A

Project work
On

“CARRIAGE OF GOODS BY SEA”

Submitted towards the partial fulfillment of

IInd Semester of M.B.A. & M.B.L.
degree course, for the subject

COMMERCIAL TRANSACTIONS

NATIONAL LAW UNIVERSITY, JODHPUR

April, 2008

PREFACE
1
Preparing an academic project at the Post Graduation Level should serve as the very
base of further practical projects likely to be taken up by the candidate during his
future career. Luc de Clapiers de Vauvenargues, a French Author has very well said
that Men despise great projects when they do not feel themselves capable of great
successes. But it is normally seen that academic projects are a result of the
candidate’s feeling that he is really capable of undertaking the proposed project.

With the same conception in my mind, I have made an honest attempt to study the
“Carriage of goods by Sea.” The time that has been passed/invested in searching here
and there and everywhere for anything relevant to carriage by sea and its associated
rules has given me a fair idea as to how merely roaming in the sea of internet add
value to your research skill and of course the knowledge of the topic you searched
for.

Though able efforts have been made to focus the study paper entirely only on the
carriage of goods by sea, it may be that some point in time the paper may seem
deviating from the topic due to the fact that it is necessary to introduce relative
information about the topic also.

Carriage by Sea as a discipline has always been a dynamic issue which expands its
scope along with changes in commercial world. This topic can be said to be important
from the point of view of international trade as well as sale of goods-both of which
are part of the course being pursued. The research carried out by the student
independently helps him gain a lot of knowledge. This is my own experience also in
this research journey and preparation of this project report.

I hope the reader will have some good idea about the topic having gone through this
study paper and that is the only criteria of the success or otherwise of this study
paper.

2
 ACKNOWLEDGEMENT

As a child, you acknowledged everything you accomplished, as you grow older

and more sophisticated, you acknowledge only major accomplishments but an
endeavor of this magnitude would not have been possible without the invaluable
help and support of Mr.Bipin Kumar who helped me till the very last minute (at
the oddest of hours) of the final dictate and supported me summing up the work
without whom this work would not have reached this place.

However, the student has tried very hard to make the research paper as thorough as
possible. This attempt at a good research paper however humble would not have been
possible had the student not been given a chance to work on it. The student therefore
would like to thank the faculty in charge for entrusting the student with the area of
research herein.

But I still fail to understand the scarcity of this page to put in the efforts of all
those people who helped me and guided me through this small part of the paper
that I have completed.

Anything that I do in my life is incomplete without the blessings of GOD who are
my parents only.

3
 SYNOPSIS

Project Topic:
“Carriage of Goods by Sea”
Introduction: - The carriage of goods means the transportation of goods from one
place to another within the country or from one country to another. The transportation
of goods plays an important role in commercial transactions, and consequently in the
economic development of a country. The law relating to carriage of goods is
therefore, of great significance. There are three persons involved in cases of carriage
of goods. They are:-
1) Carrier
2) Consignor or shipper
3) Consignee
In spite of recent developments in other forms of transport carriage by sea remains the
most usual way of transporting goods overseas. In terms of the weight, well over 90%
of goods are so carried. Sea transit may last for several weeks during which the goods
will be subject to the dangers inherent in the sea transit.

Objectives:
This research has been designed to fulfill certain underlying objectives, which could
facilitate in better understanding of the topic. These objectives could be classified as
follows:
1. To study in detail the rules relating to carriage of goods by sea .
2. To know about the importance of the bill of lading in carriage contracts
3. To know in brief about the sale contracts based on sea carriage.

Research Methodology:
Since the research is a non-doctoral one, therefore the data would be mainly collected
from secondary sources of information. These will include books, journals and
internet.

Chapterization:
a. Synopsis
b. Project work
1. Introduction

4
 2. Contract of Affreightment
3. Bill of Lading: Types and Functions
4. The Carrier’s Responsibilities under a Bill of Lading
5. The Carrier’s Immunities
6. The Shipper’s Responsibilities and General Clause
7. Sale contracts based on sea carriage
8. Bibliography

Bibliography:
Books:

1) A Text book on Mercantile Law by P.P.S.Gogna

2) Day and griffin:-The Law of International Trade
3) Schmitthoff’s Export Trade (The Law and Practice of International Trade)

5
In the commercial life of any country, the need for carrying goods from one place to another
cannot be over emphasized. Also, goods are to be moved from one country to another. For
these purposes, a contract of carriage is to be entered into. The persons, organizations or
associations which carry goods are known as carriers. It is the normal, indeed crucial,
incident to the contract of sale that the goods should be shipped to the buyer .Depending on
the type of contract we are dealing with; this duty may fall either on the seller or the buyer.
The party who arranges for the goods to be shipped is the shipper.

“Carriage is simply the transportation of goods/cargo from one location to another. It

involves loading, stowage, transportation, unloading and delivery.”

Definition of a contract of carriage:-A contract of carriage of goods is a contract of

bailment for reward. It may however, be noted that a contract of carriage is not an
ordinary contract of bailment. It is something more than that because the liabilities of
the carrier (i.e. the person transporting the goods) are more than those of the bailee.
There are three persons involved in a contract of carriage. They are:-
1) Carrier: A person who undertakes (i.e. agrees) to transport the goods, is called a
carrier (or carrier of goods).
2) Consignor or shipper: A person, who delivers the goods to the carrier for
transportation, is called a consignor or shipper.
3) Consignee: A person to whom the goods are addressed and to whom the carrier
should deliver the goods is called a consignee.

