Claused bill of lading. This is a bill of lading which contains clauses, stamped or written or typed, either in the body of the document or in the margin, the effect of the clauses being to qualify the statements and printed clauses in the bill of lading itself.
Banks may be reluctant to accept bills of lading with clauses because the clauses could easily be construed as relieving the carrier of any liability for loss, damage or delay to the goods. A "claused" bill of lading may be treated as a bill of lading that is not "clean". However, the clause may not expressly declare ". . . a defective condition of the goods and/or the packaging". (UCP 1983, Art. 34.) If it does not, it should be a "clean" bill of lading, clean, that is, for the purposes of banks. The clause may refer to some fact that has nothing to do with the actual condition of the goods themselves, for example, that the packaging is "second-hand". While banks are supposed to accept bills with such clauses, a person who works in the bills section of a bank may not be able to differentiate between such words and words, which expressly state the goods, may be defective, such as "wet" or "stained".
Some clauses may not necessarily be accurate statements of facts connected with the identifying marks, quantity and condition of the goods. For example, a clause stating that the bill of lading is subject to the terms arid conditions of a charterparty does not make the bill , of lading "unclean". However, Art. 26(c) of the UCP 1983 permits banks to reject such a document unless the instructions for the documentary credit expressly permit its acceptance. With no express instructions, this may be the situation even if a charterparty, referred to in the bill of lading, is attached to the bill of lading when this is presented to the bank for payment against documents.
The carrier is bound to issue bills of lading on demand of the shipper showing the marks and quantity of the goods as furnished by the shipper and the apparent order and condition of the goods as perceived by the master or agent of the carrier. The carrier is not bound to state the marks and quantity, which he feels, may be inaccurate or which he cannot check but the carrier is not bound to check these facts. (The proviso to Art. III, r. 3 of the Hague Rules and Hague-Visby Rules.) If the carrier issues a bill of lading that contains a reservation or qualification that implies such doubt or inability to check, for example, "weight and quality unknown", "shippers' load and count" and "particulars furnished by shipper", banks and buyers may reject such a document as having a notation. This can cause difficulties for the carrier if the vessel arrives at the discharging port and the buyer refuses to accept the goods. Article III, r. 5 of the above Rules allow the possibility that. the carrier can be indemnified by the shipper for inaccurate statements as to marks and quantity, it may be less troublesome for the earner to issue an unclaused bill of lading, especially if the shipper pressures the issuer, and seek indemnity later from the shipper if cargo claims do arise.
The pressure from shippers can be common in the case of goods and/or packaging, which may be physically defective, or not meeting the description in the contract of sale but the shipper wants an unclaused bill of lading. Some shippers also offer a "letter of indemnity" undertaking to indemnify the carrier if the cargo receivers bring an action against him. Such an indemnity is unenforceable as an "illegal contract". In Brown Jenkinson v. Percy Dalton, 1957, the vessel loaded barrels of orange juice. The barrels were obviously leaking. The carrier was Induced to issue unclaused bills of lading on the strength of an indemnity from the shipper. When the consignees under the bills of lading brought an action against the carrier, the latter attempted to claim an indemnity from the shipper. The shipper refused to indemnify. The court held that the indemnity was unenforceable because the issue of an unclaused bill of lading in these circumstances was a "fraud" on the buyer. The reason was that, at the request of the shipper, the carrier issued a bill of lading stating the goods were in apparent good order and condition. They knew this was false and must have intended that this statement would be relied upon by consignees or endorsees. The judge said that:
"In these circumstances, all the elements of the ton of deceit were present . . . a promise to indemnify the [carrier] against any loss resulting to them from making the [statement] is unenforceable. The claim cannot be put forward without basing it on some unlawful transaction. The promise on which the [carriers] rely is in effect this: if you will make a false [statement], which will deceive endorsees or bankers, we will indemnify you against any loss that may result to you. I cannot think that a court should lend its aid to enforce such a bargain." (Brackets supplied.)
This case suggests that if the carrier has a real doubt about the order and condition of the goods and/or packaging, but no actual knowledge of their defectiveness, such an indemnity may be enforceable. The judge in the above case continued:
". . . the practice of giving indemnities upon the issuing of clean bills is not uncommon. There may be some circumstances in which indemnities can properly be given. Thus if a Shipowner thinks he has detected some faulty condition in regard to goods to be taken on board, he may be assured by the shipper that he is entirely mistaken: if he is so persuaded by the shipper, it may be that he can honestly issue a clean bill of lading, while taking an indemnity in case it was later shown that there had in fact been some faulty condition. Each case must depend on its circumstances."
Clauses in the bill of lading such as "shipper's load and count" may contravene the spirit of the beginning of Art. III. If the shipper furnishes details of the marks and quantity, the earner is bound to issue a bill of lading containing these details, at the request of the shipper. When the shipper furnishes these details he is not requesting a document showing other details especially if there is likelihood that the advising or confirming bank will reject the document because of the notation and refuse to pay the shipper. There is a presumption of law that the consignee or endorsee is entitled to receive the goods as described in the bill of lading and statements such as "weight unknown" tend to attempt to displace this presumption. If the details are later found to be inaccurate the carrier can bring a claim against the shipper under Art. III, r. 5. This does, of course, imply that a lengthy, costly legal action may result and also implies that the original shipper is worth suing. Moreover, such clauses may be seen to contravene Art. III, r.8 of the Hague Rules or Hague-Visby Rules, which makes null and void any' clause in a bill of lading relieving the carrier or the vessel from liability for any loss in connection with goods.
