(a) In looking to critically discuss the view “the bill of lading is the essential document in the international contract of sale has no other document performs the functions of the bill of lading” the bill of lading is considered the most important document because it is recognised by law as the symbol of the goods described in it to guard against the risk of non-delivery by the ship-owner, the CIF (‘cost, insurance, freight’) contract requires the seller to take out a policy of marine insurance on which the buyer may sue.

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This is because, between the seller of the goods and the buyer of exchange, the delivery of the bill of lading is by way of pledge, and the security of the buyer of exchange is, until acceptance by the buyer on delivery to them of the documents, the liability of the seller as drawer of the bill of exchange with the bill of lading as collateral security.
As a result, a person who holds both the bill of lading and a marine insurance policy on the goods is, for business purposes, in as good a position as if the goods were actually in their possession, subject only to the ship owner’s lien Therefore, the delivery to the buyer of a bill of lading and an insurance policy on the goods together with the invoice which identifies them is treated both commercially and legally as satisfying the contractual obligations of the seller under a CIF contract.
However, the invoice, that normally debits the buyer with the agreed price is required partly to identify the goods sold with the goods shipped and insured to complete the record of the transaction and to show the price of the goods and to enable the buyer to raise money on their security more easily. This is because, in some trades, it is common for the price of the goods itself to vary with movements in the market according to an agreed formula – e.g. the Platt’s formula used in the oil trade.
On this basis, there are a number of requirements for the acceptable tender of a bill of lading because it is the duty of the seller to procure a contract of carriage is satisfied if they procure a contract of carriage which conforms with any stipulations agreed in the contract of sale and which is otherwise reasonable and acceptable in the trade at the time when it is made.
Therefore, this duty has been examined in the courts in the context of a number of requirements. First, in the absence of a stipulation or custom in the particular trade to the contrary, the contract of carriage must be one which will give the holder a right of action against the carrier in respect of the goods from the time of shipment until arrival at destination.
However, there appears to be no authority as to whether the seller is, in the absence of any express term to this effect in the contract of sale, under a duty to tender a bill which clearly identifies the carrier, although it is clear that the buyer may well have an interest in the identity of the carrier on whom the care of goods at buyer’s risk depends. Therefore, as to whom the buyer can sue on the contract of carriage contained in the bill of lading tendered by the seller will depend largely on the manner in which the bill of lading is signed.
Nevertheless, it is also a requirement of an acceptable tender of a bill of lading the document tendered must be a bill of lading in transferable form to allow the buyer to transfer the right to claim delivery of the goods from the carrier through transfer of the bill. Moreover, the bill of lading must cover only the goods which are the subject matter of the contract of sale, but in the absence of an express term in the contract of sale stipulating for the tender of more than one bill of lading, the seller is both entitled and bound to tender one bill of lading, at any rate when the goods sold are all of the same type.
Furthermore, the bill of lading must be a clean bill free from any annotation or clause qualifying the statement ‘shipped in good order and condition’. Also, as to whether or not a bill of lading stating that the goods have been ‘received for shipment’ and issued before the goods are placed on board by the carrier who is to carry them is a bill of lading within the requirements of a CIF contract is still a matter of some doubt.
As well as this, as to whether or not a bill of lading stating the carrier can deviate from the voyage stipulated for in the contract of carriage is also still doubtful. Furthermore, as to whether or not a clause in the bill of lading stating that the goods will or may be transshipped is valid will depend on the terms of the contract and arguably whether or not the bill of lading imposes liability on the contractual carrier from the port of loading to the port of discharge under the contract of carriage.
Finally, a bill of lading stating that freight has yet to be paid at destination (a ‘freight collect’ bills of lading) constitutes good tender so long as the contract of sale does not prohibit tender of such a document and the sum of the freight payable at destination is deducted from the commercial invoice.
However, the bill of lading must not only comply with the requirements set out above but it must also accurately evidence the contract of carriage because the buyer is not obliged to investigate, or to accept assurances about, the contract of carriage outside the bill of lading. Moreover, the buyer is also not obliged to accept a bill varied after issue, or, it seems, one altered before issue other than to correct a minor clerical error.
This is because the bill of lading must be procured on shipment that is to say as soon as is reasonably possible after the goods have been delivered to the carrier for carriage to the agreed destination. Therefore, it is to be understood no other document, for example a delivery order, a non-transferable bill of lading or a sea waybill or a ship’s release, will, in the absence of special provision or custom, amount to a good tender under the contract.