KINDS OF CARRIERS

The carriers may be classified into two types:-

i) Common carriers
ii) Private carriers
Common carriers: - A common carrier is one who is engaged in the regular business
of transportation of goods, and undertakes for hire, to transport the goods of any
person who chooses to employ him. The term “common carrier “is defined as:
“Common carrier denotes a person, other than the Government, engaged in the
business of transporting for hire, property from place to place, by land or inland

6
navigation, for all persons indiscriminately. Persons include any association or body
of persons whether incorporated or not.”1

Characteristics of a common carrier: The characteristics of a common carrier are as

follows:-
1) The common carrier must be engaged in a regular business of transportation of
goods. A person who occasionally transports the goods is not a common carrier.
2) The common carrier must carry on his transportation business for money. A
person, who transports the goods free of charges, is not a common carrier.
3) The common carrier must transport the goods only. A carrier who carries
passengers is not a common carrier.
4) The common carrier may be an individual, a firm or a company. Bu the
government is not considered as a person for this purpose. Thus, the post office is not
a common carrier although it may carry goods.
5) The term common carrier is applied to the transportation of goods by land and
inland water ways. It does not apply to carriage by sea or air.
6) The common carrier must transport the goods of all persons without any
indiscrimination.2 As a matter of fact, a common carrier is bound to transport the
goods of any person provided there is space in the vehicle. If he refuses to transport
the goods besides there being space in the vehicle, then the carrier is liable to pay
damages.3
If a common carrier reserves the right to refuse to transport the goods of some
person, he is not a common carrier.
There are certain exceptional circumstances when the common carrier can lawfully
refuse to transport the goods of any person. These circumstances are:
a) If there is no space in the vehicle
b) If the goods are not of the type which he usually transports as a common carrier.
c) If the reasonable charges for carriage are not paid
d) If the goods are unlawful, of dangerous nature or improperly packed
e) If the destination is not on his normal route, and also if the destination can be
reached only through area of disturbance.
RIGHTS OF A COMMON CARRIER
1
Section 2 of the Carriers Act, 1865
2
As used in section 2 of the Carriers Act, 1865
3
Crouch v London & North Western Rly Co., (1854) Ex 556

7
There are certain rights that a common carrier possesses. These are:-
1) Right to receive charges: A common carrier is entitled to receive the agreed
charges (remuneration) for his work i.e. for transportation of goods. If the charges for
his work are not agreed, then he is entitled to receive reasonable charges.
It may also be noted that a common carrier can also demand advance payment. But if
he accepts the goods without demanding payment of freight in advance, then he
cannot afterwards claim payment until he carried the goods to the destination.4
2) The carrier is also entitled to charge extra for the risk in respect of scheduled
articles. However, such extra charges must be displayed at the place of booking in
English as well as in the language of that place.5
3) Right of particular lien: The right of lien means a person’s right to retain the goods
until the lawful charges due in respect of the goods are paid to him. A common
carrier can exercise his lawful right of lien, over the goods transported by him, for his
charges.

LIABILITIES OF A COMMON CARRIER

1) The liability of any common carrier for the loss or damage to any [property
(including container pallet or similar article of transport used to consolidate goods)
delivered] to him to be carried, not being of the description contained in the schedule
to the Carriers Act, 1865, shall not be deemed to be limited or affected by any public
notice; but any such carrier, not being the owner of a railroad or tramroad constructed
under the provisions of Act 22 of 18636 may by special contract, signed by the owner
of such property so delivered as last aforesaid or by some person duly authorized in
that behalf by such owner, limit his liability in respect of the same.
2) The liability of the owner of the railroad or tramroad constructed under section 22
of 1863, is not limited by special contract. However, the owner of such railroad or
tramroad will be held liable for loss to goods caused by negligence or criminal act on
his part or by his agents or servants.7 Thus, where any loss or damage of goods is

4
Crouch v Great Northern Rly Co. (1856) 11 Exch 742
5
Section 4 of the Carriers Act, 1865
6
See now the Land Acquisition Act, 1894, Sec 2
7
Section 7 of Carriers Act, 1865

8
caused by criminal acts of the carrier or his servants or agents, the liability cannot be
limited by special contract.8
3) Common carrier liable for loss or damage caused by neglect or fraud of himself or
his agent: In simple words, a common carrier is liable to pay damages if loss/damage
to the goods is caused by fraud or negligent act of himself or his agent. But when
damage to goods takes place due to an accident taking place ( example bursting of the
tyre of the vehicle) it will not constitute negligence on the part of the driver and it
cannot be said that the carrier did not take proper care in maintaining tyre of the
vehicle. Thus, the carrier is not liable to pay damages.9
A carrier will also not be held liable if the consignment of goods is wrongly
delivered.10

BURDEN OF PROOF:- In any suit brought against a common carrier for the loss,
damage or non-deliver of goods (entrusted to him) for carriage, it is not necessary that
the plaintiff prove the fault of the carrier by showing the negligence or any other
criminal act of the carrier, his servants or agents.11
In other words, the burden of showing that the damage to goods was not caused due
to the negligent act of the carrier or his agents or servants would be entirely on the
carrier.12

2) Private carrier: A private carrier is one who casually or occasionally transports the
goods of persons of his own choice. He is not engaged in the regular business of
transportation of the goods. The private carrier reserves his right to accept or reject
the goods offered to him by carriage. In other words, he undertakes to transport the
goods of others on special terms which are mutually agreed upon between him and
the consignor.

8
Gaya Muzaffarpur Roadways Co. v Fort Gloster Industries Ltd., AIR 1971 Cal 494
9
State of Rajasthan v Mehta Transport Co., AIR2002 Raj 157
10
The Manager, Doars Transport (P) Ltd. V Canara Bank , AIR 1992 Mad 324
11
Hussainbhai Mulla Fida Hussain v Motilal Nathulal, AIR 1963 Bom 208
12
Assam Bengal Roadways Ltd. V Union of India, AIR 1988 Kant 157

9
Characteristics of a private carrier

1) The private carrier is not engaged in the regular business of transportation of

goods.
2) The private carrier is not bound to transport the goods of all persons. He reserves
the right to accept or reject the goods offered to him for transportation.
3) The private carrier transports the goods for selected persons of his own choice, and
not for everybody.
4) The private carrier may also transport the goods gratuitously i.e. without any
charge.

COMPARISON BETWEEN A COMMON CARRIER AND A PRIVATE

CARRIER

Common Carrier Private carrier

1) Engaged in the regular business of
Transportation of goods.
2) Transports the goods of all persons
Without any discrimination.
3) Always transports the goods for hire
(i.e. charges)
4) Does not reserve his right to reject the
Goods.
5) Liabilities of a common carrier are
Governed by Carriers Act, 1865.
Not engaged in the regular business
Of transportation of the goods. He
Occasionally transports the goods
Of others.
Does not transport the goods of
All persons.
may also transport the goods
without any charges.
Reserves his right to reject the
Goods.
Liabilities are not governed by
Carriers Act, 1865 but by the
Law relating to bailment that
Is the Indian Contract Act, 1872.

