Bills of lading and charterparties

Bills of lading and charterparties. In exercising the authority to sign bills of lading the charterers, agents and masters must ensure that the terms within the bill of lading are consistent with those in the charterparty that require a bill of lading to be signed and issued.

Terms, which are merely different, do not pose a problem. Only if the terms in bills of lading are extraordinary or “manifestly inconsistent” with the terms in the charterparty, can they be considered to be incompatible with the charterparty. Examples would occur if the terms in the bills of lading are not permitted by the charter or change the entire purpose of the contract in the charterparty. A complete change would take place if the voyage charter was for a vessel to carry cargo between two named places and the bill of lading named a different discharging port.

The charterparty contains the contract of carriage or hire. The bill of lading is considered to be the evidence of the contract of carriage. As explained in the introduction to this chapter, in some circumstances, the bill of lading can and should be considered to be contract of carriage. This is particularly true in the case of a liner vessel operating as a “general vessel”.

If a bill of lading is issued under a charterparty and the holder of the bill of lading is also the charterer, the actual contract is in the charterparty and the bill of lading is merely the receipt for cargo. If a bill of lading is issued under a demise charter where the charterer takes over control of the vessel as a “disponent owner”, the bill is then evidence of the contract of carriage between the disponent owner and the shipper. If the bill of lading is issued by a sub-charterer problems can and do arise, especially if the terms in the head charterparty are different to those in the sub-charterparty and also in the bill of lading.

Generally, a charterparty will contain a clause requiring any bills of lading issued under the charter to incorporate all the terms of the charterparty, be “without prejudice to the charterparty” and also incorporate appropriate legislation and Rules. For example, the “Clause paramount” in most charterparties will state that the charter is subject to either the Hague Rules 1924, or Hague-Visby Rules 1968 or the U.S. Carriage of Goods by Sea Act 1936, or the Hamburg Rules 1978. Normally the Hague-Visby Rules, for example, do not apply to carriage under a charterparty for they were designed for carriage under bills of lading. Article V of the Hague-Visby Rules states:

β€œ . . . The provisions of these Rules shall not be applicable to charter parties, but if bills of lading are issued in the case of a ship under a charter parry they shall comply with the terms of these Rules . . .”

However, the Rules do apply to charterparties when the charterparty contains a “Clause paramount”. incorporated the Rules. If there are terms in the charterparty that are more or less onerous than the terms in the Rules, the carrier will be bound by the obligations in the Rules, hence the word “paramount”. In The Satya Kailash, 1982, a charterparty incorporated the United States Carriage of Goods by Sea Act 1936 (which generally implements the Hague Rules) and also a clause requiring tile vessel to be absolutely seaworthy. The Hague Rules require the carrier merely to exercise “due diligence” to make the vessel seaworthy. The judge in the English court said:

“It is a perfectly proper and legitimate approach to construe the contract as a whole and to accept that some portions of it may be modified or even superseded by others. So I conclude that the United States Carriage of Goods by Sea Act is incorporated.”

The bill of lading may also incorporate the terms and conditions of the charterparty. If a bill of lading is issued and describes the charterparty, the terms of which are incorporated, the charterparty terms will apply if the holder of the bill of lading is also the charterer. For a third party holder of a bill of lading, the terms of the bill of lading will apply, especially if they are subject to the Hague Rules or Hague-Visby Rules.


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Bills of Lading Act 1855

Bills of lading carried on board (“On-board bills of lading”)