The rapid expansion of trade during the 19th century and the continuing tendency for merchant adventurers to separate their activities so as to specialise either as shipowners or traders led to an increase in national and international law governing the carriage of goods by sea. One major strand of international maritime law was generated because of the principle of English law under which only those who are party to a contract can sue under that contract.
Under CIF and C&F contracts, it is the duty of the seller to conclude the contract of carriage. The ordinary application of the English doctrine of privity of contract meant that the buyer (or consignee/ endorsee) would be left without a remedy against the carrier (shipowner) even though he has sustained a loss, as he was not a party to the contract of carriage (see figure 5.1). This severely undermined the
commercial value of a bill of lading and restricted its negotiable value at a time when international trade was becoming more complex and banks were increasingly involved in financing transactions on the face value of documents alone, particularly the bill of lading.
This in turn led directly to the Bills of Lading Act 1855 (the 1855 Act) which was central to maritime commercial practice for nearly 140 years until the effects of containerisation and through transport and an increasing need for the endorsee to be brought more fully into the scope of the Act resulted in the Carriage of Goods by Sea Act 1992 (the 1992 Act). (This is not to be confused with the Carriage of Goods by Sea Act 1924 which is a different branch of .the legal tree which implemented The Hague Rules in England and which is discussed later in this chapter.)
In a CIF or C&F sale contract, the contract of carriage is the responsibility of the seller and, although the bill of lading is evidence of this contract, the bi1yer, as consignee, is not a party to the contract of carriage although he may be affected by it. The 1855 Act established the legal link between carrier and receiver by providing that:
Every consignee of goods named in a Bill of Lading, and every endorsee of a Bill of Lading, to whom the property and the goods therein mentioned shall pass upon or by reason of such consignment or endorsement, shall have transferred to and vested in him all right of suit, and be subject to the same liabilities in respect of such goods as if the contract contained in the Bill of Lading had been made with himself
Whilst the tenor of the 1855 Act might seem to have solved the problem, presiding judges were keen to ensure that not too wide an interpretation was made of the freedom to litigate bestowed by the Act. After all, it was establishing a right which extended beyond the long established law of privity of contract.
The increasing complexity and sophistication of modern trade, attributable to improved international communications, revealed severe limitations with the 1855 Act. Without exploring the legal complexities relating to the 1855 Act, the Carriage of Goods by Sea Act 1992 (the 1992 Act) expands the scope of the contractual link between carrier and receiver and brings English law more in line with European law-e.g., Dutch Commercial Code Article 510, French Decree 99-1078 of December 1966 Article 49, Section 606 of the German Commercial Code and the US Pomerene Act (Federal Bills of Lading Act 1916).
In summary, the 1992 Act provides for the following: (1) Documents to which the Act applies (section 1)
(a) Bills of lading, unless it is a document which is incapable of transfer by endorsement (e.g., a ,straight' or 'nominated' bill of lading). A ,received for shipment' bill of lading now falls within the Act.
(b) Sea waybills (this is an important new extension).
(c) Ship's delivery orders but not merchant's delivery orders.
(d) Electronic data interchange (EDI) -the Act makes provision for the future application of EDI. (2) Rights under the shipping documents (section 2): The essential objective of the Act is to enable the
lawful holder of a bill of lading to assert contractual rights against the carrier, irrespective of the passing of property (the goods or cargo) and regardless of whether the lawful holder of the bill of lading has suffered loss himself. .
Although under the 1855 Act there was a problem with title to sue where the endorsee came to hold the bill of lading after the goods had already been delivered (by the carrier), this problem no longer applies. 'Property' in the goods is no longer a requirement for title to sue and, just to make the point completely clear with respect to bulk cargoes, Section 5 (4) (b) states expressly that it does not matter that goods cannot be identified because they are mixed with other goods (e.g. grain in a silo, oil in a tank).
However, there are still many countries whose law is governed by the old Act and it is for this reason as has been demonstrated time and again, good original records and contemporaneous evidence from the vessel is frequently crucial to the Courts or arbitrators who are attempting to unravel and adjudicate on complex transactions which have taken place some years previously. The master's commercial
responsibilities mean that he plays an active and involved role in that happens on board and in
connection with the cargo which has been entrusted to his care. It does not become, somebody else's problem' as soon as the discharge port is reached and the hoses are connected or the hatches opened.
Without an intention to enter into a discussion of case law, a pre-1992 Act claim, the Delfini (1990) Lloyd's Rep 252, illustrates a situation which is only too well known to masters of bulk vessels and, especially, tankers.
- First sale contract: Vanol International BV, by contract dated 2 July 1985, purchased 100,000 tonnes of Algerian condensate from Sontrach.
- Second sale contract: Vanol onsold 20-25,000 tonnes to Enichem, CIF terms, delivery Gela. The sale contract provided that payment and delivery could be made against either the shipping documents or a letter of indemnity backed by a bank guarantee to be in place no later than the date of nomination of the vessel.