10
 CARRIAGE OF GOODS BY SEA

Carriage is frequently the final step in a contract for the sale of goods. The shipper is
often the vendor of the cargo. The ultimate consignee is often the buyer of the cargo. Risk
and title to the goods will often pass during the course of the contract of carriage. There is a
general presumption that title passes when risk passes but this is a rebuttal presumption. The
exact point at which risk and title pass depends on the terms of the contract of sale and the
intention of the parties.

Contract of Affreightment: A contract to carry goods by sea is called the “contract of

affreightment” and the consideration or charges paid for the carriage is called the
“freight”. A contract of affreightment may take either of the two forms, namely—
(i) a charter party, where an entire ship, or a principal part of a ship is placed at the
disposal of merchant known as a charterer); A charter party may be for a particular
period, or for a particular voyage. In the former case it is called a time charter party and
in the latter case, a voyage charter party has no specific form; the form varies from trade
to trade depending on the customs of the trade.
(ii) a bill of lading where the goods are to be carried in a general ship and the person
consigning the goods is known as a shipper.
There are three persons involved in a contract of affreightment. These are:-
1) Ship-owner: A person who is the owner of the ship and undertakes to transport the
goods is called a “ship-owner”. In other words, he is the carrier of the goods.
2) Charterer: A person, who hires the ship and delivers the goods to the ship-owner
for transportation, is called a charterer. In other words, he is the consignor of the
goods and is also known as a shipper.
3) Consignee: - A person to whom the goods are addressed and to whom the ship-
owner should deliver the goods is called a “consignee”.

TYPES OF FREIGHT

1) Lump sum freight: - While freight is normally arranged according to weight,

measurement or value, the shipper may agree to pay a lump sum as freight for the use
of the entire ship or a portion thereof. In this case, the amount of freight payable by
the shipper is fixed and invariable and , if the ship-owner is ready to perform his
contract, is payable whether the shipper uses the hired space to full capacity, or loads

11
below capacity or does not load at all. Moreover, in the absence of agreement to the
contrary, the whole lump sum freight is payable if only part of the loaded cargo is
delivered by the ship-owner at the port of destination and the remainder is lost.
However, the ship-owner cannot claim lump sum freight if he is unable to deliver at
least part of the cargo.
2) Pro rata freight: - It is the freight which is payable proportionate to the goods
loaded on the ship or to the use of carrying capacity of the ship. Sometimes, ship-
owner agrees to load the full cargo. But only loads and carries a part of it. In such
cases also, he will be entitled to pro-rata freight only unless there is an express
agreement for the payment of the whole freight.
3) Dead freight: - Where the shipper fails to load the cargo or the full cargo after
arranging with the ship-owner for its carriage, he is in breach of the contract of
carriage and is liable to pay the agreed freight as damages (dead freight). But the
ship-owner, who uses the freight space which would have been taken up by the goods
of the defaulting shipper, and carries therein goods of other shippers, has to deduct
the earned freight when claiming damages.
4) Back freight: - When the delivery of the goods has been prevented by events beyond the
control of ship owner or his master, the master is empowered to take steps in dealing with the
goods. The ship owner then becomes entitled to charge the shipper or the cargo owner back
freight to cover expenses incurred by the shipmaster.
5) Primage: - It is the extra freight which is payable, by an agreement, to the captain of
the ship. It is calculated at a fixed percentage on the ordinary freight. As a matter of
fact, it is a sort of reward to the captain of a ship for taking care of the cargo put on
board the ship. Nowadays, the payment of primage is not a common practice.

THE CARRIER’S ( IMPLIED)RESPONSIBILITIES UNDER A BILL OF

LADING

The common law implies three undertakings by the carrier into a contract of carriage
by sea. These terms may be excluded by express terms in the contract. The common
law differs in these matters from the Hague-Visby Rules. The three terms relate to the
seaworthiness of the vessel, to deviation from route and to delay.

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SEAWORTHINESS

When goods are to be carried by sea the fitness of the vessel which is to do so is
obviously a matter of concern to any person having an interest in the goods. At
common law it is an implied term of the contract of contract that the ship shall be
seaworthy. A ship is not seaworthy if it has a defect which a prudent owner would
have required to be rectified before sending the ship to sea. This requirement is
absolute; the ship must be seaworthy and it is not enough that every effort has been
made to make it so.
The ship must be seaworthy in two respects. It must be fit to sail on the particular
voyage or a particular stage of the voyage and it must be fit to receive the particular
cargo. As regards the ship itself, unseaworthiness can take many forms. It may be a
physical defect, such as inefficient engines but it may also take the form of
incompetence on the part of the crew. In this respect the ship must be seaworthy when
it sails and there is no breach of term if it is so but becomes unseaworthy while on the
voyage.
E.G. The Maori King (Cargo owners) v Hughes13, a ship was held to be unseaworthy
in respect of a cargo of frozen meat because refrigeration equipment was defective. In
this respect the ship must be seaworthy when the cargo is loaded and there is no
breach of the implied term if it becomes unfit for the cargo after the cargo has been
loaded.
The legal effect of a breach of the term will depend on the effect of the breach on the
contract. If the breach results in unseaworthiness which is such as to frustrate the
commercial purpose of the contract of carriage the cargo owner will be entitled to
repudiate the contract. If it is not so serious he must rely on the action for damages.
Under a contract for carriage in a general ship the cargo owner will normally be in the
latter position unless he is the original shipper. Also, if there is a breach of the
implied term, the carrier cannot rely on a clause absolving him from liability for some
cause of loss or damage unless the loss/ damage was actually caused by the
unseaworthiness.
On the other hand, under the Hague-Visby Rules, the carrier is liable before and at
the beginning of the voyage, to exercise due diligence to make the ship seaworthy,
properly man, equip and supply the ship and make the cargo spaces fit and safe for
13
[1895] 2 QB 550, CA

13
the reception, carriage and preservation of goods. This is identical with the common
law but in this case, the burden on the carrier is only to exercise due diligence to
make the ship seaworthy. It is not absolute like that in common law. If due diligence
has not been used to make the ship seaworthy the carrier will be liable for any loss or
damage resulting from the unseaworthiness even though the primary cause of the loss
of damage was one for which the carrier would not otherwise be liable under the
Rules.

