Marine Cargo Claims - Assignment Example

? Marine Cargo Claims Marine Cargo Claims Since historic times, bills of lading have been the most important commercial documents in international carriage of goods by sea. They are part of the indigenous and most international forms of contract under both the common and the civil law dating back to at least 14 century1. In recent years, technological innovations, such as faster ships, containerised processing and multimodal transporters with integrated transport systems, have resulted in the introduction of documentary standardisation, electronic data interchange, and seaway bills. In an attempt to keep pace with fast moving goods, sea waybills have avoided cargo congestion at destination terminals caused by delayed bill of lading arrivals from the consignor or one of the banks involved in the credit transaction2. The late arrival of waybills does not affect delivery because, contrary to a bill of lading, the nature of a sea waybill is different from that of a bill of lading in that the former is a non-negotiable document, and to receive the goods, the consignee does not need to present the original sea waybill3. The sea waybill, however, cannot replace the bill of lading in many important areas of marine. This paper examines the bill of lading as a document of title by endorsement. Although the sea waybill is important, it cannot replace the bill of lading in many important areas of marine transport where a document of title is required4. Bills of lading are still widely used in any trade that requires the sale of goods during the voyage, such as commodity trades5. In the case of oil tanker trade, or bulk cargoes of grain, ore, and coal, for instance, the cargo is often the subject of repeated negotiations while in transit. Furthermore, only bills of lading, due to their negotiability, can serve as security for loans since banks may collect waybills without any documented approval. A bill of lading, as a foundation of overseas trade, serves three distinct purposes6. First, they are a receipt for goods. Second, they are the best evidence of the contract of carriage, and third, they are a negotiable document of title. By serving the last function, the bill of lading replaces those goods indicated on its face, enabling the endorser to transfer the property in the goods7. The last function is the one dealt in depth in this paper. By endorsing a bill of lading, the carrier states that it has received the specified goods and it promises to transport and deliver them to designated and legitimate endorsee or consignee. In international trade, bills of trade once passed legitimately for value out of the hands of the shipper; facilitate the documentary credit process as documents of title, where payment is made against a document upon which reliance can be placed to represent the goods shipped8. Ownership of the bill of lading is tantamount to ownership of the goods. Banks, through a system of documentary credit, finance a considerable proportion of international trade9. Under the normal CIF contract, the seller is supposed to take to take to the bank the bill of lading alongside other documents upon shipment of the goods10. When these documents are presented in the right form to the bank, the seller can now pay the contract price. Possessing of the bill of lading is equal to possessing the goods according to three different purposes11. First, the holder of the bill of lading is entitled to delivery of the goods at the port of discharge12. Second, the holder can claim the possession of the bill of lading when they are being carried only be endorsing it13. Third, the bill of lading can be used as a security for a debt14. By commercial usage, the bill of lading has become the key document in the contract of sale. Accordingly, the seller is obliged to tender to the buyer a shipped onboard bill of lading under common shipment contracts concluded on C&F and CIF terms15. Where the International Convention for the Unification of Certain Rules Relating to Bills of Lading, otherwise known as The Hague and Hague/Visby Rules apply, Article III (3) expressly acknowledges the shipper or seller’s right to demand such a document according to the terms of the contract of carriage16. In addition, to its obligation to receive and carry the goods to their destination, the carrier has the duty to convey the information it receives from the shipper to the consignee through the particulars inserted in the bill of lading17. The carrier may also avoid inserting such statements, which he doubts that they correctly stand for the goods which are received, or which he has had no rational means of examination18. If, however, the details are included in the bill of lading devoid of any qualifications, the bill of lading shall be prima facie proof of the reception of the carrier of the goods as elaborated in the bill of lading. Article III (4), as amended by the Visby-Protocol, explicitly contains, in contrast to the original Hague Rules, the supplementary provision that the carrier is stopped from disproving the details of the goods contained in the bill of lading when it has been transferred to a third party acting in good faith19. If the bill of lading is silent as to any damage or other insufficiency of the goods, the law imposes a legal presumption that