships his goods on board a ship that is to his knowledge chartered, impliedly consents to pay the charter rate of freight.97
3.52 However, in the absence of such consent the terms of a charter cannot bind a shipper who is not party to it and the both the decision in the case and Lord Romilly’s dicta referred to above need to be treated with caution given the more modern approach that the equitable doctrine of constructive notice is inapplicable in this context. This is illustrated by Manchester Trust v Furness,98 where a clause in the charter providing that the master should sign bills of lading as agent of the charterer did not bind the holders of the bill who had notice of the existence of the charter by reference to it in the bill. Lindley L.J. observed, in rejecting an argument that reference to the charter gave constructive notice of the clause, that “if we were to extend the doctrine of constructive notice to commercial transactions we should be doing infinite mischief and paralysing the trade of the country”.99
3.53 The question of who is entitled to bind the carrier, by signature of a bill,100 and on what terms, is fundamental. The master remains a person of paramount importance. The traditional approach at common law is that he has implied or usual authority to bind the shipowner in numerous respects in terms of concluding contracts or in making representations in bills of lading. The leading case at common law is Grant v Norway,101 in which it was said that:
The authority of the master of a ship is very large, and extends to all acts that are usual and necessary for the use and enjoyment of the ship; but is subject to several well-known limitations. He may make contracts for the hire of the ship, but cannot vary that which the owner has made. He may take up money in foreign ports, and, under certain circumstances, at home, for necessary disbursements, and for repairs, and bind the owners for repayment; but his authority is limited by the necessity of the case, and he cannot make them responsible for money not actually necessary for those purposes, although he may pretend that it is. He may make contracts to carry goods on freight, but cannot bind his owners by a contract to carry freight free. So, with regard to goods put on board, he may sign a bill of lading, and acknowledge the nature and quality and conditions of the goods. Constant usage shows that masters have that general authority; and, if a more limited one is given, a party not informed of it is not affected by such limitation. The master is a general agent to perform all things relating to the usual employment of his ship: and the authority of such an agent to perform all things usual in the line of business in which he is employed, cannot be limited by any private order or direction not known to the party dealing with him.
3.54 The fine distinctions drawn in the old cases102 between what a master does or does not have usual authority to do are of little relevance today, given the range and speed of modern communications. Indeed, there is a respectable argument that there is no necessity for implying authority for a master to bind owners contractually, beyond an implied authority to sign bills of lading that conform with the governing charterparty or the owners’ standard form of bill of lading. However, under the principles of ostensible or usual authority as discussed below, a shipowner would be bound by a master’s signature to a bill, even if it is not in terms that conform with the charterparty or the standard form of bill of lading unless the other contracting party has knowledge of the limitation on the master’s authority, which in most cases he will not have.
3.55 The ratio of the decision in Grant v Norway (from which the notoriety of the case stems) is that a master has no authority to sign bills of lading for goods which have not been shipped. This remains the common law position, although the effect of this rule has been largely, but not entirely, rendered irrelevant by statute.103 The case has been distinguished or criticised on numerous occasions104 and its reasoning not applied or extended to its logical limit.105
3.56 If the charter provides for signature by the master, it would appear that even though he is the employee of the owners, the signature of the owners will not suffice: The Princess,106 where the charterparty provided for “Captain to sign bills of lading…”. It is suggested that the justification for the decision (that signature by the principal will not do where signature by a named agent is provided for) is questionable as the true effect of the clause was, it would appear, to provide for signature on behalf of the carrier of the relevant bills of lading, rather than to provide exclusively who may sign.
3.57 Where a time charter requires the master to sign bills of lading “as presented” or contains wording to a similar effect, the clause in itself confers authority to sign bills of lading upon the charterers. In The Berkshire,107 Brandon J. considered clause 8 of the NYPE time charter, which requires the master to “sign bills of lading as presented, in conformity with the Mate’s or Tally Clerks’ Receipts” and said:
The effect of such a clause in a charter-party is well settled. In the first place, the clause entitles the charterers to present to the master for signature by him on behalf of the shipowners bills of lading which contain or evidence contracts between the shippers of goods and the shipowners, provided always that such bills of lading do not contain extraordinary terms or terms manifestly inconsistent with the charter-party; and the master is obliged, on presentation to him of such bills, to sign them on the shipowners’ behalf. In the second place, the charterers may, instead of presenting such bills of lading to the master for signature by him on behalf of the shipowners, sign them themselves on the same behalf.