The Hamburg Rules specifically contain provisions relating to reservations clauses in bills of lading. Article 16, r.l allows the carrier to insert a reservation specifying inaccuracies, grounds of suspicion or the absence of reasonable means of checking the details of the marks and quantity, also furnished by the shipper. The reservation may need to be a detailed explanation as to his doubts. In the same Article, r.2 states that if the carrier fails to note on the bill of lading the apparent condition of the goods, this is a presumption that the goods were in apparent good condition.
In the United States, the Pomerene Bills of Lading Act 1916 is much more specific. Section 20 provides that:
"When loaded by a carrier, such carrier shall count the packages of goods if package freight, and ascertain the kind and quantity if bulk freight, and such carrier shall not, in such cases, insert in the bill of lading . . . `Shipper's weight, load and count', . . . indicating that the goods were loaded by the shipper and the description of them made by him . . . If so inserted . . . said words shall be treated as null and void and as if not inserted therein."
Section 21 of the Act protects the carrier when the shipper loads the cargo:
"When the package freight or bulk freight is loaded by a shipper and the goods are described in a bill of lading merely by a statement of marks or labels upon them or upon packages containing them, or by a statement that the goods are said to be goods of a certain kind or quantity or in a certain condition, or it is stated in the bill of lading that packages are said to contain goods of a certain kind or quantity or in a certain condition, or that the contents or the condition of the contents of packages are unknown, . . . such statements, if true, shall not make liable the carrier issuing the bill of lading . . . The carrier may also by inserting the bill of lading the words `Shipper's weight, load and count', . . . indicate that the goods were loaded by the shipper and the description of them made by him . . ."
(In sections 20 and 21, above, "cargo" can be read in place of "freight".)
The Pomerene Act may apply only to all bills of lading issued in the United States for Carriage of Goods by Sea within the U.S. or outwards, but the sense of the provisions seems clear.
In the Hague Rules and Hague-Visby Rules it is provided that statements of marks and numbers are "prima facie evidence" in the hands of the shipper. This is similar to the position at common law. However, clauses such as "weight and quantity unknown" or "said to contain" may reduce the prima facie evidential value of the statement of marks and quantity. Some printed forms or bills of lading contain the "weight, quantity . . . unknown" reservation and the written or typewritten statement in the bill may be a statement by the shipper, which the carrier may be unable to verify. The use of "unknown" clauses may prevent the bill of lading from being "prima facie evidence" of the actual quantity shipped (New Chinese Antimony v. Ocean Steamship Co., 1917). The burden of proving that the cargo described on the bill of lading fell on the holders of the bill.
A modern example may help understand the effect of a "weight unknown" clause on a bill of lading. The Sirina, 1988, loaded a cargo of oil but the bill of lading figures were very different from ship figures for the cargo after it was discharged into shore tanks. The bill of lading contained a clause: "Weight, quality, condition and measure unknown". Under the New Chinese Antimony precedent, the suitably claused bill of lading may not be prima facie evidence of the quantity shipped. However, the judge felt that there ought to be limits on this effect of such a clause, especially where the discrepancy between ship's figures of cargo loaded and bill of lading figures was so large that it should be obvious to any master that the bill of lading quantity is inaccurate. Unless the master made a protest, the bill of lading quantity with a "weight unknown" clause implied that the quantity actually loaded was not very different from the quantity marked on the document. Therefore, because such a bill of lading could be "prima facie" evidence, the shipper can adduce evidence to corroborate the bill of lading quantities.
While the above example concerned bulk cargo, clauses on bills of lading for cargo in containers can also cause difficulties.
For example, in the Australian case of the Esmeralda 1, 1988, the vessel loaded containers in Brazil for carriage to Sydney, Australia. One bill of lading stated that one container contained "437 cardboard boxes of cutlery, leaflets and posters". The container was sealed at the container terminal in the loading port. When the bill of lading was signed by the carrier's port agent in Brazil, it was stamped with the words "said to contain-packed by shipper" under the description of the container and the number of the cardboard boxes. Along the margin of the bill was a clause "particulars furnished by shipper of the goods". In addition, another endorsement proclaimed that the bill of lading was "clean on board".
The cargo in the container was "Full Container Load" (FCL) which means that the carrier does not pack the container nor have any opportunity prior to sealing and padlocking to inspect its contents. The bills of lading bore on their face the letters FCL/FCL which means that the shipper, who wants to ship a whole container, obtains the container from the carrier, loads it, packs it, stows it and seals it. He then brings it to the container depot for shipment. The shipper uses a seal given by the carrier Generally the FCL/FCL container, which is packed by the shipper, is unpacked by the importer. When the container was opened at the destination it was discovered that the boxes within had been broken into and that 118 cartons were missing. The receivers informed the shippers in Brazil that the seals appeared to be intact and evidence within the containers indicated that the pilferage took place before the vessel sailed from the loading port.
The receivers sued the carrier and one of the principal issues for the court was whether the terms of the bill of lading prevented the carrier from denying that it received for carriage the 437 cardboard boxes.
The bill of lading is normally prima facie evidence as to the quantity of goods shipped. However, the New Chinese Antimony case has established that the prima facie nature of the statements is displaced where the carrier makes it clear that it accepts no responsibility for the quantity, weight, marks, numbers, etc. of such goods. In The Esmeralda 1, ". . . no representation was made by the carrier as to the accuracy of the statement that the container contained 437 cardboard boxes of cutlery, leaflets and posters' The stamped words `said to contain-packed by shippers' . . . (and the other clauses) . . . as well as the initials `FCIJFCL', plainly demonstrate that the (earner) did not pack or seal the container and that it was relying upon the representations of the shipper as to the contents, which contents it was not able to check for itself . . ."
The judge decided that the clauses on the face of the bill of lading protected the carrier from liability for not delivering the cargo as described in the bill. The earner delivered to the receiver the container with all its contents of which the carrier had had no personal knowledge nor opportunity of checking.
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