What is the difference between a straight bill of lading... Bill of lading is one of the most significant documents...

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What is the difference between a straight bill of lading and a bill of lading?
Bill of lading is one of the most significant documents in carriage of goods by sea. It has been used by
the shipping world for centuries even in the early middle ages. 1 B/L2 has become a major player in
transportation industry especially after the usage of B/L spread across the globe. 3 Although there is no
prescriptive legal definition of B/L, it is accepted by the law that if a bill serves three functions which
are:4
a receipt for the goods; it is an official receipt by the shipowner, certifying that the goods
specified quantity and condition have been shipped from the said port to the said
destination by an indicated vessel. If it is shipped in apparently good order and condition,
the B/L then be called as clean, otherwise it is issued with an additional clause.5
a document of title to the goods described in the B/L which gives its holder ,who can either be
the consignee or any other individual to whom B/L may have been transferred, the right to
claim the goods when the cargo arrives to the port of discharge.6
an evidence of the terms and conditions agreed upon for the transportations of the goods.
It can hence be described as; a bill of lading is a document issued by the carrier to the shipper, listing
and acknowledging receipt of goods for transport and specifying terms of delivery.7
B/L can either be order bills or non-negotiable bills. An order B/L, which is also known as negotiable
B/L, is made out to, or to the order of, a particular person and can be transferred by endorsement and
delivery of the bill. This means that it is a negotiable instrument.8 In practice, an order B/L is issued
either to the shipper’s order or to the consignee or his order.
In the first case, the consignee is not specified in the B/L, which enables the shipper to name the
consignee by indorsing the bill to him when the goods are already in transit.
1
Chester B. McLaughlin, “The evolution of the Ocean Bill of lading” (1925-1926) 35 Yale Law Journal 548,
p.550.
2
Bill of Lading
3
Chester B. McLaughlin, “The evolution of the Ocean Bill of lading” (1925-1926) 35 Yale Law Journal 548,
p.550.
4
Chuah, J., Law of International Trade, 2005, 3rd Ed., Sweet & Maxwell pg. 193
5
Carr, I., International Trade Law, 2005, 3rd Ed., Cavendish Publishing pg. 184.
6
7
Freight Accounting and Information Management Association (FAIMA), faima.com/glossary.
8
In the second case, the shipper has to put the name of the consignee without adding the words ‘to
order’ when completing the bill. This bill is non-transferable and is generally used as straight bill of
lading.9
Accepted view of shipping world in connection with the straight B/L was stated in The Brij10 as
follows:
“...Straight Bills are also very much known to the shipping world and essence of Straight Bills is that
they are not negotiable and the contractual ,mandate is to deliver to the named consignee without the
production of the original document.”
Although both bills are made out in the same manner and the form, the main distinction between a
B/L and a straight B/L is that an order B/L has the document of title function. This is the main
characteristic of a B/L which enables it to be transferred even the goods are in transit.11 Therefore,
possession of the B/L is equal to possession of the goods and its transfer has the same effect as the
delivery of the goods themselves. For this reason, a B/L can be deemed a sort of symbol of the goods
covered by it, and its transfer results in passing the possession of the goods. In addition, on the arrival
of the cargo to the designated port of discharge, buyer or his agents has the right to collect the goods
providing that he presents the B/L.12
What is the difference between a straight bill of lading and a sea waybill?
Sometimes legal and practical position of B/L can become disadvantageous. Over the last two
decades, technological developments in shipping industry is reflected upon shipping documents as a
result of significant increase in carriers’ speed. Thus, the goods they carry often arrive before the
relevant shipping documents, which have to be processed and posted.13 If this scenario happens to a
B/L, the shipowner has to wait until it is presented by the consignee before he is allowed to release the
goods in his hands. This is affecting parties both in money and time consuming matters. This is where
the sea waybills come into charge. It is a simpler document yet has some practical advantages over
B/L.14It is also a prima facie evidence of conclusion of the underlying contract of carriage, and a
9
Katalikawe, J., Law of International Trade, 2005, 5th Ed., Old Bailey Press pg. 53-54.
Hong Kong High Court in The Brij [2000] 3 HKC 313.
11
Katalikawe, J., Law of International Trade, 2005, 5th Ed., Old Bailey Press pg. 53-54
12
Derrington C. S., JI MacWilliam Co Inc v Mediterranean Shipping Company SA (The Rafaela S) University
of Queensland Law Journal, (2005) UQLJ 8
13
14
Wilson F. J. “Carriage of Goods by Sea”, 5th ed, (2004) pg.163.
10
receipt for the goods delivered to the carrier. Unlike the B/L, it is not a document of title and not
negotiable.
The practical implications of this are that the shipowners involved is entitled to release the goods to
the consignee if the latter knows the number of the sea waybill and able to prove his identity. In other
words, the consignee does not need to produce the document to claim their delivery.15
The straight B/L is relatively used less than a waybill. 16 The main difference from a waybill is that the
straight B/L is made out in the form of ordinary B/L which enables its producer to prepare it either
negotiable or non-negotiable. In The Rafaela17, it was stated that unlike a sea waybill, straight B/L
was made out in a classical B/L form which could constitute a document of title even though nonnegotiable.18 It was given three reason to come to that conclusion:
1. According to the Rix LJ19, the Hague Rules and Hague Visby rules are mostly concerned
with the content of a contract of carriage rather than its negotiability. In other words; while
the standard B/L could be transferred one to another many times, the straight B/L could only
be transferred once of course to the named consignee unless he is the same person as
shipper.20
2. A straight bill:
“while transferable on only one occasion may still, in a sales context, be withheld by the
shipper against payment of the price.”21
3. Unlike a sea waybill, a straight B/L is written in a classical format of a B/L and it was
qualified as the similar document of title under the COGSA22 1971 -1(4). Therefore, it was
stated by Rix LJ that:
“the straight B/L is in principle, function and form much closer to a classical negotiable bill
than to a non negotiable receipt”23
Furthermore, when the suing concerns are taken into account, in the case of a loss or damage the
straight B/L is deemed as a sea waybill for the purpose of the 1(3) COGSA 1992, and title to sue vests
15
Michael B. L., to be or not to be:“a bill of lading or any similar document of title”, (2005), Legal News,
04/05, skuld.com
16
17
JI MacWilliam Co Inc v Mediterranean Shipping Co SA (The Rafaela S) [2005] 2 A.C. 423 (HL)
18
19
20
21
22
Carriage of goods by sea act 1971
23
in the consignee indicated in the bill. However in The Rafaela S, it was stated that while a straight bill
is not a B/L for the purposes of the 1992 Act, it does not necessarily follow that its status is the same
purposes of the Hague or Hague Visby Rules.
Why is it important to know whether or not the straight bill of lading is a document of title?
A document of title serves as proof of possession of goods, authorising its possessor to receive the
items represented by it. In commercial practice, the most important documents of title are the Bs/L
and warehouse warrant. As can be seen, a document of title is a symbol of goods. Consequently,