3.58 This doctrine also extends to agents and sub-agents of the charterers, on the basis that signing of the bills is a ministerial act108 and also extends to authorised sub-charterers or their agents, where the charter provides for signature by charterers’ agents, as in The Vikfrost.109
3.59 The customary authority of other species of agent who may bind the carrier, such as chartering and loading brokers, is of more historical than practical interest today.110 However there is a distinction between the usual authority of a charterer or sub-charterer that may readily be implied, and the authority of “agents” of such parties. The word “agent” covers a variety of functions that may differ markedly depending on the nature of the “agent” and the place in question. Agents who are to sign bills are generally given specific authority by their principals to do so. In the absence of such express authorisation this cannot automatically be implied, and it is suggested that the mere appointment by a party of an “agent” at a port in general terms does not constitute holding out that agent as authorised to sign bills.
3.60 A statement or representation in a bill of lading may be inaccurate. This may occur without fault on anyone’s part or, more usually, because of negligence or fraud. A common problem is where under a sale contract shipment has to be made by a particular date, and charterers’ local agents (who may be amenable to pressure from local shippers) are authorised to sign bills of lading, and ante-date them to disguise late shipment.111 The effect of false representations in bills of lading is dealt with elsewhere,112 but three other common consequences of inaccurate bills of lading are that: (i) the carrier contends that it is of no contractual or other effect and that he is not bound by it because it was issued by an agent who only had authority to issue accurate bills; or (ii) the document is alleged to be a nullity because of forgery; or (iii) an attempt is made by one or more parties to amend, rectify or reissue the bill.
3.61 The issues raised are complicated by the facts that: (i) the effect vis-à-vis the shipper may be different from that vis-à-vis a subsequent holder of the bill; and (ii) the effect on the bill as a document containing representations and as one containing (or evidencing) a contract may be different.
3.62 In Kwek Tek Chao v British Traders & Shippers Ltd.113 a contract for sale on c.i.f. terms of Rongalite (a chemical) provided for payment against bills of lading. Payment was duly made against bills of lading showing shipment on 31 October when it was, in fact, not made until 3 November. The buyers sued the sellers under the sale contract claiming a return of the price, and damages, on the basis, inter alia, that it was a term of the contract that accurate bills of lading would be presented, the bills of lading were forgeries and a nullity, and there was a total failure of consideration. It was common ground that the misdating of the bills of lading, by the seller’s forwarding agents, was a material alteration (the misdating apparently occurring after issue of the bills of lading114). Devlin J. held on the facts that the fraud of the forwarding agents was not something for which the sellers were liable. He also rejected the contention that the bills of lading were a nullity because of the misdating. He said:115
…if the forgery corrupts the whole of the instrument or its heart, then the instrument is destroyed; but if it corrupts merely a limb, the instrument remains alive, though no doubt defective…. Accordingly, in my judgment, the bills of lading in the present case were not a nullity….”
3.63 This case concerns the status of a bill as a document required under a sale contract.116 However, the approach of the judge highlights the need to look carefully at the nature and effect of any particular part of the bill alleged to be inaccurate, as well as whether the inaccuracy is innocent, negligent or deliberate, and the circumstances in which it was issued.117
3.64 There have been a number of recent cases where the carrier has sought to escape from the consequences of bills of lading being ante-dated or otherwise inaccurate by contending that the agent who signed them acted outside his authority. Such attempts have generally failed, on the basis that the agent is doing incorrectly a task (such as dating the bill) that he is authorised to do. The principal is bound under the doctrine of “usual” authority by something that the agent has authority to do in the normal course of things, and/or under the doctrine of “ostensible” authority where the principal by words or conduct represents that the agent has authority.118
3.65 In The Saudi Crown119 the claimant buyer accepted the bill of lading in reliance on the false date inserted by the agent who was authorised to sign bills. Sheen J. rejected an attempt by the carrier to rely on Grant v Norway to limit the scope of the agent’s authority, and awarded damages for misrepresentation, relying on the principle as expounded in Lloyd v Grace Smith & Co.120 that a principal is responsible for the fraud of his agent, acting within his authority.