the goods were in the correct state when they were delivered to the carrier. Such a bill of lading without any qualifications on its face is called a ‘clean’ bill of lading20. Due to their function as prima facie evidence, bills of fading very often become the most important pieces of evidence in marine cargo disputes concerning cargo damage, short delivery or non-delivery21. For the shipper the bill of lading can provide evidence of its contract. For the consignee, it will be evidence of its right to possession of the cargo22. In marine cargo disputes, it is commonly hard to explicate the reason for fraud done to a cargo23. This has been a challenge that has been exacerbated by an increase in containerised packaging24. In claims to recuperate reparation from the maritime carrier for the failure of or injury to cargo, the particular burdens of evidence are the central issues25. As its third fundamental function, the bill of lading represents a negotiable document of title, permitting the parties to transfer title to the goods or to pledge them as security to a creditor while in transit26. One may say that the bill represents the goods inasmuch as possession of the bill of lading is equivalent to possession of the goods themselves27. Since the goods are not commercially immobilised while in transit at sea and it is possible to negotiate them, the bill of lading may be considered a negotiable instrument, or at least a ‘quasi-negotiable document’28. Physical inability of the merchant to deliver the cargo may have triggered the custom amongst merchants to take the bill of lading as symbolising the goods29. Until goods are physically delivered, ownership of the bill of lading is taken to be positive tenure of the goods. When the bill of laden is transferred form the seller to the buyer, this is considered a symbol of delivering the goods. As such, when the ship arrives, the buyer is able to demand delivery of goods30. The ownership of the bill of lading is equated to possession of the goods31. As such, the buyer can decide to sell the cargo while still in transit at sea to a third party. Since the third party now becomes the holder, he can demand delivery of the goods on arrival32. It should be noted that not all bills of lading could be transferred. In order for a bill of lading to be transferable, it ought to be in the form of an order bill33. This implies that the carrier is bound to take the goods to a particular consignee or to his order or assigns34. Bills of lading that are made out to named consignees, known as straight bills of lading, are not documents of title35. After endorsement, the endorsee replaces the initial stakeholder to the bill of lading, and is liable for suing on all the terms, express and implied, in the bill of lading despite of privity of contract. This is achieved by the joint operation of sections 2 and 3 of the Carriage of Goods by Sea Act 199236. Commonly said to be a negotiable document in commercial circles, a bill of lading is not similar to a bill of exchange. The latter is a document that can be negotiated in the legal sense. The holder of an endorsed bill of lading does not obtain a bill of lading free of defects. That is, a holder who endorses a bill of lading cannot give a better title that the one he has37. As such, if he has no title, he cannot pass one. In other words, the bona fide transferee for valuable consideration of a bill of lading acquires as good as a title as the transferor possesses38. It, therefore, makes no sense in legal terms to talk of the bill of lading as a transferable document rather than a negotiable document39. Since the bill of lading is a document of title, the carrier is obliged to deliver the cargo only if the original bill of lading is provided40. If the carrier delivers goods without the production of a bill of lading, he will be liable in the contract and tort to the bill of lading holder41. Where a person seeks to take delivery of goods in the absence of an original bill of lading, he must prove to the carrier’s reasonable satisfaction that he is entitled to possession of the goods and there is a sound explication for the absence of the bills of lading42. For instance, it can be shown that the bills of lading are lost. Frequently, the carrier may be asked to notify a customs broker of the rule that delivery must take place against the original bill of lading. In these circumstances, the carrier will not be liable for breach of the contract were he to deliver the goods without presentation43. It is common for bills of lading to contain a clause that allows the carrier to discharge goods without production of a bill of lading against a warranty of title, and an indemnity clause in favor of the carrier for any loss he suffers because of discharging the goods without a bill of lading44. If a Carrier does deliver cargo without production of the Bills of Lading, he does so at his risk45. Such an act would be an interference with the rights of the true goods Owner to possess and dispose of the cargo46. It would technically be a conversion of the cargo rendering the Carrier potentially liable for the full value of the cargo to the true cargo Owner47. Put very simply, production of the original negotiable Bill of Lading to the Carrier is sufficient proof to the Carrier that he is entitled to deliver the