Class notes for ACCA Compiled by Njihia Kaburu

TRANSPORTATION DOCUMENTS
a) Define and explain the operation of bills of lading. (k)
Goods are usually transported to the buyer by a third party, mainly a
courier or shipping company. There may arise a chain incase delivery
is obtained through one third party and sub-contracted or otherwise
carried out by another different party.
Illustration


The most important document associated with transfer of goods from
the buyer to the seller in this arrangement is a bill of lading.
BILL OF LADING
Bill of Lading is a document which is issued by a carrier to the
shipper evidencing the receipt of goods for purposes of shipment and
that they have been placed on board a particular vessel, bound for a
particular destination.
The bill of lading represent a little bit more than receipt of goods, it
represent in addition a document of title to the goods and a as a
Memorandum of the contract of carriage entered into for the
shipment of the goods to the port of destination. It also states to
whom the goods are being shipped.
The bill of lading therefore accomplishes three things:
Provides evidence that goods of the state description have been
received by carrier and shipped if it!s a shipped bill of lading".
#vidences or contains within it the contract of carriage and terms on
which the goods are to be carried.
It can be a document of title of the goods being shipped.
Types of bill of lading
$ bill of lading may belong to one of four types%
a" Inland bill of Lading: relates to contract for transporting of goods
overland to the sellers! international carrier.
b" Ocean bill of lading: relates to a contract for carriage of goods
from a seller in one country to a specific port in another country.
c" Through bill of lading: combines the contracts for inland and
marine carriage.
d" Airway bill: relates to contract for carriage of goods by air both
domestic and international" from one point to another.
Caego!ies of bill of lading
Bills of lading can further be categorised into two brad categories%
a" Negotiable bill of lading: this is a bill issued to the seller!s order,
rather than a named recipient of goods. The carrier holds the
goods until it receives an original bill of lading endorsed by the
seller, which has been presented by the selle to the ban& for
payment. Thus the person who legally owns the bill of lading
owns the goods and has the right to re'route them.
b" Non-Negotiable bill of lading: the bill of lading names a recipient
to whom the carrier must deliver the goods. $irway bill fall under
this category.
The bill of lading becomes crucial in determining passing of ris&
under an international sales contract. The general rule is that ris&
passes to the buyer when the goods pass to the carrier. The bill of
lading is an evidence of goods passing to the carrier, thus an evidence
of passing of ris&.
(
)eller
)hipper
*elivery agent"
+arrier
Buyer
,--*)
Class notes for ACCA Compiled by Njihia Kaburu
Bill of lading as a do"#$en of ile
$ document of title to goods is a document that enables the owner of
those goods to deal with them even though they may not be in his
physical possession at that particular time. Indeed even domestically
even where there is no physical evidence of ownership, as long as the
documents are there, one can pass title. In the (.
th
century the Bill of
Lading emerged as a document of title and in case of Lickbarrow v
Mason [!"#$% T& '( [!!%-()*$ A+& ,
/hat we are saying is that only the transfer of the bill of lading is
effected to transfer the constructive possession as well a ownership
of the goods then in the possession of a bailee. The bailee in this
case is the carrier of the goods.
The above decision opened the way for goods to be sold and pledged
while afloat and is indeed credited for laying a foundation for the
financing of international or overseas trade, li&e in:
-arclays -ank v .usto/s 0 +1cise .o//issioners ["'2$Lloyds
'
The matter concerned some consignments of washing machines
which were purchased for delivery against some acceptance of some
bills of e0change. The goods were shipped from 1otterdam to
+ardiff under some bills of lading that were to the order of the
shipper i.e. transferable by the shipper. The B2Ls were tendered to
the buyer after acceptance of the Bills of #0change whereafter the
goods on arrival at +ardiff were warehoused by the ship owner.