DEVIATION

There is an implied undertaking at common law in any contract for the carriage of
goods by sea that the vessel will at unreasonably deviate for the agreed route or, if
there is no agreed route, form the usual route or, if there is no usual route, from the
direct route. Since the undertaking is implied it can be excluded by an express term in
the contract.
There is no breach of the term if a ship deviates on reasonable grounds as, for
example, to avoid the dangerous weather or to save the life at sea, although deviation
to save property at sea is not a permitted deviation art common law as it is under the
Hague-Visby Rules.14
The importance of the term for the cargo owner lies in the legal effect of a breach of
the term by the carrier. Any voluntary and unjustified deviation is a fundamental
breach of the contract of carriage. In consequence, the cargo owner is entitled to
repudiate the contract and, if he does so, the carrier will lose the benefit of any
immunity in the contract protecting him from liability for loss or damage except those
available to a common carrier and even the common carrier’s defences will only be
open to him if he can prove that the loss or damage would have occurred even if there
had been no deviation.
Example:-Joseph Thorley Ltd. V Orchis Steamship Co15.-A vessel carrying goods
from Cyprus to London deviated, at the beginning of the voyage, to ports of Eastern
Mediterranean. When the vessel arrived at London the cargo was damaged by the
negligence of the stevedores unloading it. When the cargo owner sued in respect of
this damage the carrier pleaded a clause in the contract absolving him from liability
for any such damage. It was held that because the vessel had deviated the cargo

14
Rio Tinto Co v Seed Shipping Co (1926) 42 TLR 381
15
[1907] 1 KB 660, CA

14
owner was entitled to repudiate the contract of carriage and the carrier was not then
entitled to the benefit of the community unless he should show that the damage by
stevedores in London would have occurred even if the vessel had not deviated in the
Eastern Mediterranean, a demonstration which clearly presented some difficulties.
A cargo owner is not bound to repudiate the contract in these circumstances. He may
waive the breach of the undertaking either expressly or by implication. Any such
waiver will not, however, affect the rights of a subsequent indorsee of a bill of lading
who takes it without knowledge of the deviation.
Under the Hague-Visby Rules any deviation in saving or attempting to save life or
property at sea or any reasonable deviation is not deemed to be an infringement or
breach of the Rules or of the contract of carriage and the carrier is not liable for any
resulting loss or damage. The Hague-Visby Rules are silent as to the legal effect of an
unreasonable deviation on the contract of carriage and the position will therefore be
as at common law.
A deviation, in addition to being a breach of the contract of carriage by sea, may
amount to a breach of a contract of sale by a seller who has agreed, expressly or by
implication, that the goods will be carried on a particular route. The legal effect of
such a breach would, of course, be a matter to be decided under the law on the sale of
goods.

DELAY

At common law there is an implied undertaking by the carrier that the voyage will be
carried on without undue delay. In many cases delay will amount to deviation. The
Hague-Visby Rules are silent on this matter.

DUTIES OF A CARRIER BY SEA

In case of carriage of goods by sea, the carrier is the ship-owner or the charterer who
enters into a contract with the consignor (shipper) for the carriage of goods. The
duties of a carrier by sea are:-

15
1) Duty to exercise due diligence: - It is the most important duty of a carrier by sea.
The duty requires that the carrier shall be bound, before and at the commencement of
the voyage, to exercise due diligence in respect of the following:-
(a) To make the ship seaworthy
(b)To properly man, equip and supply the ship
(c) To make the holds, refrigerating and cool chambers, and all other parts of the ship
in which the goods are carried, fit and safe for their reception, carriage and
preservation.
The words “before and at the beginning of the voyage” are important in respect of
the above stated duties. This means the period from at least the beginning of the
loading until the vessel starts on the voyage. If there is failure to exercise due
diligence during that period, the carrier will be held liable for the loss. Thus, where
the ship was seaworthy when the cargo was loaded but was lost in fire before the
beginning of voyage, the carrier was held liable for the loss.
2) Duty to load and handle the goods properly:-It is another duty of the carrier to be
careful in dealing with the goods to be carried on board the ship. This duty requires
that the carrier shall properly and carefully load, handle, stow (i.e. store or fill
properly), carry, keep, care for and discharge the goods carried by him.

THE CARRIER’S IMMUNITIES

Under the Hague-Visby Rules the carrier will not be liable for loss of or damage to
the cargo caused by the events below16. It should however be noted that these
immunities will not avail the carrier if he ahs not exercised due diligence to make the
ship seaworthy and the loss or damage was caused by the unseaworthiness.

(a) Act, neglect or default of the master, mariners, pilot or the servants of the
carrier in the navigation or in the management of the ship. While few problems
have arisen concerning “navigation”, difficulties have arisen on what is meant by
“management of the ship”. It does not include care of the cargo, which is a separate
duty.

(b) Fire, unless caused by actual fault or privity of the carrier.

16
Art. IV (2)

16
(c) Perils, dangers and accidents of the sea or other navigable waters. These are
dangers to which the sea transit is particularly prone, such as stranding, storms,
collision and seawater damage. To come within the immunity it must be shown that
the loss or damage was caused by something more than the ordinary action of wind
and waves. There must be an element of fortuity about the event and it must not be
some occurrence which in the ordinary course of events should have been foreseen
and guarded against.
Also, the carrier may be protected by this immunity even though the peril of the sea
was not the immediate cause of the loss or damage.

(d) Act of God. This is any natural event for which no human agency is responsible
and against which precautions could not reasonably have been taken. Thus, a carrier
could not plead Act of God when a ship went aground in a fog, since human agency
was necessary to steer the ship on the shoal.17

(e) Act of war. This is any direct hostile act resulting from war. War probably
includes civil war and does not necessarily involve an official declaration of war.

