Order bill of lading. Most of the bills of lading used in international trade and shipping are of this type. When a bill of lading does not contain the name of the consignee it is not a named bill of lading.
It may have the name of the notify party who may not be entitled to the goods. If the seller of the goods has not transacted them before shipment he may insert the name of the notify party on the bill of lading and mark it “to order”. In standard form bills of lading a box on the front of the document may also be marked “Consigned to the order of”. The goods must be delivered to the order of the person named or even that of the shipper himself. One duly indorsed part of the set of bills of lading is presented in exchange for the goods.
The consignee or shipper may negotiate the order bill of lading by merely signing across the back of the bill of lading. This is “blank indorsement”. This process converts the order bill of lading into a “bearer bill of lading”. A bearer B/L may be transferred further by mere delivery of the document. It may also be indorsed to a named person or to the order of that person. This is “special indorsement” and converts the order bill of lading into a “straight bill of lading” or named bill of lading”. Without indorsement or a set of order bills of lading only the shipper can take delivery of the goods.
The transferability and negotiability can make the order bill of lading of great importance in international commerce and trade.
The effect of the order bill of lading was described in The San Nicholas, 1976, in the English Court of Appeal:
“… By reserving it ‘to order’ the shipper reserved to himself power of disposing of the property and the property did not pass to the purchaser on shipment… In order to obtain delivery, the bill of lading would have to be endorsed specially or in blank. When produced by the… (buyers) … it would be evidence that they had taken it by endorsement and were entitled to the goods by reason of it.”
In the United States, the “order bill of lading” is defined in section 3 of the Pomerene Bills of Lading Act 1916:
“A bill in which it is stated that the goods are consigned or destined to the order of, any person named in such bill is an order bill. Any provision in such a bill or in any notice, contract, rule, regulation, or tariff that is non negotiable shall be null and void and shall not affect its negotiability.., unless upon its face and in writing agreed to be the shipper.”
The order bill of lading may be transferred by simple delivery and an undertaking that the title to the goods is also being transferred. The transferee obtains ownership to the goods. An order bill negotiated by indorsing in blank or special indorsement gives the indorsee the ownership of the goods and rights against the carrier.