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Loss Prevention Circular 13-02

Loss Prevention Circular 13-02

Straight bills of lading – Delivery – Do your bills use clear words?

 

Introduction

There have recently been a number of court cases questioning the status and functions of a straight bill of lading. A straight bill of lading is generally accepted to be one completed in such a way that delivery is to be made to the named consignee only. Accordingly, it is not a transferable or negotiable document of title, which can be used to transfer title (the right to possession) to the goods, covered by that document. Bills of lading that are made out “to order” are, by endorsement, negotiable documents of title. Bearer bills of lading are negotiable without endorsement.

 

The commonly held view is that, whilst delivery under a negotiable bill of lading should only be against production of an original bill, such production is not necessary under a straight (non-negotiable) bill of lading, i.e., delivery need only be made to the properly identified named consignee. As mentioned in Gard’s Guidance on Bills of Lading, however, and in light of recent case law, that view is over-simplistic and indeed dangerous. If care is not taken, the carrier risks facing claims for misdelivery.

 

The problem

In a recent case before the English courts, THE HAPPY RANGER[1], the bill of lading appeared to be a straight bill - the consignee box showed only a named consignee and did not contain the words “to order” or others similar. However, the face of the bill contained, in another body of text, the printed words “consignee or to his or their assigns” and these were the only words on the face of the bill indicating negotiability or otherwise. Since those words are accepted to mean “to order”, the court decided that made the bill negotiable.

 

Whilst this case did not concern a misdelivery claim, it nevertheless demonstrates that, if the intention is to issue a straight non-negotiable bill, clear words must be used (and other words should not conflict with them) to show that the bill is in fact a straight non-negotiable bill. If not, the bill will probably be deemed to be negotiable and the carrier will be obliged to deliver the goods only against production of an original bill.

 

In another recent case, which did concern misdelivery, the carrier had delivered the cargo without production of an original bill. The shipper had retained the original bills (all three) because the buyer/consignee had not yet paid in full, and when he failed to do so, the shipper sued the carrier. The case, Voss Peer v. APL Co Pte Ltd[2], was brought before the Singapore courts.

 

The bill of lading form was, as is increasingly commonplace, designed for various circumstances including when the bill is to be negotiable and when it is to be non-negotiable. It was accepted that the bill was a straight bill[3]. Notably, the bill of lading contained printed words elsewhere on its face “Upon surrender to the Carrier of any one negotiable bill of lading, properly endorsed, all others to stand void”. Under English law[4] such words were recently interpreted to apply only when the bill was negotiable. By implication therefore, under a straight non-negotiable bill, the carrier was not prevented from delivering the goods without production of an original bill.  The Singapore Courts disagreed and decided that “clear words were required” to reflect the intention of the parties to contract out of delivering the goods without production of an original bill. 

 

As a result, the Singapore courts found the carrier liable for the misdelivery claim. Less recent English case law suggests that the requirement for clear words may be correct. Carriers should therefore ensure that, where the bill is a straight non-negotiable bill, it contains clear words permitting the carrier to deliver the goods without production of an original bill.

 

Recommendations

In consideration of the above recent court cases, Gard Services recommends Members and clients to:

 

  • Check their standard form bills, particularly those designed for various circumstances including when the bill is to be negotiable and when it is to be non-negotiable.
  • Ensure that printed words in the bill make it clear in what circumstances the bill will be a straight non-negotiable bill. For example, use of the words “(B/L not negotiable unless “order of”)” in the consignee box.
  • Ensure that other printed words, particularly on the face of the bill, such as those in THE HAPPY RANGER, do not conflict with a bill which is intended to be non-negotiable. If those words cannot be deleted, or others more appropriate used, it should be made clear that they only apply where the bill is negotiable.
  • The document issued should of course properly reflect what has been agreed with the shipper. If a non-negotiable document is sufficient, a sea waybill will usually be most appropriate. If a sea waybill[5] can not be issued, it is suggested that the straight bill should also contain words (handwritten or stamped to give preference over printed words) such as “where non transferable/negotiable, the carrier is entitled to deliver the goods to the named consignee without surrender of an original bill of lading, and is obliged to do so unless the shipper requests otherwise before delivery takes place”.
  • Where it is agreed that a non-negotiable document is to be issued, that, together with the carrier’s delivery obligations thereunder, should preferably be reflected in booking confirmations.
  • In case of doubt, cargo under straight bills should not be delivered without production of an original bill, unless and until written consent has been obtained from the shipper.

 

Gard Services will be happy to review Members’ bills of lading and to provide guidance in light of the above.

 

A more in-depth commentary on the cases referred to in this loss prevention circular appears in Gard News 169 (February 2003).

 



[1] [2001] 2 Lloyd’s Rep. 530 and [2002] 2 Lloyd’s Rep. 357.

[2] [2002] 3 SLR 176 and Civil Appeal No. 18 of 2002.

[3] It contained the printed words “(non-negotiable unless consigned to Order)” and the words “to order” did not appear in the bill that was issued, either next to the named consignee or elsewhere.

[4] See for example the RAFAELA S [2002] 2 Lloyd’s Rep. 403

[5] Sea waybills expressly state they are non-negotiable and that delivery does not require production of an original sea waybill.