Bill of Lading. Delivery of Goods Last updated 22-Oct-2015

[I]t is of the essence of contract that a shipowner is both entitled and bound to deliver the goods against production of an original bill of lading, provided that he has no notice of any other claim or better title.
Per Rix J in Motis Exports Ltd v Dampskibsselskabet Af 1912 Aktieselskab [1999] 1 Lloyd’s Rep. 837.

A right and an obligation to deliver the goods

The carrier has a right and an obligation to deliver the goods to the consignee. Any transportation goods across the sea under bill of lading contract has, as Lord Denning noted in Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] AC 576, as one of its main objects, the proper delivery of the goods by the shipping company against production of the bill of lading. It would defeat this object entirely if the shipping company was at liberty, at its own will and pleasure, to deliver the goods to somebody else, to someone not entitled at all, without being liable for the consequences.

Sale of Goods Act, 1979 s.61(1) defines delivery as "voluntary transfer of possession from one person to another". Mere discharge of cargo therefore does not constitute delivery as a general rule. As Smith J put it in Glencore International AG v MSC Mediterranean Shipping Company SA & Anor [2015] EWHC 1989 (Comm) at para 17:

I shall say something about what would constitute delivery of goods in order to set the scene for the parties' submissions on what is in issue. In the context of the sale of goods. In Barclays v Customs & Excise, [1962] 1 Lloyd’s Rep 81,89, Diplock J observed that a bill of lading contract is "not discharged by performance until the shipowner has actually surrendered possession (that is, has divested himself of all powers to control any physical dealing in the goods) to the person entitled under the terms of the contract to obtain possession of them". Thus, as it is put in Cooke on Voyage Charters (4th Ed, 2014) at para 10.4, delivery is "a bilateral act, involving the receipt of the goods by the consignee or his agent as well as the relinquishing of possession by the carrier, and so it cannot be effected merely by discharging the goods over the ship's side at the port of delivery. Equally delivery cannot, in the absence of special terms, be effected merely by putting the goods into the custody of a person who is not the agent of the consignee".

On the other hand the consignee is bound, within a reasonable time after arrival of the vessel, to be ready to remove and receive his goods, and in default of his so doing, the shipowner may land them, and claim from the consignee all expenses properly incurred by him for such landing. In absence of custom or special provision in the contract, the shipowner is not bound to give notice to consignee of the arrival of ships.

In The Lehmann Timber [2013] EWCA Civ 650, [2013] 2 Lloyd’s Rep 541 Sir Bernard Rix said at para 95:

In Gaudet v Brown (Cargo ex "Argos") (1873) LR 5 PC 134 the authorities at Le Havre prevented the discharge of a cargo of petroleum. The shipowner found no nearer port where he could discharge the cargo and so took it back again to London. He was held entitled to his freight, backfreight and expenses, because the consignee was under a duty to discharge the cargo and the shipowner was under a duty to take care of the cargo in the circumstances which had arisen and he had acted reasonably. He could not throw the cargo into the sea, but he was not required to retain and preserve the cargo at his own expense. That was not a case where a lien was exercised, but the case illustrates the doctrine that a shipowner is entitled to be indemnified in contract and/or bailment for the reasonable expenses of dealing with a cargo where the consignee is unwilling or, as here, unable to perform his duty of discharging the cargo (at 161, 165).

Lately it was affirmed in Sang Stone Hamoon Jonoub Co Ltd v Baoyue Shipping Co Ltd (The Bao Yue) [2015] EWHC 2288 (Comm) such storage of the goods when proper delivery either impossible or the consignee failed to take delivery of the cargo, even if not authorized by the consignee expressly , is always deemed to be authorized impliedly as an aspect of the well established general law of bailment applicable to the situation where a bill of lading holder fails to take delivery at the discharge port.

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