(f) Public enemies. The nature of these is unclear, though most authorities instance
pirates.

(g) Arrest or restraint of princes, rulers or people or seizure under legal process.
The phrase “princes, rulers or people” in effect means “established governments” and
the immunity covers cases of government action such as embargoes, import bans,
quarantine restrictions and the like.

(h) Quarantine restrictions. In view of the preceding immunity there appears to be no

reason for the appearance of this as a separate immunity as far as English law is
concerned.

(i)Act or omission of the shipper or owner of the goods, his agent or representative

17
Liver Alkali Co v Johnson (1872) LR 7 Exch 267

17
(j) Strikes or lockouts or stoppages or restraints of labour whatever cause whether
partial or general.

(k) Riots or civil commotions. A civil commotion has been said to be an intermediate
stage between a riot and a civil war.18

(l) Saving or attempting to save life or property at sea.

(m) Wastage in bulk or weight or any other loss or damage arising from an
inherent defect, quality or vice of the goods. This exception, which in the common
law is known as “inherent vice”, covers any loss occurring through some natural
defect or quality in the goods themselves, as, for example, acid in the fertilizers
eventually rotting the bags in which they were packed.”
The immunity will naturally not avail the carrier if the damage, though arising from
the nature of the goods, was caused by bad stowage.

(n) Insufficiency or inadequacy of marks

(o)Insuffiency of packing. This immunity, like the previous one, will not apply
where there has been bad stowage.

(p) Latent defects not discoverable by due diligence

(q) Any other cause arising without the actual fault or privity of the carrier or
without the fault or neglect of the agents or servants of the carrier…….The carrier
will be able to claim the benefit of this immunity only to the extent that he can prove
the absence of fault, privity or neglect.

BILL OF LADING

The term “bill of lading” may be defined as a document acknowledging the shipment
of the goods, and containing the terms and conditions upon which the goods are to be

18
Bolivia Republic v Indemnity Mutual Marine Assurance Co Ltd [1909] 1 KB 785, CA

18
transported by the ship. It is signed by the ship-owner or his authorized agent or by
the master of the ship. It should also be stamped.
However, it must be observed that all countries do not follow the same form of
legislation globally. The broad categories may be stated as follows:
i. The Hague Rules.
ii. The Hague/Visby amendments.
iii. The Hamburg Code.
iv. Hybrid systems based on the Hague/Visby and Hamburg regimes

FUNCTIONS OF THE BILL OF LADING19

1. Bill of Lading as a Receipt: - The bill of lading will acknowledge the quantity
of goods put on board, their description and their condition. The bill of lading
form will usually be completed by the shipper or his forwarding agent and sent to
the carrier. As the goods are loaded they will be checked by tally clerks and if the
particulars are found to be correct the bill of lading will be signed for the carrier
by his agent, the loading broker. However, the evidentiary value of the bills in all
these cases is not the same in all case and it depends upon the circumstances of
the case such as whether the bill falls within the Carriage of Goods by Sea Act
1971 or not.

Bill Of Lading Falling Within The Carriage Of Goods By Sea Act 1971
Under Article III (3) of this Act, the carrier has to include the leading marks, the
number of packages or pieces or the quantity or weight of the goods and the
apparent order and condition of the goods on the bill of lading. The statements
made on the bill of lading are regarded as prima facie evidence of the receipt of
the goods as described under III(4).

Bill Of Lading Not Falling Within The Carriage Of Goods By Sea Act 1971
Statements as to quantity:
According to Common Law, a statement specifying quantity received is a prima facie
evidence of the quantity shipped. The burden of proof lies on the carrier to prove that
19
http://www.essexcourt.net/uploads/publication/BILLOFLD.doc

19
the cargo as specified has not been shipped. This burden is an absolute one.
In the case of Smith v/s. Bedouin Steam Navigation Co [1896], the bill of lading
stated that 1,000 bales of jute had been shipped, whereas only 988 bales were
delivered. It was held that the carrier could successfully discharge the burden of proof
only if he could show that the goods were not shipped, not merely that the goods may
not possibly have been shipped.

There may be endorsements on the bill of lading with statements such as weight and
quantity unknown and the courts recognize these, since information on quantity
entered on a bill of lading is based on statements made by the shipper and which does
the carrier not normally verify. However, when the statements is contained as ‘
quantity unknown’ alongside the gross weight entered by the shippers for the
purposes of Section 4 the weight entered is not a representation that the quantity was
shipped.

Example: A bill of lading which states that 11,000 tones of cargo were shipped ‘
quantity unknown’ means that the quantity is unknown and not that that amount of
cargo was actually shipped, this would be the meaning construed by the Courts.
According to the Hague/Visby Rules, the shipper can demand the carrier issue a bill
of lading showing ‘either the number of packages or pieces, or the quantity, weight
etc as furnished in writing by the shipper’. Accordingly, the carrier may use any of
these three methods of quantifying cargo. However, he cannot acknowledge one kind
and disclaim knowledge of others.
In the case of Oricon v/s Integraan (1967), the bills of lading acknowledged the
receipt of 2,000 packages of copra cake said to weigh gross 1,05,000 Kgs for the
purposes of calculating freight only. It was held that while each of the bills of lading
being Hague Rules of bills of lading, acknowledged the number of packages shipped
as a prima facie evidence.
Regarding the evidentiary bill of lading is concerned; the Hague/Visby Rules serve as
prima facie evidence of the amount of cargo shipped.