cargo to that person. However, if the original negotiable Bill of Lading is not produced then the Carrier is taking the risk that he may be delivering the goods to the wrong party48. Even if the party named as Consignee in the Bill of Lading produces convincing proof of his identity, the Ship-owner is still taking a risk if he delivers the cargo to him without requiring him to surrender the original bill of lading49. It must also be appreciated that the document, which must be surrendered, is the original negotiable Bill of Lading. It is the negotiable character of the bill of lading, which is potentially dangerous to Ship-owners50. Therefore, whilst an owner often releases both negotiable and non-negotiable copies of bills of lading (the latter being required for evidential purposes) he will not protect himself by delivering against a non-negotiable copy since this will leave the negotiable copies still in circulation as negotiable instruments51. The belief that that the bill of lading is proof of the contract of carriage is right only on condition that the holder of the bill is the shipper. When endorsement is done to a third party, the bill of lading becomes the contract of carriage52. Any verbal or written accord between the shipper and ship-owner not articulated on the bill of lading will not influence the third party on basis of lack of notice53. The bill of lading is not the contract of carriage but evidence of the contract, which has previously been negotiated (perhaps orally) between the shipper and the carrier54. Whilst the bill remains in the hands of the shipper, either party can produce other evidence to show that the terms of the bill are incorrect and have not accurately set out the terms agreed for the carriage55. In conclusion, although the contract of carriage is originally made between the shipper and the carrier, both rights and liabilities under the contract are usually transferred with the bill to subsequent holders of the bill. The rights and duties of subsequent holders and the carriers inter se are not necessarily the same as those between the original shipper and the carrier since the subsequent holders of the bill are bound only by the terms as they appear in the bill of lading itself56. They are not bound by any other terms which were negotiated between the shipper and the carrier but which were not recorded on the bill of lading57. Despite the description elaborated in this paper of a bill of lading as a document of title but not a contract, the bill of lading still serves satisfactorily as a contractual basis for international carriage of gods by sea. Bibliography Aikens, R Lord, R, &Bools, M, D, Bills of lading, New York, Informa, 2006. Astle, W, E, Bills of lading law, London, Fairplay Publications, 1982. Bools, M, D, The bill of lading: a document of title to goods: an Anglo-American comparison, London, LLP, 1997. Carr, I, & P, Stone, International trade law, London, Taylor & Francis, 2009. Chuah, J, Law of international, London, Sweet & Maxwell, 1998. Cole, S, D, The law of charters and bills of lading shortly explained, London, E. Wilson, 1995. Gaskell, N, J, & Baatz, Y, Bills of lading: law and contracts, New York, LLP, 2000. Debattista, C, Sale of goods carried by sea, New York, Butterworths, 1990. Dockray, M, & Thomas, K, R, Cases & materials on the carriage of goods by sea, New York, Cavendish, 2004. Giermann, H, A, The evidentiary value of bills of lading and estoppels, Berlin, LIT Verlag Munster, 2004. Girvi, S, D, Carriage of goods by sea, Oxford, Oxford University Press, 2011. Gold, E, & Chircop A, E, Maritime law, London, Irwin Law, 2003. Hughes, A, D, Casebook on carriage of goods by sea, London, Blackstone, 1994. Larish F, A, The bill of lading, Michigan, University of Michigan Press, 2009. Mitchell, A, Bills of lading: law and practice, London, Chapman and Hall, 1982. Saunders, A, Maritime law, London, E. Wilson, 1990. Sheppard, A, M, Modern maritime law and risk management, London, Routledge, 2007. Sze Hai Tong Bank Ltd -v- Rambler Cycle Co. Ltd [1939] 2 LLR 120. Tetley, W, McDonough, B, & Nixon, E, Marine cargo claims, London, Editions Blais, 1988. Todd, P, Bills of lading and bankers' documentary credits, London, Lloyd's of London Press, 1993. Tommen T, K, Bills of lading in international law and practice, London, Eastern Book Co., 1985. White, M, Australian maritime law, Melbourne, Federation Press, 2000 Wilson, J, F, Carriage of goods by sea, London, Pearson Longman, 2004. Yiannopoulos, A, N, Ocean bills of lading: traditional forms, substitutes, and EDI systems, The Hague, Nijhoff Publishers, 1995. Table of cases Cf Sanders v Maclean (1883) 11 QBD 327 (CA), 342. Lickbarrow -v- Mason (1794) 5 T.R. 683 Per Diplock I.J. in Barclays Bank Ltd -v- Commissioners of Customs and Excise [1963] 1 LLR at p.89. Per Lord Selborne in Glynn Mills & Co. -v- East and West India Dock Co. (1882) 7A.C. at 596 Glyn, Mills & Co. v. East & West India Dock Co. (1882) 7 App Cas 591, 605. Trucks and Spares -v- Maritime Agencies [1951] 2 LLR 345 Strathlorne -v- Andrew Weir [1934] 50 LLR 185. Hicks -v- Raymond [1898] A.C. 22 Carlberg -v- Wemyss (1915) S.C. 616 Lyle -v- Cardiff Corporation (1899) 5 Com. Cas. 94 Pyrene Co. v Scindia Navigation Co. [1954] 2 QB 402. Leduc v Ward (1888) 20 QBD 475. Sewell v Burdick (1884) 10 App. Cas. 74 Read More