The )hip owner!s charges under the Bills of Lading were paid by the
buyer who in the course of time pledged these documents to Barclays
Ban&. In the meantime the ta0man obtained a 3udgment against the
buyer for some arrears of purchase ta0 and the ta0man obtained an
order for the attachment of those goods so that when the Plaintiff
attempted to attain physical delivery of the goods, the local sheriff
declined with the result that some inter pleader proceedings were
brought before the court in order to determine the actual status of
those goods.
The ban& contended that the title vested in it with effect from 4
nd
5une (67( when the documents were pledged to the ban&. -n the
other hand the +ustoms 8 #0cise contended that the ban& had no
title to the goods because the bill of lading ceased to be document of
title when the contract of carriage was completed.
It was held that
(. )o long as the contract of carriage was not discharged, the
bills of lading remained documents of title by
endorsement and delivery of which the right to the
property in the goods could be transferred ie. To a third
party%
4. In this case the contract of carriage had not been
discharged on 4
nd
5une (67( and that the goods remained
in the construction possession of the ship owner in the
warehouse at +ardiff%
9. the ship owner were under no obligation to surrender their
constructive possession of the goods e0cept on the
production of bills of lading in respect of those goods and
since none had been produced then they retained the
constructive possession
:. In these circumstances the bills were at all material times
effective documents of title for the goods by the deposit
of which to the plaintiff a valid pledge to the goods could
be made.
The courts thus found that it is Barclays that was entitled to claim
title to these goods.
The uni;ue status of the BILL as a document of title means that only
this document meets the needs of the parties that is where the
consignee of the goods wishes to deal with those goods in the high
4
Class notes for ACCA Compiled by Njihia Kaburu
seas whilst in the custody of the bailee. This has helped in the growth
and development of commodity trade internationally.
The main purposes of bill of lading is therefore to enable the owner
of the goods to dispose of the goods rapidly even though the goods
may not be in his custody at the material time but the goods may be
in the high seas. The seller is responsible to ensure that a bill of
lading is delivered to the buyer with the goods or beforehand".
T%e !ansfe! of %e bill
This largely depends on the category of the bill of lading. /here no
consignee is named in the bill, this is what is described as <-rder
Bill=, the bill is transferable simply by delivery thereof to the
intended transferee. The carrier of those goods will be instructed
deliver the goods to any person that produces the copy of the Bill and
ma&es a claim for those goods. Transfer of an order bill thus simply
means a transfer of the constructive possession of those goods,
because the goods are in the physical custody of the carrier at that
material time and not the transferee.
-n the other hand, if the bill ma&es goods deliverable to >?@ or a
named consignee or <-rder= this means that it is transferable only by
endorsement of the name of the transferee and by delivering the bill
to him. -n the other hand where a bill names a certain person >yA or
where it states it is not negotiable, the carrier can only deliver the
goods to the person named in that bill.
The ingenuity of merchants and custom that has evolved is that it is
ta&en that when a buyer or seller pledges the bill to a ban& in a way
of securing financial accommodation for effecting the trade, then the
intention is that that document B2L is such as to enable the ban& in
the event of a default to sell those goods and recover money, to that
e0tent the B2L retains its status as a document of title so long as the
goods in issue remain in the possession or the custody of the carrier.
T%e B&L e'iden"es %e "on!a" of "a!!iage
The bill will contain some terms of the contract of carriage which
may be set out in full on the bill or incorporate by reference to some
standard contract of carriage. )trictly spea&ing a Bill of Lading is
not a contract of carriage. Bsually the contract of carriage between
the seller and shipper will usually have been concluded at the point in
time when the vessel is boo&ed for purposes of shipment of these
goods or indeed when the goods are accepted on board the vessel and
normally both those two instances will have occurred well before a
bill of lading is issued.

In fact the general rule is that the terms of the bill of lading are
incapable of affecting the contract of afreightment that has already
been made.
The Ardennes ["%$ 3- %%
This was a case involving some Mandarin +hinese oranges" that
were for shipment or carriage to London and it was agreed that these
goods were to be shipped or carried direct to London so as to arrive
before an anticipated rise in the import ta0 on Mandarins.