Moreover, a ‘received for shipment’ bill of lading is also of some interest because it states goods have been received by the carrier for shipment on board, but does not state the goods have actually been shipped on board, since it is a matter of some doubt whether such a bill of lading can be tendered by a CIF seller.
This is because such tender is valid if sanctioned by the agreement of the parties or by usage of the particular trade and, where the contract expressly prohibits the tender of such a document, the seller is bound to tender a bill of lading stating that the goods have been shipped on board. But, in cases where the contract of sale is silent as to the tender of ‘received for shipment’ bills, it is not yet clear whether the seller is entitled to tender such a document.
This is because, save for a trade custom to the contrary, the seller is bound to tender a bill of lading in transferable form and, given that a ‘received for shipment’ bill of lading has been held not to be transferable, given the common currency of ‘received for shipment’ bills of lading in international trade, and, given that such bills of lading are now arguably recognised as transferring to the buyer rights of suit against the carrier under a contract of carriage, such bills of lading constitute good tender under CIF contracts which do not prohibit such tender
Furthermore, where a CIF buyer with rights of suit against the carrier transferred to them by the seller through the operation of the Carriage of Goods Act 1992 suffers loss as a result of the deviation by the carrier from the voyage agreed in the contract of carriage between the buyer and the carrier, the buyer may pursue any remedies against the carrier afforded by that contract.
But it is doubtful whether a buyer can reject a bill of lading against the seller simply because it seeks to give the carrier a liberty to deviate. Nevertheless, where the contract of sale stipulates shipment must be direct, it would seem a buyer can reject a bill of lading containing a liberty to deviate clause.
Also, where the contract of sale fails to stipulate as much, or where it expressly envisages shipment may be direct or indirect, the buyer can reject a bill of lading granting the carrier a liberty to deviate where the extent of the liberty is uncertain because the clause itself is not printed on the bill.
Moreover, where the extent of the liberty is certain and wide, it has been said that the buyer can reject the bill of lading Therefore, given the currency of wide liberty to deviate clauses in bills of lading and given the protection afforded to the buyer by the rules regulating the contract for the carriage of goods by sea, it would seem, however, equally arguable a buyer could not reject a bill of lading
In conclusion, in looking to critically discuss the view that “the bill of lading is the essential document in the international contract of sale has no other document performs the functions of the bill of lading”, despite some discrepancies evidenced in this discussion, the bill of lading is the most important document because the symbol of the goods described in it to guard against the risk of non-delivery by the ship-owner.
This is because, between the seller of the goods and the buyer of exchange, the delivery of the bill of lading is by way of pledge, and the security of the buyer of exchange is, until acceptance by the buyer on delivery to them of the documents, the liability of the seller as drawer of the bill of exchange with the bill of lading as collateral security.
Therefore, someone holding both the bill of lading and a marine insurance policy on the goods is, for business purposes, in as good a position as if the goods were actually in their possession so the delivery to the buyer of a bill of lading and an insurance policy on the goods together with the invoice which identifies them is treated both commercially and legally as satisfying the contractual obligations of the seller under a CIF contract.
(b) In looking to advise the carrier with regard to any liability owed to Najeeb to begin with it must be recognised that under a CIF contract the duty of the seller is actually accomplished when the goods described in the contract of sale are put on board a ship bound for the destination specified in the contract or through the purchase of such goods already afloat. Accordingly, the contract is, in a commercial sense, an agreement for the sale of goods to be performed by delivery of documents or a sale of documents representing goods, the seller having obligations in law regarding both the goods and the documents covering them.
This means that it is generally understood that the property in the goods (i.e. the 500 bags of flour) will commonly pass when the documents which represent the goods are tendered in exchange for the price. However, the carrier must be advised that if, in accordance with the general principle, property may, if the contract shows such an intention, pass at some different stage, as on shipment or on consignment of the documents to the buyer, then the contractual link between the buyer (Najeeb) and the ship-owner, arises out of the contract of carriage.
This is because the contract is an agreement for the sale of goods to be performed by delivery of documents, or a sale of documents representing goods, with the seller having obligations in law regarding both the goods and the documents covering them Accordingly, this is in keeping with the fact that an agreement for the carriage by sea of a cargo or for the use of a ship for a voyage or series of voyages or for a specified time is normally contained in or evidenced by a bill of lading
On this basis, it must be recognised that the carrier needs to be advised the bill of lading is considered the most important document in this kind of contract. This is because of the fact that it is recognised by law as the symbol of the goods described in it to guard against the risk of non-delivery by the ship-owner, the CIF (‘cost, insurance, freight’) contract requires the seller to take out a policy of marine insurance on which the buyer may sue.