Statements as to condition: Bill of lading usually contains the printed words,

“Shipped in good order and condition.” At common law, in the hands of the shipper,
this statement is not even prima facie evidence of the condition of the goods when

20
shipped. It amounts merely to evidence of the condition and if the goods arrive
damaged the onus remains with the shipper to show that the goods were shipped in In
Compania Naviera Vasconzada V Churchill and Sim 20 timber was stained with oil
when shipped but a “clean” bill of lading was nonetheless issued to the shipper who
indorsed it to a third party. The indorsee sued the carrier in respect of the damage.
The carrier was estopped, by the statement in the bill of lading, from denying that the
timber was in good condition when loaded and was thus liable to the indorsee for the
damage.
On the other hand, in Canadian and Dominion Sugar Co Ltd v Canadian National
(West Indies) 21Steamships the bill of lading contained the phrase “signed under
guarantee to produce ship’s clean receipt”, thus clearly incorporating the receipt terms
into the bill of lading. The receipt stated, “Many bags stained, torn and re-sewn.” The
bill of lading statement thus qualified did not estop the carrier from proving the
condition of the timber when shipped.
Statements as to leading marks: Leading marks are the distinguishing marks, code
marks, symbols etc. placed on the goods or their containers by the shipper. Where the
Hague-Visby Rules apply, the carrier can refuse to enter them on the bill of lading
unless they are such as should ordinarily remain legible until the end of the voyage.
At Common law the carrier is entitled to show that goods shipped were marked
otherwise than as noted I the bill of lading as long as the marks in question are not
material to the description of the goods.
In Parsons V New Zealand Shipping Co.22 some carcasses of frozen lamb were found
on arrival to bear marks different from those in the bill of lading. The marks in
question only reflected details in the shipper’s storage system and were not related to
the quality or description of the carcasses. The carrier was thus entitled to prove that
the carcasses delivered were the ones actually loaded. It appears, however, that the
carrier is not bound by any statement as to the marks that indicate quality, on the
grounds that he is not a judge of quality.

THE BILL OF LADING AS A DOCUMENT OF TITLE

20
[1906] 1 Lloyds Rep 642
21
[1947] AC 46, PC
22
[1901] 1 KB 548, CA

21
A document of title is one which the law recognizes as representing the goods so that
the transfer of the document to a party will vest in that party the ownership or
possession of the goods to which the document relates, provided that this transfer of
rights was intended by the parties. Some documents of title are so by virtue of the
common law’s recognition or mercantile usage while others have been made so by
statute. The ability to transfer property rights in goods by the transfer of a document
is the keystone of international trade practice.
The bill of lading has long been recognized by the courts, following mercantile usage,
as having this quality. In E Clemens Co V Bidell Bros23, the buyer under a CIF
contract was offered a bill of lading but refused to pay until the goods themselves
were delivered. It was held that since possession of the bill of lading amounted in law
to the possession of the goods the seller was entitled to perform his part of the
contract by handing over the document.

BILL OF LADING AS A NEGOTIABLE INSTRUMENT

A bill of lading is a document of title of the goods mentioned in it i.e. it is a symbol

of the ownership of the goods. Thus, the consignee named in a bill of lading is the
owner of the goods mentioned in it, and cans ell them while they are still in sea i.e. in
transit. The goods can be sold by the consignee by transferring the bill of lading to the
purchaser. For the purpose of transferring, the bill of lading may be classified into
two types:-
1) Order bill of lading: - In this case, the goods shipped under a bill of lading are
made deliverable to “a particular person” or to “his order.”
2) Bearer bill of lading:-In this case, the goods shipped under a bill of lading are
made deliverable to a “name left blank” or to “a bearer”.
An order bill of lading can be validly transferred by making an indorsement in favour
of the transferee, and then delivering the same to him. And a bearer bill of lading can
validly be transferred by its mere delivery to the transferee. When the bill of lading is
validly transferred, the transferee becomes entitled to the goods mentioned in the bill
of lading. This characteristic of a bill of lading resembles that of a negotiable
instrument. On account of this similarity between the two kinds of instruments, a bill
of lading is generally described as “quasi negotiable” or “as good as negotiable”. It
23
[1912] AC 18, HL

22
may be noted that a bill of lading is negotiable only in the sense that it is transferable.
Thus, in the strict legal sense of the term, a bill of lading is not a negotiable
instrument.
The points of difference between a negotiable instrument and a bill of lading:-
1) A negotiable instrument is a contract to pay money, and entitles its holder to
receive the money due on it. On the other hand, a bill of lading is not a contract to pay
money. It entitles its holder to obtain the goods covered by it i.e. mentioned in it.
2) In case of a negotiable instrument, a transferee who gets in good faith and for value
(e.g. a holder in due course) gets a better title than that of the transferor. But, the
transferee of a bill of lading does not get a better title than that of the transferor e.g. if
he acquires it bonafide and for value i.e. the transferee of the bill of lading gets it
subject to any defect in the title of the transferor.

Statement of Principles as per The (Indian) Bills of Lading Act, 1856.

The standard short form bill of lading is a part of the contract of carriage of goods and it
serves a number of purposes:

• it is evidence that a valid contract of carriage exists and it incorporates the full terms of
the contract between the consignor and the carrier by reference (i.e. the short form simply
refers to the main contract as an existing document, whereas the long form of a bill of
lading (connaissement intégral) issued by the carrier sets out all the terms of the contract
of carriage);
• it is a receipt signed by the carrier confirming whether goods matching the contract
description have been received in good condition (a bill will be described as clean if the
goods have been received on board in apparent good condition and stowed ready for
transport); and
• it is also a document of transfer, but not a negotiable instrument, i.e. it governs all the
legal aspects of physical carriage but, unlike a cheque or other negotiable instrument, it
does not affect ownership of the goods actually being carried. This matches everyday
experience in that the contract a person might make with a commercial carrier like FedEx
is separate from any contract for the sale of the goods to be carried.

23
KINDS OF A BILL OF LADING

A bill of lading is of the following types:-

1) Clean bill of lading: - It is a bill of lading which acknowledges the receipt of the
goods in their perfect condition. The perfect condition of the goods is indicated by
using certain words in the bill of lading such as “shipped in good order and condition.
As a matter of fact, a bill of lading begins with these words, and the ship-owner may
cancel these words if the goods are not in a perfect condition. It may be noted that in
case of a clean bill of lading, the ship-owner is bound to deliver the goods in the same
condition in which they were at the time of loading, excepting the ordinary
depreciation of voyage. In this case, the ship-owner cannot take the defence that the
gods were not in a good order and condition when they were loaded on the ship.

2) Qualified bill of lading: - It is a bill of lading which does not acknowledges the
receipt of goods in the perfect condition. The use of certain words such as “goods
shipped in a damp condition: or “weight, value and contents unknown”: indicate that
the goods are not in a perfect condition. If the goods are not in a perfect condition, the
ship-owner may retain these words, and cancel the opening words reading as
“shipped in good order and condition”. In this case, the ship-owner qualifies his
liability and is not bound to deliver the goods in the perfect condition.