possession of the document is equivalent to possession of the goods, and its transfer has the same
effect as delivery of the items themselves. 24A document of title has two main characteristics. First,
transfer of the document acts as symbolic transfer of possession of the goods, but not necessarily of
property in them; it passes such rights in the goods as the parties intend to pass.25 If a consignor ships
goods abroad on consignment, it is evident that he, by delivering the bill of lading involved to the
foreign consignee, intends to pass only the right to claim delivery of them from the shipowner, but not
property in them. This shows quite clearly that, in this context, the term title to the goods simply
means “rights in the goods”, without specifying what rights are actually meant. Second, only the
holder of the document may claim delivery of the goods – in the case of a B/L from the shipowner or
his agent. 26
A bill of lading can function as a negotiable document of title at common law, provided that it is in an
appropriate form. Although it is generally recognised that there is no widely accepted definition of the
term "document of title at common law",27 the essentials are that bills of lading in the correct form
can, by endorsement and delivery, transfer constructive possession in the goods to the holder. Hence,
it was stated that the bill of lading operating “as a symbolical delivery of the cargo”. Moreover, the
transfer of the bill of lading transfers such rights of property in the goods as it is the transferor's
intention to transfer.28
One thing is not clear after all that whether a straight bill of lading is a document of title for the
purposes of the Hague Rules. As mentioned above, it is not clear in common law either.
24
Katalikawe, J., Law of International Trade, 2005, 5th Ed., Old Bailey Press pg. 53-54.
26
27
Girvin S., Bill of Lading and Straight Bills of Lading: Principles and Practice,(2006), Journal of Business
Law, (JAN) 86-116
28
25
It can be said that the House of Lords was prepared to imply into every straight bill a term requiring
the production of the original straight bill of lading for delivery. If that is the case, parties would
probably have to specifically subcontract of this obligation, if they so would like to, by stating on the
bill e.g. “No bill of lading need be surrendered in exchange of delivery of the goods”.29 Following this
elimination, one question would be whether such a document would continue to be a “bill of lading or
any similar document” under the Rules. There may yet be a degree of uncertainty with the House's
“look and feel” approach: it may "look and feel" like a bill of lading, but amount in substance to a sea
waybill. 30
In The Rafaela S, however, use is made of a different test for determining whether the bill in that case
was a “document of title” for the purpose of the Hague-Visby Rules. This question was said “possibly
to depend on whether the consignee is obliged to present the document” to the carrier in order to
obtain delivery of the goods. 31 The Rafaela S deals with the contractual relations between on one
hand, shipper or transferee and on the other, the carrier; in other words, with the questions whether the
carrier is contractually bound to deliver goods covered by such a bill to the transferee and whether he
is contractually liable to the consignee if he delivers the goods without production of the bill. The two
questions are, however, related in the sense that the transferability by endorsement of an order bill
helps to account for the rule that a carrier is not bound to deliver the goods to someone else except on
production of the bill and that he is liable to the holder of the bill if he wrongfully delivers the goods
to anyone else. This rule is, it is submitted, a consequence of the “negotiability” of an “order” bill and
not the reason for that “negotiability.” That reason lies in the mercantile custom referred to above
which is established in the case of order bills. The requirement of proof of such a custom in the
present context may be compared with the rule that a monetary instrument can become truly
negotiable only on proof of custom or by statute.32
29
30
Treitel G.H., The Legal Status of Straight Bill of Lading, (2003), Sweet and Maxwell, (OCT)11
Bennett H. N., “Straight Bills of Lading”, (2005), Law Quarterly Review, Sweet & Maxwell, 121(OCT)
32
Wilson F. J. “Carriage of Goods by Sea”, 5th ed, (2004) pg.162, 163.
31
From the judgement in The Rafaela S, does it follow that a straight bill of lading is a bill of
lading in every aspect?
In The Rafaela S, a consigned straight B/L had been issued for the carriage of some containers of
machinery from Durban to Felixstowe with a final indicated destination of Boston. When the cargo
was discharged at Felixstowe and re-loaded on a second ship owned by the same carrier for carriage
to Boston. A new B/L was not issued. The goods suffered severe damage and point at issue was
whether the carrier could invoke the Hague/Visby Rules to limit any claim by the cargo owner.
Although both the first carriage and ‘the on-carriage’ were carried out by the same carrier, Court of
Appeal held that two separate contract were involved. The second carriage constitutes a separate
contract therefore the shipper has the right to have a new B/L.33In addition, in the straight B/L, it was
expressly said that “presentation is required for delivery”.34
The court of first instance followed the traditional way which is accepting the fact that a straight B/L
is not a document of title. Court of Appeal, however, revised the decision of the previous court stating
that if a straight B/L is in the form of classical B/L, it can be seen as under the rules of Hague Rules
regardless of its non-negotiable function. In other words, in the light of this decision, the straight B/L
can be looked at differently than a non-negotiable receipt.35
In The Rafaela S, it was accepted that the straight B/L has the main characteristics with a normal B/L
as long as it is only transferred to a named consignee yet no one else. Once the named consignee
posses the straight B/L it can be this time deemed as document of title. 36
Even though the straight Bs/L were treated as sea waybills in the COGSA 1992, there would be no
effect on Hague Rules , and could not hence alter the right construction of Article I(b).37
Hague Rules should show the same protection to those who is the named consignee and received a
B/L and consignee who received the straight B/L.38
When the Hague Rules were implemented, there was a common trade use of the straight B/L. It was
inferred from the absence of any special provision to exclude straight bills from the scope of the rules
that such bills were intended to be covered.39 When it is needed to mention about the international
33
34
35
36
37
38
39
Wilson F. J. “Carriage of Goods by Sea”, 5th ed, (2004) pg.164,165, 166.
nature of the Hague Rules, specific care was shown to the practice covering the usage of such papers
in other legal regimes. 40
In spite of the fact that the express clause about presentation on delivery in the contract, the House of
Lords stated that even where a straight bill missed out such a clause, the shipowners were nonetheless
under an obligation to present the actual B/L.41
Therefore, even if The Rafaela S did touch on the status of straight B/L in a broad sense, that must be
noted that the actual problem in the case was the applicability of the Rules to the straight B/L in
question. The House of Lords’ general opinion on straight B/L is by no means conclusive and must be
considered carefully.
Nevertheless, one of the most important practical implications of The Rafaela S on the carriage of
goods by sea is the necessity of creation of the original straight B/L for delivery. Mere proof of
identity of the named consignee may no longer be sufficient.
Word Count: 3119
40
Girvin S., Bill of Lading and Straight Bills of Lading: Principles and Practice,(2006), Journal of Business
Law, (JAN) 86-116
41
BIBLIOGRAPY
BOOKS:

