What is Bill of Lading?

A Bill of lading is a document issued by the ship-owners or their agents acknowledging receipt of the goods for carriage to a specified port of destination. It also contains a full description of the goods, with their marks, identification numbers, and contents as declared by the shipper.

What is the bill of lading?

It also contains the terms and conditions subject to which the goods are carried and an undertaking to deliver the identical packages in the same condition as received, to the consignee, his order, or assigns.

Where freight is not paid in advance, the shipping company reserves the right not to deliver the goods until freight and other charges specified in the bill of lading are duly paid.

What is Bill of Lading
What is the Bill of Lading

The function of the bill of lading

A bill of lading has three important functions. They are-

It is evidence of receipt of goods by the shipping company but the shipping company is not responsible for the actual contents of the packages or bales.

The bill of lading is only a piece of prim face evidence that the packages with special markings and numbers were received by the shipping company.

The shipping company is not expected to verify the contents of the packages before receiving them for shipment.

It is a contract of carriage. It contains terms and conditions on which the carrier agrees to carry goods from one port to another.

It is also a document of title and property in goods. It can be transferred by mere delivery in case it is a bearer instrument and by endorsement and delivery if it is an order instrument.

Precautions to be taken in case of advance against bill of lading

Bill of landing is usually issued in triplicate (in a set of three) all of which are signed and, state that they are respectively the ‘original’, ‘duplicate’, or ‘triplicate’ bills.

The shipping company delivers the goods on the presentation of any one of the three copies of the bills of landing, thus rendering the other two ineffective.

The bank while advancing should get hold of all the copies of the set duly endorsed preferably in blank and delivered to him; otherwise, the danger is that in case the shipper fraudulently endorses and copy of the set to an innocent third party for valuable consideration without handing over the same to the banker and in case that party presents the bill first and obtains delivery of the goods, the banker may be forced into unnecessary litigation.

If any copy of the set is not received, immediate notice should be given to the shipping company concerned as to his lien on the bill of lading as well as his rights on the goods on the arrival of the ship.

The banker should advance money only against the shipped bills of lading which mean that the goods stated therein are received on board a named ship and are being carried to the point of destination.

The banker should not accept the received shipment bill of lading as security. Such bills do not afford any evidence that the goods have been shipped or on which vessel they were loaded.

A bill of lading is not a fully negotiable instrument although it carries with it certain characteristics of negotiability.

As a negotiable instrument, a bill of lading is a document of title and it is transferable by endorsement and delivery, and the transferee can sue thereon in his own name and right and can give a valid discharge to the person liable.

But the title of the transferee of the bill of lading will not be better than that of the transferor though he might have accepted it in good faith and for valuable consideration except under circumstances as stated in sections 27 and 30 of the Sale of Goods Act, 1931. On account of this limitation, it is considered to be semi-negotiable.

It should be ensured that the goods represented by the bill of landing have been insured and the policy should be assigned in favor of the bank.

An appropriate memorandum of charge should be taken conferring on the bank the power to sell the goods, in the event of default by the borrower and, apply the sale proceeds towards reimbursement.

Since the bill of lading is not a fully negotiable instrument, it should be accepted only form a person having honesty and integrity.

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