Rights and Obligations of Ship Owner under the Bill Of Lading - Essay Example

Rights and Obligations of Ship Owner under the Bill Of Lading Introduction The central role played by the bill of lading in international trade cannot be underestimated. The history of this document dates back to the 14th century where it was merely a receipt showing that the ship owner had received a certain quantity of goods shipped. Later the bill of lading developed in status from the mere receipt it used to be to the level of becoming a document of title. This is after terms of carriage were progressively incorporated into the bill of lading. In effect, the bill of lading implied possession. For instance a buyer of goods in port A could not transfer the goods to a third party until the physical goods in the high seas arrived. With the developments in international and the elevation of the bill of lading to a document of title then a buyer of goods could transfer or resell them to a third party without the physical possession of the goods. This was made possible by the bill of lading which puts an implied obligation the ship owner to deliver the goods to the holder of the original bill of lading in the agreed port. The duty to ensure delivery of the goods shipped to the holder of the original bill of lading is central to trade and as a result of this duty, being in possession of the original bill of lading impliedly had the same effect as being in possession of the goods in transit. From the above short overview, there are several duties imposed on the ship owner by the bill of lading. Key among these being the duty to deliver the cargo to the holder of the original bill of lading, failure to do so makes the carrier liable both in contract and tort. The following essay explores the duties and rights of the ship owner under the bill of lading in details. Discussion Nature of Rights under the Bill Of Lading Depending on who is holding it the bill of lading can act as a receipt, a contract of carriage or evidence of the same. It can also be a document of title. As a receipt, the bill of lading shows the quantity and the apparent condition of the goods shipped. Section 111(3) of the carriage of goods by sea Act obliges the carrier on demand by the shipper to issue a bill of lading on receipt of goods shipped indicating the quantity and also identification marks on the goods. The Act further requires the carrier to indicate the apparent condition of the goods shipped. Under subsection 4 of the same section, the Act states that the statements made under the bill of lading shall be prima facie evidence that the shipper received the goods shipped. From this section, once the carrier issues a bill of lading, then such a carrier is stopped from denying receipt of the same goods. As to the condition of the goods shipped, the statements that the carrier makes regarding the condition of the goods shipped under the bill of lading operate as prima facie evidence of the true condition of the goods shipped. the carrier cannot therefore later deny or be allowed to state contrary to what is contained in the bill of lading. For instance if the carrier indicates in the bill of lading that the apparent condition of a certain commodity that he or she receives for shipping as good or without defects, he or she cannot escape liability if the commodity is later found to be defective. Implied Duties of Ship Owners Seaworthiness The ship owner is under an obligation under the common law to provide a seaworthy ship for voyage. The degree of care that is required of the ship owner under common law is not that of a perfect ship but rather a reasonably seaworthy ship. This duty also includes the duty to cargo-worthiness; that is the duty to provide a ship that that is reasonably fit and ready to carry the cargo to the agreed destination after loading. This obligation requires the ship owner to ensure that the vessel is actually fit for the voyage and it is not an excuse for a ship owner at fault to claim that he did his best if the vessel remained unfit even after doing so (Steel v State Line Steamship Company, 1877). The degree of seaworthiness that is required of the ship owner is that of a prudent ship owner having regard to the voyage ahead and its nature. In other words, the standards are not fixed but rather vary depending with the intended use of the vessel. The obligation to ship owners to provide a seaworthy vessel is so serious that not even exclusion clauses intended to exclude owners from liability will reduce it. The courts have exhibited a tendency to disregard such clauses in order to give effect to the implied obligation to seaworthiness (Ingram v Services Maritime [1914] 1 KB 541, 1914). The duty to seaworthiness for contracts under the Hague/Visby rules (Article III rule 1) is reduced to that of observing due diligence and making the ship seaworthy. This is a bit lenient than what the common law demands of ship owners. Talking of readiness to carry the cargo, the common law duty exceeds providing a fit ship for the voyage and goes to the extent of obliging the ship owner to ensure proper and adequate manning of the vessel for the voyage. Other obligations such as ensuring that the vessel has ample fuel for the voyage also fall