Bill of Lading Importance of great care on the part of ship’s master when signing the bill of lading

‘…to issue a bill of lading with a figure which a master knows to be false, or where the master has no belief in its truth, or where he has simply decided to make no effort at all to check its accuracy, would be to issue a dishonest bill.’
Liquid Cargo Shortage Claims. North of England P&I, 2008

Legal effect of Master’s signature on bill of lading

When the goods have been loaded on board of the vessel and signed bill of lading handed by the master to the shipper, such bill of lading begins its existence in a role of master’s receipt for shipper’s goods. The shipowner is usually bound by the master’s signature to a bill of lading, unless the master, in signing the bill of lading, exceeds his authority. As Lord Esher stated in Leduc & Co v Ward (1888) 20 QBD 475 at 479, the master:

… has no authority to make contract of carriage to bind the shipowner, except in respect of goods received by him. If the goods have not been received, the bill of lading cannot contain the terms of a contract o carriage with respect to them as against the shipowner. But, if the goods have been received by the captain, it is the evidence in writing of what the contract of carriage between the parties is …

The following statements acknowledged by master’s signature in the bill of lading will bind the shipowner:

1. relating to the amount of freight to be paid by the consignee,

2. relating to the shipment or receipt of the goods,

3. relating to the condition of the goods.

Therefore when the goods shipped "in good order and condition" the master is expected to be able to assert whether the goods actually shipped in good condition, while assessment of quality of the goods is not his business to know anything about. Channell J in Compania Naviera Vasconzada v Churchill and Sim, Compania Naviera Vasconzada v Burton & Co [1906] 1 KB 237, 10 Asp MLC 177 distinguished qualification as to quality of goods ("quality unknown") from statement related to condition ("in good order and condition") at p.245:

It seems to me that whith reference to some things and to some defects in them "condition" and "quality" may mean the same thing, yet that they do not either necessarily or even usually do so. I think that "condition" refers to external and apparent condition, and "quality" to something which is usually not apparent, at all events to an unskilled person. I think a captain is expected to notice the condition of the goods, though not the quality.

Master is not required to be an expert on the condition of cargo loaded, so he may ask for professional advice from a surveyor but ultimately it will be a matter of his own judgement on the appearance of the cargo being loaded. The master’s signature on the bill confirms conformity of the quantity and quality of the cargo loaded with that description represented in bill of lading. If the master signs the bill knowing that the statement as to apparent quality and quantity of the goods or the date of shipment is incorrect, he makes the owners vicariously liable in fraud to anyone who suffers loss by relying on the presentation (see Fraudulent Representation). Therefore an importance of great care on the part of ship’s master when signing the bill of lading can hardly be exaggerated – a master or his representative who signs a bill of lading that inaccurately describes the cargo is making a misrepresentation of fact, which can have considerable legal consequences. Basic idea of importance of master’s obligation to provide a correct description of the cargo in bill of lading is that final holder of the bill will have to completely rely on master’s statement when he pays for the cargo. In other words master is under duty of care when signing documentation which will be negotiated for value to third parties(Read also The Nogar Marin: master’ duty of care when signing documentation).

Bill of lading defines mutual liabilities between the shipowner and the holder of bill of lading (the cargo owner), whereas contractual relations between the shipowners and the charterers documented in form of either time or voyage charterparty. Therefore if the charterers are not the cargo owners they are not the party to the bill of lading contract – thus theoretically have no influence over the provisions and statements represented in the bill of lading. On the other hand the charterers, while operating the vessel, have a direct command over the vessel and her master in commercial matters and therefore usually do have authority to insist on certain provisions in bill of lading, even when they are not the cargo owners. This is a complex matter, but in very simplified form position of English law can be expressed in a way that the master is bound to sign any bill of lading presented by the charterer if the terms of the charterparty between the charterer and the shipowner would not to be altered by this signature, or if altered, the shipowner should not be exposed to greater liability than under the charterparty.

As illustration of the words above, one can study decision of Aikens J in Sea Success Maritime Inc v African Maritime Carriers Ltd. [2005] EWHC 1542 (Comm). The owners’ vessel "Sea Success" was chartered and sub-chartered under chain of charter parties. The head time charter was on amended NYPE (1981) form with clause 52 to read as below:

The vessel to use Charterers’ Bills of Lading or Bills of Lading approved by Charterers and/or sub-Charterers which to include New Both-To-Blame Collision Clause, New Jason Clause, Clause Paramount General, USA or Canadian, as applicable, P&I Bunkering Clause and Baltime 1939 War Risks Clauses, during the period of this Charter. Master to authorise, time by time, in writing Charterers or their appointed Agents to sign Bills of Lading on behalf of Master in accordance with Mate’s receipts. Master has the right and must reject any cargo that are subject to clausing of the BS/L.

There was a final sub-charter in the chain. Time charterers sub-chartered the vessel to the voyage charterers, pursuant to a voyage charterparty on an amended GENCON form for trip with two load ports Constantza and Novorossiysk for shipment of several consignments including one of steel pipes and one of steel coils.

In Constantza the master found steel pipes to be in a damaged condition and consequently refused to accept the cargo on board for carriage. Eventually the problem was resolved by the issue of a Letter of Indemnity. In Novorossiysk, being the next port, the vessel was to load the cargo of hot rolled steel coils. Once again the cargo was in a damaged condition and the master refused to permit the cargo to be loaded in accordance with the instructions given by or on behalf of charterers. Then shippers proposed to incorporate in the bill of lading the apparent order and description of the steel coils cargo as found by the Club surveyors, but the master still refused to sign B/L. The problem was resolved by the parties entering into a "without prejudice" agreement as to their respective rights and the cargo was loaded. The dispute arose between the owners and the head timecharterers whether the master was entitled and obliged to reject the cargo presented for loading in Novorossiysk.

The judge in his ruling stated two options open to the parties in situation when the master, on examining the cargo, takes the view that he would have to qualify the bill of lading in order to ensure that the description of the cargo given is consistent with a statement as to the cargo’s "apparent order and condition":

i) either the charterers/shippers reformulate the description of the cargo in the draft bill of lading, so that it would accurately represent the description and condition of the cargo;

ii) or the Master must qualify, or "clause" the bill of lading so that it records accurately both, the shippers/Charterers’ description of the cargo, and the actual condition of the cargo loaded on board, as assessed by the master.

Accordingly, the judge held that should the Charterers’ proposal had been accepted at Novorossiysk, there would have been no need to qualify the statement of the apparent order and condition of the cargo as described in the bill of lading presented for signature by the master. Therefore, on the proper construction of clause 52 of the Charter, the master did not have the right to reject the cargo at Novorossiysk.

Evidently the master has acted under the stress of the moment and without clear understanding of the scope of his rights to clause bill of lading, therefore, it is probably worth of emphasising that the master’s right to reject to sign bill of lading exists only as long as he positively knows that description of the goods in bill of lading does not represent the true facts. Such right ceased to exist when the shippers declare their readiness to amend description of the cargo in the bill of lading as to correspond to one found by the surveyors, i.e. independent experts. If master agrees with the view of surveyors he must sign bill of lading if not, he should offer another formula to describe cargo or qualify bill of lading. In simple words while description of heavily rusty steel pipes as just "steel pipes in good order and condition" would evidently mislead the holder of bill of lading, then if the cargo will be described as steel pipes with moderate to severe oxidation" or "steel pipes severely oxidised" would bear a correct meaning in the sense of being in "proper" order and condition.

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