Charterparty bills of lading

Charterparty bills of lading. In “Charterers’ bills of lading” (above)’ emphasis was laid on the identity of the carrier and whether this person was the charterer. The charterparty and the bill of lading are also connected usually by incorporation of charterparty terms and conditions into the bill of lading.

If a bill of lading contains a clause stating that “All conditions and exceptions as per charterparty dated . . .” this does not make the bill of lading a defective document.. The bill of lading is a receipt, and may contain details of the contract of carriage of goods by sea. When it is also used as a document of title in international sale and purchase of goods, a clause such as this may create difficulties. If a seller tenders a bill of lading containing such a clause without also producing the charterparty to which the clause refers, the bank paying the seller on behalf of the buyer may refuse to accept such a document. In the system of “documentary credits” the “Uniform Customs and Practices 1983” (UCP) provides in Art. 26:

“If a credit calling for a transport document stipulates as such document a marine bill of lading: (c) Unless otherwise stipulated in the credit, banks will reject a document which: (i) indicates that it is subject to a charterparty.”

If banks are so cautious this can be understood. They can incur liability to a buyer if they pay the seller on production of documents and one document is subject to another, which is not produced. Neither the banks nor the buyer may have an opportunity to discover the carrier’s responsibilities, liabilities and rights under the non-produced charterparty. The banks’ cautious approach is different to that of the courts. In Finska v. Westfield, 1940, it was held that despite non-production of a charterparty referred to in the bill of lading, the seller was still entitled to be paid. The UCP is more modern and is likely to govern contracts of sale.

The conditions and exceptions of a charterparty may govern the relationship between the charterer and the shipowner/carrier especially if the charterer is also the shipper and holds the bill of lading. However, a charterer who is also an endorsee under a bill of lading, may be uncertain as to which contract governs his rights to bring an action. In The Dunelmia, 1970, the charterers were the endorsees. The charterparty contained an arbitration clause. The bills of lading contained clauses that freight would be payable according to the charterparty and also that “All conditions and exceptions as per charterparty”. The arbitration clause was not expressly referred to. Arbitration clauses are procedural in nature and deal with the procedure for handling disputes under the contract. They are not central to the subject matter of the contract and therefore cannot be considered to be “conditions or exceptions”. There was a dispute between the charterers and the shipowner. The carrier argued that the bill of lading was the main contract, and the endorsee was time-barred under the bill of lading. If this were correct, the bill of lading would have modified the charterparty. The court held that this did not occur. The main contract was still the charterparty and although time-barred under the bill of lading the endorsee could refer the dispute to arbitration as charterer.

Therefore, a clause “all conditions and exceptions of the charterparty” will not cause the bill of lading to be subject to clauses in the charterparty, such as arbitration clauses, unless these are expressly incorporated. If charterparty terms are incorporated into a bill of lading, and the vessel is sub-chartered by the head charterer, the terms of the head charter are considered to be incorporated.


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