under this category (Alfred C Toepfer Schiffahrtsgesellschaft mbH v Tossa Marine Co Ltd (The Derby), 1985). Nature of the Obligation The obligation to provide a seaworthy vessel can be viewed from two dimensions. The first one is the obligation to provide a vessel that is properly manned for the voyage while the second dimension requires a cargo-worthy vessel that is suitable to receive the type of cargo the shippers want to transport. Under the first dimension, the ship owner is under an obligation to provide competent staff, take care of all other requirements such as the documentation as well as adequate fuel for the voyage (The Framlington Court, 1934). The second dimension is much more dependent on the nature of the contractual cargo to be shipped. The vessel must be fit to receive the nature of the cargo. For instance a vessel receiving meat for shipping must have a functional refrigerator (Cargo per Maori King v Hughes, 1895) Obligation of Reasonable Dispatch This is the second duty to the ship owners. The duty requires the ship owners to take not more than reasonable time in dispatching the cargo; that is in case the time was not expressly stated in the terms of the contract. Under all voyage contracts therefore there is always an implied condition that the ship owner will ensure that loading and the voyage itself takes place within the time agreed in the contract. It should further be noted that it is not an excuse for the ship owner to allege that there was no agreement on the time in the voyage contract as in this case there is an implied condition meaning that the parties need not negotiate or agree on it, that the voyage contract will be performed within reasonable time. Whether or not the ship owner is in breach of the implied obligation of reasonable dispatch cannot be measured against an objective scale but rather what is expected of a prudent ship owner having regard to the circumstances of each case. This is because each voyage is a different case and the prevailing circumstances at the time of the voyage are different and unique in each case. These specific circumstances are what should be considered in testing whether a particular ship owner acted reasonably. This principle is widely used in other contracts too and the effect is such that she ship owner for instance will not be held liable for any delays whose cause was outside his control (Hick v Raymond, 1983). In the event that the ship owner is guilty of unreasonable delay to the other party, such an aggrieved party can sue for damages to cater for the loss suffered as a result of the delay (Freeman v Taylor, 1831). In extreme cases however, the aggrieved party may repudiate the contact especially where the delay by the ship owner is to the extent that the objectives of the contract of carriage have been rendered nugatory by the delay. A good example of this is when a ship is chattered to deliver certain goods from port A to B, then return immediately to port A for the second consignment. If the ship owner/master decides to load goods destined for port A from another port in order to make an extra coin and in the process causes unreasonable delay to the other party, then such a ship owner is liable and can be ordered to pay damages for the breach. If on the other hand the ship owner takes too long such as to frustrate the main object for which the other party had hired the ship, then the aggrieved party retains the right to treat the contract as repudiated. It should also be noted that an aggrieved party who only suffers a delay that cannot be classified as unreasonably long and which can be cured through damages cannot be allowed to treat the contract as repudiated just on account of the delay (MacAndrew v Chapple, 1866). Deviation from the Agreed Route Like the previous obligation that is implied in all voyage contracts, there is an implied condition in all voyage contracts that the ship owner will not deviate from the agreed route. Again, this condition need not be expressly incorporated into the terms of the contract since it will have effect to the parties whether or not the same was a term in the voyage contract or not. The use of the word deviation presupposes a situation where there is a pre-agreed route which the ship is to follow from the port of loading to the port of destination. In most cases, voyage contracts will expressly define the route to be followed by the vessel and any alteration or deviation from this without sufficient reason is what constitutes breach. In the absence of a clearly defined route to be followed by the vessel under the contract, the practice is that the direct route between the ports of loading to that of discharge is the impliedly agreed route. This is a presumption which can only be rebutted by the ship owner adducing evidence to show the contrary, for instance where there is a different custom or usage that the ships follow (MacAndrew v Chapple, 1866). The ship owner is also allowed to adduce evidence as to the previous routes followed by other vessels previously (Reardon Smith Line v Black Sea and Baltic General Insurance, 1939). Worth noting under this too is the requirement that a deviation must be caused deliberately by the officers manning the vessel, an involuntary deviation