3) Through bill of lading: - It is a bill of lading which is issued by a ship-owner for

the transportation of goods partly in his own ship, and partly in the ship of another
ship-owner for an inclusive freight. Sometimes the goods are to be carried partly by
sea and partly by land, and the ship-owner has charged for both the carriages i.e. by
sea and land. In such cases also, the bill of lading issued by the ship-owner is a
through bill of lading. It may be noted that in such cases, in the absence of any
contrary provision, a contract is considered to be made with the ship-owner who
issues the bill of lading , and he would be liable for the loss occurring on any part of
the journey.

24
4) Received for shipment bill of lading: - It is a bill of lading which states that the
goods have been received for shipment. It may be noted that it is not a “proper bill of
lading”. It operates only as a receipt of the goods received for shipment. A proper bill
of lading, also called the “shipped bill of lading” is issued only after the goods are
loaded on the ship. If a “received bill of lading” is held by the charterer, he must after
the loading of the goods, surrender it to the ship-owner and obtain from him the
“shipped bill of lading”.

OTHER DOCUMENTS (RELATED TO CARRIAGE BY SEA)

Mate’s receipt: - It is a temporary receipt given by the person incharge of the ship as
an acknowledgement that the goods have been received on board the ship. After the
bill of lading is prepared, this receipt is handed over to the master in exchange for the
bill of lading. It may be noted that a mate’s receipts is not a document of title. It
simply entitles the holder to receive the bill of lading from the master of the ship.

Sea way- bill: - A sea way bill is a receipt for goods carried by sea but differs from a
bill of lading in that it is not a document of title. It contains or evidences an
undertaking by the carrier to the shipper to deliver the goods to an identical person.
The shipper may, at any time before the delivery of the goods, change the identity of
the person to whom delivery is to be made. The consignee obtains delivery not by
presenting the way-bill, which remains in the hands of the shipper, but by production
of acceptable evidence of his identity as consignee.
The sea way-bill cannot be used as a security. Its chief advantage lies in the fact that
it does not have to be transmitted to the consignee to enable him to obtain the goods.

Delivery orders:-An exporter, who ships the bulk cargo and receives one bill of
lading in respect of it, or an indorsee of this bill of lading, may afterwards, while the
goods are in transit, sell various unascertained portions of the cargo to different
buyers. He clearly cannot transfer the bill of lading to all the buyers and must find
some other way to satisfy each buyer’s demand for some document evidencing his
right to the goods he has bought which will enable him to collect or resell them. In
such cases a delivery order may be used, “delivery order” is not a precise term and the

25
legal status and effect of such a document will depend on its nature and the
circumstances in which it is issued.
A delivery order is not a document of title unless proved to be so by reason of
mercantile custom.

CLAUSES OF A BILL OF LADING

A bill of lading issued in case of a general ship contains the clauses in respect of
terms of the contract of affreightment. These are generally the same as contained in a
“charter party”. The clauses of a bill of lading should state the following particulars:-

1) Name of the parties

2) Name of the ship

3) Port of loading

4) Port of destination

5) Name of the consignee

6) Marks for the identification of the goods such as number of package

7) Statement regarding the condition of the goods and their quantity or quality or

weight

8) Other terms and conditions of contract of affreightment such as amount of freight,

expected perils etc

COMPARISON BETWEEN A CHARTER PARTY AND A BILL OF LADING

Charter party Bill of lading

1) It is a document by which the charterer It is not the document by which the

enters into a contract with the ship-owner ship is in contract with the
charterer.It

26
 for the hire of the whole or substantial part
by
of the ship.
2) It always contains all the terms and
conditions of the contract mutually
agreed between the ship-owner and
charterer.
3) It is the governing document between
the ship-owner and charterer. It does not
acknowledge the receipt of the goods.
4) It is not a document of title to the
goods
goods.
5) It does not possess any characteristic
of a negotiable instrument. And thus, it
cannot be transferred to a third person.
6) It may be for a particular voyage or
for a particular period of time.
7) It requires a stamp of higher amount.
amount
8) It may amount to lease of the ship to
the
the charterer.
AN ELECTRONIC BILL OF LADING24
Bills of lading have always been issued as paper documents. However, the
replacement of a paper bill of lading with an electronic bill of lading seems a sensible
24
Journal of Information, Law and Technology, 2001
acknowledges the receipt of goods
the ship-owner for carriage.
It may or may not contain all such
terms and conditions.
It is an acknowledgement of the
receipt of the goods loaded on the
ship.
It is a document of title to the
mentioned in it.
It possesses some of the
characteristics of a negotiable
instrument. However, it is not
negotiable in the legal sense of
the term.
It is always for a particular
destination.
It requires a stamp of less
as compared to a charter party.
It can never amount to lease of
ship to the charterer.
27
step forward in the new electronic commerce world. A major problem facing an
electronic bill of lading is the negotiability of such documents of title. A document of
title relies upon the transferability of the document by physical possession. An
electronic bill of lading cannot be handled in physical possession with the result that
it cannot be produced on delivery, nor endorsed to a new holder. Therefore, this
inhibits the capability of it representing a document of title.
Various ways around this problem have been sought. In 1985, a “bill of lading
registry” was suggested by the Chase Manhattan bank and INTERTANKO, which
was established Sea Dock Registry Ltd. Unfortunately this survived only six months.
The idea of a registry was further developed by the CMI Uniform Rules for
Electronic Bills of Lading adopted in 1990. Also, established in 1996, the
UNICTRAL Model Law on Electronic Commerce aims to solve many of the
problems affecting the legal effect of electronic documents.
The registry system is designed to be a depository for documents, while the rights to
the goods are transferred by the communicating of authenticated messages between
the registry and the parties who have an interest in the goods. The registry facilitates
the transfer of title from one party to another, canceling the first party’s title at the
moment the title is transferred to the new holder. The newest project in this area is
called “BOLERO”, whose name stands for Bill of Lading Electronic Registry
Organization. BOLERO is an internet-based system and therefore, relatively
inexpensive. BOLERO builds on the CMI Rules but has established a central registry
as the secure third party. BOLERO has set up an electronic registry for bills of lading
called “the title registry”. The registry is a database application. It creates and
transfers the rights and obligations relating to an electronic bill of lading. The title
registry deals with any change of interest in the goods.
Where the BOLERO system is used, the carrier creates a BOLERO bill of lading,
sends the instructions to the title registry and the shipper is logged as holder of the
BOLERO bill. If the holder of the bill wishes to transfer his constructive possession
to the bill to another, he can make the transfer by attornment. Attornment occurs
when the holder sends instructions to the registry that name the new holder. Once
these instructions are received the registry sends a message confirming the new
holder. The cargo is delivered to the last holder of the bill by the registry giving up
the BOLERO bill to the carrier.