Bnfortunately the carrier went to the continental port of $ntwerp
with the result that the mandarins arrived in London late well after
the ta0 rise had been implemented. The sellers sued the carrier
claiming that they had incurred a loss as a result of the delayed
arrival of the shipment, carrier in defence relied on a clause in the
B2L which allowed it to deviate from the agreed route.
It was held that the clause in the bill was not a part of the contract for
carriage which contract had already been concluded before the bill of
lading was issued.
The above position is the strict understanding. Cowever the bill of
lading represents a contract of carriage for a third party such as an
endorsee of a bill of lading. This third party has no way of laying his
hands on the actual contract of carriage entered into between the
9
Class notes for ACCA Compiled by Njihia Kaburu
seller and the carrier of the goods and therefore the only document
perhaps that he has that represents some form of contract is the BL
which will to him provide conclusive evidence of the terms of the
contract of the carriage of these goods. Ce has no way of &nowing
what the actual terms of the contract may have been .
Bill of Lading as a Re"eip
$t the port of destination, the carrier is re;uired to deliver the goods
shipped to the holder of the bill of lading. $ssuming that the carrier
of the goods too& custody of (DD bo0es and delivers ED, there is a
dispute, in the event of such a dispute between the carrier and holder
of the bill of lading, it is always essential to establish the ;uantity of
the goods that was delivered to the carrier in the first instance.
$ssuming that the bo0es are delivered bro&en, it becomes mandatory
to &nown the condition in which those bo0es were delivered to the
custody of the carrier at the time of loading at the port of shipment.
)hould the goods be sold while in the Cigh )eas, it will be necessary
that there be some evidence of the condition in which those goods are
for any prospective purchaser of those goods to be satisfied as to the
actual physical condition of those goodsF
Geeping in mind that a sub buyer of the goods has absolutely no
opportunity to inspect the goods at all. $t this point that the bill of
lading is helpful because it will provide some evidence about the
;uality and ;uantity of the goods depending on how they are pac&ed.
This is done usually because there is a general re;uirement that the
carrier of the goods in issuing the bill should note the following
things
(. The leading mar&s necessary for the identification for the
goods
4. The ;uantity of the goods loaded
9. The apparent order and condition of the goods at the time
of loading.
The leading mar&s of the goods are normally stamped or indeed
mar&ed on the goods themselves and the idea of placing mar&s is so
as to ensure that the mar&s remain legible throughout the voyage so
they must be of a &ind that is not easy to erase in the cause of the
voyage. -n the other hand the ;uantity of the goods loaded will be
noted with reference to the number of pac&ages or pieces or in terms
of the weight on each of the pac&ages etc.

-n the other hand the statement as to the apparent order and
condition of the goods is in reference to the e0ternal appearance of
the goods. Indeed a carrier of goods is never e0pected to ma&e any
comment or statement as to the actual ;uality of the goods, the actual
condition of the goods because the actual physical condition is
un&nown to the carrier.
Most shippers including the buyers will re;uire a clean bill of lading.
It is a bill that states that the goods are in good condition. This gives
them the comfort of &nowing that anybody that the documents are
transferred to will ta&e them in good faith and as representing the
carriers true opinion of the goods true physical condition as he
inspected them at the point of shipment.
It is vital that the bill of lading be signed by the carrier to indicate his
commitment as to the statement contained therein and to indicate that
he is bound by whatever he says regarding the e0ternal physical
appearance of those goods. The carrier is bound by the bill once the
bill comes into the hands of a third party who comes to it as a sub
buyer. The sub buyer depends entirely on the information given by
the carrier about the goods believing he is entering into a good
transaction, if in the end the goods were never in good order and
condition then such a buyer will suffer disappointed and the law will
3ealously protect a buyer in that position, innocent purchaser for
value with no notice.
The bill of lading is thus an important document in international trade.
COMPILED B()
:
Class notes for ACCA Compiled by Njihia Kaburu
F!an"is N*i%ia +ab#!#, IMIS -Dip,./ LL,B -0ons,./ LL,M -"on.,
Le"#!e!/ Os%1al College,
E