will not suffice in finding the ship owner liable for deviation. An example is when a vessel deviates in a bid to avoid storms or where the vessel is drifted off the agreed route by the storms against the will of its master. Other circumstances where a vessel may deviate include where a vessel is hijacked at sea or where a vessel is steered off the route due to a mechanical problem or in a bid to evade war in the high seas. Conditions under Which Deviation May Be Permitted Under common law At common law, deviation from the agreed route is allowed under the following circumstances; To save life: A vessel is allowed to deviate from the agreed route in order to save life. The lives to be saved in this case do not have to be only for the members aboard the deviating ship; a deviation to save a ship in distress is allowed under this exception as long as the main objective is to save the lives of those on board. Saving cargo, which may form part of the rescue mission does not fall into this category of saving lives but a ship master is not expressly forbidden from saving cargo. To evade danger (to ship and cargo): There are instances where the master of the ship is forced o deviate from the agreed route in order to avoid dangers, such as heavy tides or war in the sea, that may otherwise affect his vessel. This is a duty and it is not optional for the ship master to do as failure to steer the vessel from danger will make such a master liable for breaching a duty of due care. (Notara v Henderson, 1870). In deviating under these circumstances, there is a requirement that the danger must seem to be persistent as opposed to a short occurrence in the sea. Under this, a ship master may not be allowed to deviate from the agreed route just on account of a small tide or wave that could easily be managed without necessarily having to change the route. Default on the part of the charterer: Where the charterer loads excess cargo to the ship without informing the ship owner, the ship master may deviate to offload such cargo in another port save the one agreed as the port of offloading. Similarly, where the charterer fails to load all cargo at the loading port, the ship master may deviate to load the remaining cargo from another port. This may however not be possible in most cases especially in cases where other parties have also loaded their cargo into the vessel to the effect that a deviation would cause unreasonable delay of their cargo. Deviation under the Hague/Visby rules: The Hague /Visby rules (Article IV rule 4) provide for other two instances under which deviation may be allowed. These are; 1. “deviation in saving or attempting to save property at sea” and 2. “any other reasonable deviation” Rights of Ship Owners This should be viewed from the perspective that every duty on the shippers towards the ship owners/ carriers is on the other hand a right to be enjoyed by the ship owner or carrier. An example of such a right/ duty is given below. Shippers Have a Duty Not To Ship Dangerous Goods Under this, shippers are under an implied obligation at common law not to ship dangerous goods without the consent of the ship owner or carrier. For contracts under the bill of lading, there would be an express term to clause to this effect. It should however be noted that failure to incorporate such a term in the bill of lading does not exempt a shipper from liability since the obligation is an implied one. Conclusion As evidence to the contract of carriage, the contract may have negotiated orally and the terms agreed upon by the shipper and the carrier long before the bill of lading is issued as the discussion above had explored. In this case the terms of the contract may not all be included in the bill of lading itself. Nevertheless, the bill of lading exists as a proof that there was a contract agreed upon by the shipper and the carrier. Looking at the bill of lading as a contract of carriage itself, the statements in the bill of lading will be taken as the actual terms of the contract between the shipper and the carrier. It should however be noted that the bill of lading will only be viewed as a contract of carriage if the holder is the shipper. A third party is not privy to this and hence the position of such a third party is a different one. This was the position of the court in leduc v ward (1888)20QBD 475 where the endorsee sued the ship owner for loss of cargo after the ship deviated. The court held that an argument by the carrier that the shipper knew of the planned deviation at the time of shipment could not stand since that information was not in the hands of the endorsee. Reference List Alfred C Toepfer Schiffahrtsgesellschaft mbH v Tossa Marine Co Ltd (The Derby) , 2 Lloyd’s Rep. 325 (1985). Cargo per Maori King v Hughes , 2 QB 550 (1895). Framlington Court , AMC 272 (1934). Freeman v Taylor, 8 Bing 124 ((1831)). Frenkel v MacAndrews, AC 545 (1929). Hick v Raymond, (1983) AC 22 (1983). Ingram v Services Maritime [1914] 1 KB 541, 1 KB 541 (1914). MacAndrew v Chapple, LR 1 CP 643. (1866). Notara v Henderson, LR 5 QB 346 (1870). Reardon Smith Line v Black Sea and Baltic General Insurance, AC 562. (1939). Steel v State Line Steamship Company., 3 App Cas 72 (1877). The Framlington Court , AMC 272 (1934). Read More