Bills of lading carried on board (“On-board bills of lading”). The bill of lading is a receipt for cargo and evidence of the contract of carriage, and serves as a document of title. Bills of lading are signed in more than one original copy.
For commercial reasons related to the function of a bill of lading as a document of title bills of lading are presented for signature usually in sets of three. The charterer or shipper or their agents may present all the sets to the master for his signature. They will then take ashore with them two “originals” and leave a signed copy with the master (in the “ship’s bag” as this is sometimes referred to) for on-carriage to the consignee at the discharging port.
This is meant to solve the problem of the possible delay in the arrival of documents of title to the cargo. The vessel may arrive before the original bill of lading arrives and the consignee or receiver or endorsee may be unable to claim the cargo without presentation of a good bill of lading.
“Although there are potential risks in the master carrying to the consignees an original hill of lading, there are obvious advantages. . . . it is a common practice for a Charterer to send to the consignees via the master an original negotiable bill of lading. This is common in the oil industry . .”
In that case the vessel was chartered to load a cargo of oil from Singapore to Madras. After loading was completed, the charterer’s “water clerk” came on board with three bundles of cargo papers. The first contained documents, which were taken away by the clerk after the master signed them. The second contained papers for the use of the master and retained on board. The third contained documents to be carried to the consignees. In the first bundle there was a receipt for documents, which was signed by the master. One receipt was for the papers in the third bundle, which was stated to include “Bill of Lading 1 Triplicate 1 Copy”. Owing to his concern to depart from the loading berth quickly, the master did not sign the triplicate but told the water clerk he would do so on the passage to Madras. The charterers intended that the triplicate should have been signed, carried onboard the vessel, delivered to the consignees and then presented by them to the master to obtain the discharge of cargo.
This was common practice.
Before the vessel reached Madras, in communications between the owner and the charterer the owner advised the charterer that cargo would not be discharged against an original bill of lading, carried on board and that if no original was produced, the owner would require indemnification for delivering cargo without presentation of the original bills of lading . The charterer maintained that there was an original bill of lading (the triplicate) on board which the master had agreed to sign and deliver to the consignees so that the consignees could present it in exchange for the cargo. The master had already agreed to sign the bill of lading on the passage from Singapore to Madras and to deliver it to the consignees. However, he forgot to sign the triplicate copy held on board and, when the vessel was in Madras he Was instructed by the owner’s representative not to sign nor to discharge cargo. The vessel was delayed.
The judge decided that the owner was in breach of the charterparty clause that required the master to sign lawful bills of lading for cargo in such form as the charterers directed. The reason for the breach was that the master did not sign, despite his earlier agreement. The result of the breach was that there was no signed negotiable bill in the discharging port and this prevented discharge. The time lost was also the result of the breach and the owner was unable to claim demurrage. It is clear that lawyers consider that such a practice is full of risks but it is carried out because of time constraints in international trade. The shipowner can face claims by holders of bills of lading if the part of the sets of bills of lading carried on board is delivered to the wrong person and the cargo is delivered to the same person. If the other negotiable parts of the sets remain with the shipper, they can be stolen or lost or even transacted fraudulently.
The bill of lading carried on board can contain the consignee’s name or be an “Order bill of lading”, possibly indorsed by a bank.