Therefore, where goods for which a bill of lading has been signed have been shipped, the property in the goods may, so long as the voyage continues, be transferred by a transfer of the bill of lading, made according to its tenor, and with the intention of passing the property in the goods However, the transfer may be made with the intention of passing the property conditionally, or for a specific purpose only, and not for the purpose of passing the property outright in the goods, as where the bill of lading is transmitted with a bill of exchange drawn on the buyer.
This means the carrier needs to be advised that the voyage is deemed to continue so long as the goods are in the custody of the master of the vessel, or of some person on his behalf and until possession of the goods has been taken by or on behalf of the person entitled to demand it.
The carrier also needs to be advised that this is in keeping with the fact there are a number of requirements for the acceptable tender of a bill of lading. This is because of the fact that it is the duty of the seller to procure a contract of carriage is satisfied if they procure a contract of carriage which conforms to any stipulations agreed in the contract of sale and which is otherwise reasonable and acceptable in the trade.
Therefore, the carrier must be advised that, in the absence of a stipulation or custom in the particular trade to the contrary, the contract must give the holder a right of action against the carrier in respect of the goods from shipment until they arrive at their destination But as to whom the buyer can sue on the contract of carriage contained in the bill of lading tendered by the seller will depend largely on the manner in which the bill of lading is signed.

Moreover, whilst the document tendered must be a bill of lading in transferable form to allow the buyer to transfer the right to claim delivery of the goods from the carrier through transfer of the bill, the bill of lading must only cover the goods subject to the contract of sale.
Nevertheless, with particular reference to the facts of this case, the carrier must be advised that the bill of lading must be a clean bill free from any annotation or clause qualifying the statement ‘shipped in good order and condition’. Also, as to whether or not a bill of lading stating that the goods have been ‘received for shipment’ and issued before the goods are placed on board by the carrier who is to carry them is a bill of lading within the requirements of a CIF contract is still a matter of some doubt.
But the bill of lading must not only comply with the requirements set out above but it must also accurately evidence the contract of carriage because the buyer is not obliged to investigate, or to accept assurances about, the contract of carriage outside the bill of lading. Moreover, the buyer is also not obliged to accept a bill varied after issue or one altered before issue other than to correct a minor clerical error because the bill of lading must be procured on shipment.
Accordingly, the carrier needs to be advised that the fact that Jac offered the carrier an indemnity if a clean bill of lading was issued meant that between the seller of the goods and the buyer of exchange, the delivery of the bill of lading is by way of pledge, and the security of the buyer of exchange is, until acceptance by the buyer on delivery to them of the documents, the liability of the seller as drawer of the bill of exchange with the bill of lading as collateral security.
Therefore, whilst the words ‘shipped in good order and condition’ do not import a warranty, they do amount to a representation of fact the goods were shipped in apparent good order and condition. This means that if an indorsee changes their position on the faith of this representation and afterwards sues the ship-owner for delivering the goods in bad condition, the shipowner (at any rate where they were not induced to make the statement by fraud) will be estopped from denying that the goods were shipped in apparent good order and condition in keeping with the 50 damp bags and 100 bags which contained tiny holes and some of the sugar had escaped through the holes during the journey that should have been recognised when the sugar was being loaded.
Nevertheless, the carrier must still be advised that estoppel will be available to the indorsee or holder only if they have changed their position on the faith of the representation and the fact that the indorsee has taken up and pays for the bill of lading and other shipping documents under a CIF contract is prima facie evidence that they changed their position on the faith of the representation in the bill of lading.
Moreover, it must also be shown in looking to advise the carrier that those relying on the estoppel satisfied the court that the defect in question was one which would have been apparent to the shipowner on reasonable examination and the statement upon which the alleged estoppel is founded must be clear and unqualified, otherwise the whole case of estoppel against them fails.
Furthermore, the carrier also needs to be advised that if, however, the contract of sale precludes the indorsee from rejecting the shipment, although giving them a right to claim damages for the defects in the goods, they will not have changed their position by taking up the documents.
But it must also be recognised that the carrier also needs to be advised that where the Hague-Visby Rules apply, by virtue of the Carriage of Goods by Sea Act 1971, and the receiver is taking advantage of the estoppel in the Hague-Visby Rules at Article III, rule 4, there is no need for them to prove that they relied upon the statement.