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BOLERO incorporates security for all transactions. Digital signatures of relevant
parties are used and all messages are secure from unauthorized access. In the UK the
Electronic Communications Act 2000 regulates the provision of electronic signatures,
encryption technology and reliance on third parties such as BOLERO. However,
service providers must have a connection with the jurisdiction, i.e. the service must be
provided from premises in the UK or to persons carrying on a business in the UK.
This Act, therefore, does not support electronic commerce.
The EU Electronic Directive deals with the certain legal aspects of information
society services. The liability of BOLERO or other similar information society
service providers is generally set out in Rule 4 of the Directive. The Article provides
for the conclusion of contracts electronically, although there is no provision for
sanctioning the recognition of a contract made and evidenced by an electronic
instrument.
The UNICTRAL Model Law on Electronic Commerce (as amended 1998) was
created because of the inadequate legislation which existed in relation to international
trade and electronic commerce. It covers the main legal issues like requirements for
writing, signature, admissibility and probative value and actions related to contracts
of carriage of goods. Its provisions have generally found their way into national laws
and the UK Electronic Communications Act 2000 is consistent with the provisions of
the UNICTRAL Model Law.
The International Chamber of Commerce also launched an e-business tool that
provides secure online contracting based on ICC’s model international sale contract.
It enables the speed and convenience of dealing over the web. Thus, with the e-
commerce era moving ahead, the electronic bill of lading is also gaining ground.

INCOTERMS25 i.e. INTERNATIONAL COMMERCIAL TERMS USED

FREQUENTLY IN THE COURSE OF CARRIAGE OF GOODS

There are a number of special trade terms ,such as INCOTERMS 2000 ,open to traders to
apply to their contract of sale .These have been laid down by the relevant trade association
,such as the International Chamber of Commerce .They are often referred to during the course
of drafting the Bill Of Lading during the carriage of goods by sea.

25
INCOTERMS 1990, ICC Publication No. 460(ICC, Paris, 1990)

29
1. EXW (Ex Works)

The buyer bears all costs and risks involved in taking the goods from the seller's premises to
the desired destination. The seller's obligation is to make the goods available at his premises
(works, factory, warehouse). This term represents minimum obligation for the seller. This
term can be used across all modes of transport.

2.FCA (Free Carrier)

The seller's obligation is to hand over the goods, cleared for export, into the charge of the
carrier named by the buyer at the named place or point. If no precise point is indicated by the
buyer, the seller may choose within the place or range stipulated where the carrier shall take
the goods into his charge. When the seller's assistance is required in making the contract with
the carrier the seller may act at the buyers risk and expense. This term can be used across all
modes of transport.

3.CPT (Carriage paid to.)

The seller pays the freight for the carriage of goods to the named destination. The risk of loss
or damage to the goods occurring after the delivery has been made to the carrier is transferred
from the seller to the buyer. This term requires the seller to clear the goods for export and can
be used across all modes of transport.

4.CIP (Carriage and insurance paid to.)

The seller has the same obligations as under CPT but has the responsibility of obtaining
insurance against the buyer's risk of loss or damage of goods during the carriage. The seller is
required to clear the goods for export however is only required to obtain insurance on
minimum coverage. This term requires the seller to clear the goods for export and can be used
across all modes of transport

5.FOB (Free on Board)

Once the goods have passed over the ship's rail at the port of export the buyer is responsible
for all costs and risks of loss or damage to the goods from that point. The seller is required to
clear the goods for export. This term should only be used for sea or inland waterway
transport.

30
6.CFR (Cost and Freight)

The seller must pay the costs and freight required in bringing the goods to the named port of
destination. The risk of loss or damage is transferred from seller to buyer when the goods
pass over the ship's rail in the port of shipment. The seller is required to clear the goods for
export. This term should only be used for sea or inland waterway transport.

7.CIF (Cost, Insurance and Freight)

The seller has the same obligations as under CFR however he is also required to provide
insurance against the buyer's risk of loss or damage to the goods during transit. The seller is
required to clear the goods for export. This term should only be used for sea or inland
waterway transport.

8.DES (Delivered Ex Ship)

The seller has fulfilled his obligation to deliver when the goods are available to the buyer on
board the ship uncleared for import at the main port of destination. The seller is responsible
for all costs and risk of loss or damage in bringing the goods to the named port of destination.
This term should only be used for sea or inland waterway transport.

9.DEQ (Delivered Ex Quay)

The seller has fulfilled his obligation to deliver when the goods are available to the buyer on
the quay (wharf) at the named port of destination, cleared for importation. The seller is
responsible for all risks and costs including duties, taxes in making available the goods at the
port of destination. This term should only be used for sea or inland waterway transport.
Thus an INCO Term must be accompanied by a "named place" ex. "FOB Sydney", "EXW
Tahiti"

31
BIBLIOGRAPHY

Books
1. Day and Griffin: The Law of International Trade, 2nd Edition

2. Incoterms in Practice, International Chamber of Commerce, (ed. and contributor of

a chapter on Incoterms and the Contract of Carriage), 1995

3.

Websites
1. http://westlaw.com

2. http://www.

3. htt

4. http:// www.findarticles.com

5. http://hinduonnet.com

6. http://www.legalserviceindia.com

7. http://www.helplinelaw.com

8. http://www.jstor.org

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