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Gard Guidance on Bills of Lading NEGOTIABILITY

Closely connected with the function of document of title is negotiability. If the bill of lading is negotiable it can be transferred from a person with title to a person without title, for example from a consignee named in the bill of lading to a consignee not named in the bill of lading. This in turn allows the goods to be traded whilst in transit.

The most common negotiable bills of lading are “order” bills of lading and have the words “order (or assigns)” inserted instead of or against a named consignee, respectively allowing the shipper or named consignee to transfer the bill of lading to another person. To transfer the bill of lading in this case the shipper or consignee endorses the bill of lading and then hands the bill of lading on. An endorsement in this case is made by the shipper or consignee signing his name on the bill of lading (an endorsement in blank), allowing transfer to any person to whom the bill of lading is handed. If the name of the person to whom the bill of lading is to be transferred is written in the bill of lading, in addition to the signature, the bill of lading can only be passed to the named endorsee (an endorsement in full). To allow the endorsee to transfer the bill of lading further, the words “to order (or assigns)” would have to be added against the named endorsee.

What are commonly known as bearer bills of lading are also negotiable documents. However, unlike order bills of lading, they can be transferred without endorsement. The bearer bill of lading can simply be transferred by hand from one person to another. A bearer bill of lading is either blank or the word bearer is inserted instead of a named consignee. An order bill of lading may also become a bearer bill of lading if it is endorsed in blank by the person named in the order bill of lading.

Negotiable bills of lading mean that the goods can be traded several times during the voyage. This is why delivery should only be made against presentation of an original bill of lading (see sections Meaning and relevance of title and Delivery under bills of lading which function as a document of title). This however can cause a problem if the bill of lading cannot be presented, because for example it has been lost or delayed. Waybills and straight bill of lading can be used to avoid this problem, but only if they do not expressly require delivery against presentation (see section Meaning and relevance of title). However, they cannot be negotiated because they show the names of a shipper and consignee. This of course is not a problem if the cargo is being traded between one buyer and one seller. Non-negotiable bills of lading are usually stamped or marked as such. Further explanation of proper delivery of cargo under bill of lading and waybills is given in section 1.3.4 Delivery of goods covered by a bill of lading and waybill.