The Dematerialisation of the Bill of Lading

Date01 January 2007
The Dematerialisation of the
Bill of Lading
The Traditional Bill of Lading
A contract for the carriage of goods by sea is normally evidenced by a bill
of lading when the goods to be shipped form only part of the cargo carried
on board. The bill of lading has a number of characteristics. Firstly, its role
as a document of receipt. The bill of lading acts as a receipt for those goods
shipped. The traditional shipped bill of lading began as a non-negotiable
receipt issued by the ship-owner to the shipper to contain details of the
description, quality and condition of the goods. Secondly, its role as a docu-
ment of title. More recently, the bill of lading has evolved into a document
of title. This important function enables the cargo-owner to sell the goods
to a third party whilst they are in transit. Finally, its role as evidence of the
contract of carriage. Problems have arisen, however, as it is evident that the
bill of lading has failed to adapt to technological advancements and it is for
this reason why we have seen the partial demise of the bill and its replace-
ment by other documents, such as waybills.
This paper investigates the reasons for the demise of the traditional bill
of lading and looks at the specific requirements of the ever developing
commercial world. These requirements most definitely involve faster
delivery of the bill of lading, therefore the proposals put forward using
Electronic Data Interchange (“EDI”) will be evaluated. It is clear that any
electronic equivalent must contain the same characteristics as the current
paper bill of lading and, therefore, these proposals are not without their
problems. This paper evaluates those problems and assesses the effect
international conventions, EU directives, statutory legislation, and case law
have on the development of an electronic bill of lading. In addition, the
paper shall focus on the roles of the bill of lading as a document of receipt,
evidence of the contract of carriage and as a document of title in both a
paper-based system and under an electronic system.
Signif‌icant changes are required in order to bring the bill of lading in line
with commercial practice. It is hoped that recent initiatives will instil in the
modern bill of lading the commercial conf‌idence it once had in the past.
* Kelly T. McGowan LLM (University of Kent at Canterbury), Trainee Solicitor with
Dillon Eustace
The Dematerialisation of the Bill of Lading 69
Role of the Traditional Bill of Lading
The bill of lading originated in the fourteenth century as a non-negotiable
receipt issued by the ship-owner, for cargo received, to a merchant who did
not intend to travel with his goods.1It acts as a receipt for the goods
shipped and contains certain admissions as to the type, quantity and
condition of the goods as loaded on board. Mercantile practice eventually
saw the incorporation of the terms of carriage into the bill of lading. Those
terms included exclusion clauses which were more likely to be introduced
by the shipowner as the stronger bargaining party in an attempt to exclude
himself from liability should the goods be lost or damaged en-route.
By the eighteenth century, the bill of lading had evolved into a negotiable
document thereby enabling the merchant to sell the goods whilst they were
still at sea. It is for this reason that the bill of lading is considered a docu-
ment of title in that it permits the original owner of the goods to endorse the
bill in favour of a purchaser on a sale. The subsequent purchaser may then
decide to either obtain delivery of the goods at the port of discharge by
producing the bill of lading2which is made out to his “order” by the seller,
or he may replicate the same process and sell the goods to another party.
The main problem with the traditional shipped bill of lading as it stands
is that delivery of the goods can only be made to the holder of the original
bill of lading and quite often the bill does not arrive to the purchaser until
long after the ship has arrived at the port. During this time, the vessel is
likely to be incurring port charges and will not be earning freight. This is
particularly problematic for the carrier of perishable goods which need to
be contained or transferred to specif‌ic conditions3or the carrier of oil cargo
who will be under pressure for a quick turn-around. In anticipation of the
likelihood of such events, the rights and liabilities of each of the parties must
be clear. For this reason there must be a clear point when the assignee under
the transaction obtains the rights as well as the liabilities in the goods under
the bill of lading from the assignor.
Bill of Lading as a Receipt
It is common practice for the bill of lading to be signed by the loading
broker or master.4It will normally acknowledge the quantity and condition
of the goods when loaded. The reason for this acknowledgement is so that
1Wilson, Carriage of Goods by Sea, (4th ed) (Pitman, 2001), p 119
2The bill of lading must be produced in order to obtain delivery of the goods. There may
be severe consequences where the goods are misdelivered against other documentation.
3For example, refrigeration is required in the case of fruits, shellf‌ish and the like.
4A loading broker or master is commonly employed by the shipowner to load the
goods on board the vessel. This function may also be carried out by the carrier who
will sign the bill of lading in this capacity.
the ship must deliver “what she received as she received it, unless relieved
by the expected perils”.5
Receipt as to quantity – Common Law
The bill of lading is prima facie evidence that the quantity of goods that are
alleged to have been shipped, have in fact been shipped. In order to avoid
liability a shipowner is bound to deliver the full amount of goods signed for
in the bill unless he can prove that the whole or some part of it was not
shipped. The burden is a difficult one to discharge and according to Lord
Shand in Henry Smith & Co v Bedouin Steam Navigation Co,6in order for
the carrier to avoid liability, “the evidence must be sufficient to lead to the
inference that the goods may possibly not have been shipped, but in point
of fact they were not shipped”.
The bill of lading will normally contain a description of the quantity of
goods loaded on board, either by the number of packages or by the weight
in bulk. Notwithstanding that description and statement of number or
quantity, the shipowner is not estopped7by the signature of the bill of
lading by the master, from showing that the goods, or part of them, were
never actually put on board.8In Grant v Norway,9a bill of lading was
signed by the master for twelve bales of silk, which the shipowner could
prove had not been loaded on board the ship. In deciding whether the
shipowner was liable for non-delivery, it was held that the master had no
authority to sign for goods that were not shipped and so the bona fide
endorsees of the bill of lading could not claim for non-delivery. Such a
decision is quite difficult to accept when one considers how much the
endorsee or consignee relies upon a concise statement as to the quantity of
the goods shipped.
For this reason, the enactment of section 3 of the Bills of Lading Act,
1855, attempted to address this problem. It stated that a bill of lading in the
hands of a consignee or endorsee is conclusive evidence, against the master
or other person signing it, that the goods representing to have been shipped
on board a vessel, have been shipped. It does not overcome the problem
however, where the holder of the bill of lading knew that the goods had not
been shipped. According to Moccata J. in V/O Rasnoimport v Guthrie
&Co,10 section 3 only provides that the bill of lading is conclusive evidence
5Per Lord Sumner in Bradley v Federal Steam Navigation Co Ltd [1927] 137 LT 266,
p 267
7ie, he is not prevented from denying the truth of a statement he has made or from
denying the facts that he has alleged to exist.
8Carver, Carriage by Sea, Vol 1 (13th ed) (Stephen and Sons, 1982), p 102
9[1851] 10 CB 665

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