3.66 A contrary view was reached in The Hector,121 where agents of the carrier, authorised to issue bills of lading, fraudulently ante-dated the bill. The question arose as to whether the bill was authorised and, if not, whether this vitiated the contract of carriage which it purported to evidence. The Saudi Crown was not referred to in Rix J.’s judgment but he concluded, obiter, that owners could disclaim responsibility for the falsity of the bill because the bill did not reproduce the mate’s receipts’ clausing in respect of the cargo and was falsely dated so that the bill:
…as a “shipped” bill became a fraudulent one, irrespective of the mate’s receipt. That is sufficient in my view to render the bill unauthorized by the owners, whether authority is sought in concepts of actual, usual or ostensible authority.
3.67 The judge also commented122 that although by putting his vessel under time charterers’ orders an owner holds the charterer out as authorised to sign bills of lading, he does not have usual or ostensible authority to sign false bills. This analysis has not received general acceptance and is contrary to the normal approach to “usual” or “apparent” authority summarised above. However, the decision itself may be justified on the basis that the shippers, who were party to the bill of lading “contract”, were at least reckless as to its accuracy, and thus the carrier could rely on the principle that a party who knows of or is put on notice of a limit on another party’s actual authority (for example, that there is no actual authority to sign incorrectly dated bills) cannot invoke the doctrines of apparent or usual authority.
3.68 In The Starsin123 the claimants were subsequent holders of bills of lading, and not original parties to them, seeking to sue in contract and tort. Colman J. rejected an argument by the shipowners that the bills, signed by the timecharterer’s agents, were unauthorised because the date of shipment and apparent condition of the cargo were incorrect. He conducted an extensive review of the authorities on this point124 and declined to follow The Hector. He did follow and apply the reasoning in The Saudi Crown,125 saying:126
Accordingly, as the law has now developed, Grant v Norway should be treated as conceptually aberrant and should not be used as a basis for the extension of the protection of shipowners against being bound by bills of lading issued by time charterers, or other agents on behalf of the owners, which by reason of some inaccuracy on their face, have been issued without actual authority. Not only does this conclusion give effect to the conceptual basis of ostensible authority but it also reflects a further important policy consideration. That is that if an innocent shipper, indorsee or consignee could not rely on statements on the face of a bill of lading as to such matters as the date of shipment and the absence of clausing and was obliged to verify the accuracy of the date and the apparent good order and condition of the goods each time he took a bill of lading, that would represent a most serious impediment to international trade which depends so heavily on the accuracy of bills of lading as negotiable instruments.
3.69 The approach in The Starsin was itself followed, in preference to The Hector, in Alimport v Soubert Shipping Co. Ltd.127 It is suggested that the analysis of Colman J. in The Starsin is, subject to the points made below, correct.128 Apparent authority generally requires a “holding out” to the putative contracting party or representee. In the majority of “false” bill of lading cases, it is the subsequent bill of lading holder, rather than the shipper who needs to invoke apparent authority. The cases may be rationalised on the basis that (i) appointment of an agent constitutes “holding out” both to the shipper and to any parties who may be contemplated as becoming bill of lading holders (as Colman J. expressed it the representation is made “to the shipper and indorsees”), but (ii) the doctrine of apparent authority can only be invoked by an innocent shipper, indorsee or consignee.129
3.70 It is also, however, important when considering such issues to keep separate the treatment of claims in contract and those in tort. In The Saudi Crown the claimant’s claim was in tort, the misrepresentation inducing the claimant to become indorsees of the bill and suffer loss as a result. In each of The Hector, The Starsin and Alimport v Soubert Shipping Co. Ltd., the claimant sued for a breach of the bill of lading contract, the existence of which the carrier sought to deny on grounds of want of authority.130 Statements as to date of shipment and condition of cargo are representations of fact, not contractual terms, and it does not follow, from the fact that a master is not authorised to make untrue representations of facts, that he lacks authority to conclude a contract of carriage on the bill of lading terms unless, to use Devlin J.’s language, the falsity “corrupts the whole of the instrument or its heart”. It is suggested that each case must be considered on its facts as to whether the lack of authority is in relation to making representations or concluding a contract or both.