Carr, I., International Trade Law, 2005, 3rd Ed., Cavendish Publishing.

Wilson F. J. “Carriage of Goods by Sea”, 5th ed, (2004)

Chuah, J., Law of International Trade, 2005, 3rd Ed., Sweet & Maxwell

Katalikawe, J., Law of International Trade, 2005, 5th Ed., Old Bailey Press

Carol Murray, Schmitthoff Export Trade: The Law and Practice of International Trade, 2007,
11th ed., Sweet & Maxwell

ARTICLES:

Lloyd, A, 'The bill of lading: do we really need it?' (1989) Lloyd's Maritime and Commercial
Law Quarterly 47.

Bennett H. N., “Straight Bills of Lading”, (2005), Law Quarterly Review, Sweet & Maxwell,
121(OCT)

Girvin S., Bill of Lading and Straight Bills of Lading: Principles and Practice,(2006), Journal of
Business Law, (JAN) 86-116

Derrington C. S., JI MacWilliam Co Inc v Mediterranean Shipping Company SA (The
Rafaela S) University of Queensland Law Journal, (2005) UQLJ 8


Michael B. L., to be or not to be:“a bill of lading or any similar document of title”, (2005),
Legal News, 04/05, skuld.com
Web:

West Law

Lexis-Nexis

Jstor

What is the difference between a straight bill of lading... Bill of lading is one of the most significant documents...

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