- Contract of carriage: Vanol, as shippers, entered into a voyage charter with the owners of the Delfini (the defendants). The voyage charter provided that Vanol were allowed to instruct the vessel to
discharge against Vanol's letter of indemnity if bills of lading were not available at time of discharge. (A P&I Club would not be happy with this condition being written into a charterparty which if complied with prejudices Club cover. However, P&I Clubs do recognise the realities of the commercial world and do have recommended wording for such indemnities.)
- Bills of lading issued: The vessel was loaded on 2 August and bills of lading issued naming Sontrach as shippers.
- Delivery: The vessel arrived at Gela on 4 August, gave notice of readiness but did not berth until 7 August. Bills of lading were still in the hands of Sontrach and on 5 August Vanol issued two telexed letters of indemnity, one to the ship instructing it to deliver to Enichem without presentation of the bills of lading and the other, with an invoice, to Enichem who were to pay for the goods. The vessel discharged between 7 and 9 August. (The instruction to the master to discharge without presentation of bills of lading, if it is to be given, should properly come directly from the shipowner and not the receiver and should, preferably be undertaken against a letter of indemnity in accordance with the Club's recommended wording. The L.O.I. will then replace the Club cover in the event of a claim for mis-delivery and this is why Clubs recommend that the L.O.I. be backed by a bank.)
- Settlement: On 12 August, Enichein paid Vanol. It was only on 20 August that Enichem's bank received a complete set of shipping documents from Sontrach including the bills of lading, which had never been presented to the defendants and which, naturally, stated the quantity of condensate loaded and, therefore, to be delivered. There followed a dispute in which Enichein sued the shipowners for short delivery.
- The 1855 Act:
(a) The initial judgement was that once the vessel had unloaded and sailed away, the contract of carriage was discharged despite the incomplete delivery, whereupon the bill of lading ceased to be effective as a transferable document; accordingly, no contractual rights were acquired by the transferee (Enichem).
(b) The plaintiffs (Enichem) appealed but the Court of Appeal held that they had no right of suit
because endorsement of the bill of lading to Enichem on 20 August did not play an essential part in the transfer of title to the cargo which occurred at the latest when Enichein paid Vanol on 12 August and probably earlier on discharge or even when Vanol telexed Enichein on 5 August.
(This illustrates how critical and how complex the precise identification of a specific act or event may be within the course of a normal commercial operation. It also emphasises the need for accurate and concise records to be kept on board.)
- The 1992 Act:
It was the realisation that the precedents, which established the strict interpretation of the 1855 Act rather than the natural justice of the case, were having a detrimental effect on the future of London as an international centre for the resolution of disputes which was the impetus for change. By providing that the bill of lading should be capable of endorsement so as to pass contractual rights and title even after delivery of the goods has been made (provided that the endorsement is effected in pursuance of contractual arrangements made before the delivery of the goods) the problem of the Deyini and sever4 other similar cases is avoided. It might be added that this has still to be confirmed by the
establishment of precedents confirming that interpretation of the 1992 Act.
In summary, it is perhaps unfortunate that the revision of the 1855 Bill of Lading Act carries the name Carriage of Goods by Sea Act 1992, thereby risking confusion with the 1924 and 1972 Carriage of Goods by Sea Acts, which implemented The Hague and Hague-Visby Rules respectively. However, the 1992 Act does bring English law relating to the rights of suit against a carrier even closer to the practice of other major maritime nations. It is interesting to note that the Law Commissioners, in their recommendations to Parliament, declined (as did the 1855 Act) to attempt a precise, legal definition of a bill of lading and left it to be identified by reference to its three well known functions.
The principal recommendations which effectively summarise the exposure of the carrier-i.e., the shipowner and the master, are:
- The lawful holder of a bill of lading is entitled to assert contractual rights against the carrier, irrespective of the passing of property and regardless whether he has suffered loss himself, if
necessary, being able to recover substantial damages for the benefit of the person who has suffered the loss.
- The shipper and any intermediate holder of a bill of lading should not be entitled to rights of suit after someone else has become the lawful holder of the bill of lading.
- The consignee named in a sea waybill (or other such person to whom the carrier is instructed to deliver) and the person entitled to delivery in accordance with an undertaking contained in a ship's delivery order are able to sue on the contract of carriage.
- A bill of lading, representing goods to have been shipped or received for shipment and in the hands of the lawful holder, constitutes conclusive evidence against the carrier of such shipment or receipt (this reverses the rule kn6wuas Grant v. Norway whereby it was held that the master has no authority to sign a bill of lading for goods not put on board).
The master's signature does bind the carrier and the bill of lading is conclusive evidence of shipment against the carrier. It can easily be seen how dangerous it is for a master to sign bills of lading on trust without having ascertained to the best of his ability that the goods have been loaded and are in
compliance with the description on the face of the bill of lading. It is also essential that the carrier has clear and concise procedures for delegating authority to agents to sign bills of lading on their behalf and that the master knows how these operate.