#17370 - Bills Of Lading 2 - Shipping and International Trade

BILLS OF LADING (2)

((i) As Document of Title (ii) As Transferring Contractual Rights)

SUMMARY

NOTE: under a Letter of Credit arrangement, the buyer pays the bank, and the bank pays whoever holds the LoC (i.e. the seller)

• This transfers the risk of non-payment from the seller (who has to chase the buyer in the absence of the LoC) to the bank (who is now the one chasing the buyer)

• But that assumes that the bank has paid out – that’s why the mere opening of a LoC (even irrevocable) is insufficient to transfer property

  • And bank will only pay out against conforming documents

Autonomy principle -> the separation and independence of the letters of credit from the underlying contract for the credit in respect of which the letter of credit is issued

Documents of Title

Document of Title At Common Law

• What qualifies as a document of title at common law?

  • When there is a custom at common law to the effect that the document gives possessory rights

• What is its significance?

  • It gives you constructive possession of the goods

• The short answer is that generally, only order or bearer bills are documents of title at common law

  • Exceptions being Mate’s Receipt from SG to Sarawak

Document of Title under Factors Act

• What qualifies?

  • Any document listed under s1(4)! E.g. B/L, dock warrant, warehouse-keeper’s certificate etc

• What is its significance?

  • Not the same as at common law!

• What is the significance of being able to say that your document falls within 1(4)?

  • You can rely to s2(1)

  • And other sections like S24 and S25

  • Also helpful in relying on statutory exceptions to the nemo dat rule

  • Such statutory exceptions usually refer to documents of title as referred to in s1(4)

Is an order B/L a document of title?

• At common law

  • Yes

  • But NOTE: it does not automatically transfer constructive possession -> there must be intention to pass constructive possession (Future Express)

    • For e.g. in Future Express, because the bank knew that the goods were discharged and long gone, transfer of the B/L to the bank did not transfer constructive possession

• Under Factors Act?

  • Yes, clearly

Is a straight B/L or sea waybill a document of title?

• What is the difference between a sea waybill and a straight B/L?

  • Sea waybill simply asks the carrier to deliver to the person named in the sea waybill

    • No need to produce

  • But you need to produce a straight B/L at delivery (Rafaela S)

• Is either a document of title at common law?

  • No

  • Rafaela S says straight B/L is a document of title in ONE sense

    • For the HV rules! Where it refers to a “B/L or some other similar document of title”

    • Which is unfortunate phrasing, because it clearly doesn’t mean the same thing as document of title at common law

• Is there any other difference between the two?

  • No

• Does a straight B/L count as a document of title under s1(4) Factors Act?

  • Likely yes, since you have to produce it to claim delivery

• What about sea waybills?

  • Unclear, it might fall within “any other goods”

  • But then you don’t have to produce it to claim delivery

Is a ship’s delivery order, delivery order, or warrant a document of title?

• Ship’s delivery order

  • An order to the party in actual possession (e.g. the ship/carrier) to deliver the goods to another

  • Person giving order is likely to be the owner of the goods (e.g. seller)

  • Telling the ship to deliver the goods to the buyer

  • Usually used when a seller is trying to break up a bulk cargo covered by the same B/L

• Delivery order?

  • Given by the person in actual possession

• The confusion here is that COGSA uses the terminology of “ship’s delivery order”, but what it means by SDO is actually a DO! Since it refers to an undertaking by the carrier

• Are they documents of title at common law?

  • NO – The Julia

• Under Factors Act, is it a document of title?

  • Yes!

  • What about a delivery warrant?

    • YES, covered under Factors Act 1(4) a swell

  • NOTE: distinguish between a warrant and a delivery order! (see below)

• What is attornment?

  • The bailee (carrier) recognises that the goods are held on behalf of another

• Ship’s delivery order -> an order TO the ship to deliver

  • Cf Ship’s delivery warrant -> an undertaking BY the ship to deliver

• Ship’s delivery warrant

  • A document issued by the person in actual possession of the goods, undertaking to deliver the goods to someone (usually the buyer)

  • Sometimes said to amount to an attornment

• Confusing: COGSA 1992 uses the language of a ship’s delivery order, but what constitutes a SDO under COGSA is strictly speaking a ship’s delivery warrant (because it has to be an undertaking by the carrier)

• Both are documents of title under the Factors Act

  • S.1(4) says ‘warrant or order’, which implies there’s no difference

  • Waren Import [1975] seems to require a ship’s delivery warrant - seems to require an undertaking from someone in actual possession

Electronic pin codes?

