When does a Bill of Lading become a Contract of Carriage..??
A brilliant question.. But before discussing the answer, let us first look at some definitions..
- Bill of Lading means the transport document issued by a carrier undertaking the carriage of goods from point A to point B to the Merchant..
- Carriage means the whole or any part of the operations and services undertaken by the Carrier in respect of the Goods..
- Carrier means the entity that arranges the carriage of the goods and issues the Bill of Lading to the Merchant..
- Merchant means the entity who owns or has possession of the goods carried by the carrier.. Merchant may be the Shipper, Exporter, Consignee, Receiver of the Goods or any person owning or entitled to the possession of the goods or the document of title to the goods (bill of lading and/or anyone acting on behalf of any such person..
In simple terms, a Contract of Carriage is a contract entered into between the Carrier and the Merchant for the movement of goods from point A to point B using an agreed mode of transport at an agreed price.. This contract maybe verbal or written..
In technical terms and in terms of the popularly used conventions and rules covering the Carriage of Goods by Sea such as Hague Rules (1924), Hague-Visby Rules (1968), US COGSA (United States Carriage of Goods by Sea Act), Hamburg Rules (1978), and Rotterdam Rules (2009) a Contract of Carriage is defined as below :
Page 1 of any carrier’s bill of lading will show which of the above conventions govern the carriage..
Let us look at the subject question in the context of containerised cargo..
In normal trade the rates and other terms are negotiated between the shipper/cargo owner and the carrier, and once they reach an agreement or contract (maybe verbal or written), the shipment is “booked” with the carrier and this may be considered as the commencement of the contract of carriage..
The carrier usually sends a booking confirmation as acceptance of the booking..
Clauses in the booking confirmation sent by the carrier will indicate the terms and conditions that will govern the booking and contract of carriage..
I have quoted below, clauses shown on the booking confirmations of some of the lines and you may notice that all of them say that the booking is “subject to the terms and conditions of the line’s bill of lading“, which comes at a much later stage once the shipment has been effected..
Shipment shall be subject to CMA CGM bill of lading terms and conditions available in any CMA CGM agencies or on CMA CGM web site: www.cma-cgm.com
THIS BOOKING CONFIRMATION IS SUBJECT TO THE TERMS AND CONDITIONS OF OUR BILL OF LADING OBTAINABLE FROM THE CARRIER OR THE CARRIERS WEBSITE AT:
THE CONDITIONS OF OUR BILLS OF LADING AND SEA WAYBILLS CONTAIN LIMITATIONS OF LIABILITY WHICH DEVIATE FROM STATUTORY GERMAN LAW.
Hapag-Lloyd AG is operating under the terms and conditions of its bill of lading or sea waybill depending on which document will be issued for the shipment. Our terms and conditions will be provided to you upon request or may be viewed at any office of Hapag-lloyd AG or its agents or under www.hapag-lloyd.com.
This contract is subject to the terms, conditions and exceptions, including the law & jurisdiction clause and limitation of liability & declared value clauses, of the current Safmarine Line Bill of Lading (available from the Carrier, its agents and at terms.safmarine.com/carriage), which are applicable with logical amendments (mutatis mutandis).
Agent for shipping line
* Please note that all cargo shipped is subject to terms and conditions on the lines bill of lading
The client has the option to go through the terms and conditions on the bill of lading and advise the carrier if he finds any terms that may not be suitable for his business and/or carriage..
Remember, a bill of lading has 3 basic purposes or roles..
- Evidence of Contract of Carriage
- Receipt of Goods
- Document of Title to the goods
From the above it is clear that although the bill of lading follows the contract of carriage physically, the terms of the contract of carriage are governed by the bill of lading..
The bill of lading also being a receipt for the goods, states the terms on which they were delivered to and received by the ship, and maybe considered as an excellent evidence of these terms, but it is not a contract..
Therefore, as far as containerised trade is concerned, since the contract has already come into existence before the bill of lading is prepared and issued, a bill of lading cannot become a contract of carriage but only be considered as evidence of the contract of carriage..
Let us look at this question in the context of carriage under charter parties..
The bill of lading as an evidence of the contract of carriage applies to shipments where shippers ship cargo in small quantities using either containerised service or break bulk service where there are no full charters or charter parties involved..
Where charter parties are involved, especially where the shipper charters the entire ship from the owner, the bill of lading issued along with a charter party does not evidence the terms of the contract of carriage between shipowner and cargo owner because in this case, the contract between them is governed solely by the terms of the charter party..
In cases where the contract is governed by the charter party, the Bills issued to a charterer acts merely as receipt for the cargo received and shipped and as a document of title in case the charterer decides to sell the goods while they are still in transit..
The bill of lading will, however, typically identify the charter party which is applicable to the carriage of the goods by reference to the date and place of the charter party..
If anyone has any concurring or opposing views as to when a bill of lading becomes a contract of carriage, please do share..
(This article was originally published in 2015 and has been republished with some updates/changes)