• At common law? No

• Under FA? No (not a document)

  • However, Glencore shows that it’s possible to utilise electronic codes as a means of fulfilling obligations

Mate’s receipts

• What is a mate’s receipt?

  • Just an acknowledgement that the goods have been loaded on board, usually exchanged for a B/L

• Are they a document of title?

  • NO (Nippon Yusen) – except between Singapore and Sarawak (Kum v Wah Tat Bank)

  • There is a custom between SG and Sarawak that they are documents of title

  • But elsewhere in the world, they are NOT documents of title at common law

• Under FA?

  • Yes, under “any other document”

  • Parties can sometimes try to use “mate’s receipts” to create security (e.g. Nippon Yusen, where bank told carrier not to issue a B/L except against a MR, but it doesn’t really work)

• Thus, the short answer is that generally, only order or bearer bills are documents of title at common law

Transferring contractual rights and liabilities

Transfer of Bill of Lading

• When A transfer B/L to B

• Rights?

  • Transferee gains rights under s2(1) COGSA

  • Transferor loses his rights (s2(5))

  • But NOTE: there must be an intention that the rights should pass (Erin Schulte)

  • Not present in Erin Schulte because bank initially rejected it (only wanted document for inspection)

• Liabilities?

  • Liabilities of original shipper

    • E.g. liability to pay freight

    • Liability of the original shipper continues to stay with the shipper (s3(3))

  • Liabilities of transferee

    • Liability is incurred when the conditions under s3(1) are fulfilled

    • Take or demand delivery

      • Must be a “voluntary transfer of possession” and amount to “more than just co-operating in the discharge of the cargo from the vessel” (The Berge Sisar)

      • In The Berge Sisar: taking samples of oil for testing did not count as delivery

      • The giving of a letter of indemnity by the transferee to the carrier has been said not to amount to a “demand” for delivery; and a fortiori there is no such “demand” by the transferee where (as in The Berge Sisar ) such a letter is given by someone other than the transferee to whom the delivery is to be made.

      • Also must take or demand delivery from carrier

        • So an ultimate buyer who takes delivery from an intermediate buyer will not incur liability

        • This is a criticism of Lord Hobhouse’s position in The Berge Sisar -> he argues that if the carrier has a claim against the original shipper and the ultimate buyer, the carrier doesn’t need a claim against the intermediate buyer, but here we see that the ultimate buyer might not always incur liability

    • Make a claim under CoC

    • What sort of party is s3(1) specifically designed to protect?

      • The bank!

      • Especially if the bank takes the goods as pledgee

    • Treitel: Section 3(1)(b) in terms requires the claim to be made “under the contract of carriage” and, although there are no corresponding words in s. 3(1)(a) to qualify the phrase “demands delivery”, that phrase is in The Berge Sisar interpreted as being subject to a similar requirement

      • i.e. there must be reliance on the contract to support the demand (3(1)(a)) or the claim (3(1)(b))

      • The insistence on such reliance might make it possible for the transferee to avoid liability by putting forward some other legal basis for his demand or claim: e.g., by basing his “demand” for delivery on his title or making his “claim” against the carrier in tort on the ground of the latter’s negligence.

  • What if the buyer transfers on again to a sub-buyer?

    • He loses his rights (s2(5))

    • He also loses his liabilities (Berge Sisar)

    • Although exceptions from Berge Sisar (See Treitel)

      • 1) “Such a result could follow from “the conduct of one or other party” giving rise to estoppels or from “other documents or agreements” or (it may be added) from an implied “Brandt v Liverpool” contract”

      • 2) He may be liable if he incurs liability via an irreversible step (e.g. taking “actual delivery of the goods” rather than a reversible step (e.g. making a demand for delivery and later withdrawing it)

        • In the latter, he precludes “any further dealing with the goods” between him and the carrier, thus his liability under s3 would not cease

        • This makes sense under the principle of mutuality, since he has gained the benefit of delivery

Transfer of Ship’s Delivery Order

• SDO tends to arise in a situation where you have a BL covering bulk cargo

  • And then shipper issues a number of SDOs, to affect the subsequent distribution of the bulk to a number of buyers

• What happens to the rights of the shipper?

  • Transferred, to whoever’s name is named in the SDO

    • S2(1)(c)

  • But does the shipper lose his rights?

    • NO! READ s2(5) carefully!

    • Because in a bulk case, he may need to retain some of his...