Nevertheless, the ship-owner will not be estopped from proving that the internal condition of the goods was bad so as to rot the bags in this case. Moreover, in any contract for the carriage of goods by sea to which the Hague-Visby Rules apply, by virtue of the Carriage of Goods by Sea Act 1971, neither the carrier nor the ship is responsible for loss or damage arising or resulting from insufficiency of packing.
However, by way of conclusion, it must be recognised that in the case of contracts for the carriage of goods by sea, to which the Hague Rules or the Hague-Visby Rules apply, the carrier also needs to be advised that the carrier and the ship are discharged from all liability whatsoever in respect of the goodsregarding loss or damage unless ‘suit’ is brought within one year after delivery of the goods or the date when the goods should have been delivered.
But the suit may be brought in any competent jurisdiction, not necessarily in the jurisdiction where the matter is ultimately decided; and the suit must be brought in the name of a party who has title to sue(under an agreement known as the Gold Clause Agreement, entered into between British shipowners and underwriters). Nevertheless, the carrier also needs to be advised that the one-year period may be extended if the parties so agree after the cause of action has arisen, so that it may be argued that the carrier may even have had a role in determining whether they are liable.
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‘Halsbury’s Law’s of England’ Butterworths (2007)
Table of Cases
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Arnold Otto Meyer NV v. Aune [1939] 3 All ER 168
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Barclays Bank Ltd v Customs & Excise Comrs [1963] 1 Lloyd’s Rep 81
Bateman v. Green & King (1867) IR 2 CL 166
Bergerco USA v. Vegoil Ltd [1984] 1 Lloyd’s Rep 440
Burdick v. Sewell (1884) 13 QBD 159, CA
Burstall & Co v. Grimsdale & Sons (1906) 11 Com Cas 280
Canada & Dominion Sugar Co Ltd v. Canadian National (West Indies) Steamships Ltd [1947] AC 46, PC
Cargill International SA v. Bangladesh Sugar & Food Industries Corpn [1996] 4 All ER 563
Cargill International SA v. CPN Tankers (Bermuda) Ltd, The Ot Sonja [1993] 2 Lloyd’s Rep 435, CA
Colin & Shields v. W Weddel & Co Ltd [1952] 2 All ER 337, CA
Compania Colombiana de Seguros v. Pacific Steam Navigation Co [1965] 1 QB 101
Compania Naviera Vasconzada v. Churchill & Sim [1906] 1 KB 237
Comptoir d’Achat et de Vente du Boerenbond Belge SA v. Luis de Ridder Lda, The Julia [1949] AC 293
Connolly Shaw Ltd v. A/S Det Nordenfjeldske D/S (1934) 49 Ll L Rep 183
Continental Fertilizer Co Ltd v. Pionier Shipping CV, The Pionier [1995] 1 Lloyd’s Rep 223
Cremer v. General Carriers SA [1974] 1 All ER 1
Cummins Sales & Service Inc v. Institute of London Underwriters & Deutsche Dampfschiffahrt Gesellschaft Hansa, The Goldenfels [1974] 1 Lloyd’s Rep 292 (US 5th Cir)
DI Henry Ltd v. Clasen [1973] 1 Lloyd’s Rep 159, CA
Diamond Alkali Export Corpn v. Fl Bourgeois [1921] 3 KB 443
Finska Cellulosaforeningen v. Westfield Paper Co Ltd [1940] 4 All ER 473
Foreman & Ellams Ltd v. Blackburn [1928] 2 KB 60
Fort Sterling Ltd v. South Atlantic Cargo Shipping NV, The Finnrose [1994] 1 Lloyd’s Rep 559
Glynn v. Margetson & Co [1893] AC 351, HL
Goulandris Bros Ltd v. B Goldman & Sons Ltd [1958] 1 QB 74
Hansson v Hamel & Horley Ltd [1922] 2 AC 36, HL
Hindley & Co Ltd v. East Indian Produce Co Ltd [1973] 2 Lloyd’s Rep 515
Hispanica de Petroleos SA & Cia Iberica Refinadera de Petroleos SA v. Vencedora Oceanica Navegacion SA, The Kapetan Markos NL [1986] 1 Lloyd’s Rep 211, CA
Houlder Bros & Co Ltd v. Public Works Comr [1908] AC 276, PC
Interbulk Ltd v. Ponte Dei Sospiri Shipping Co, The Standard Ardour [1988] 2 Lloyd’s Rep 159
James Finlay & Co Ltd v. Kwik Hoo Tong Handel Maatschappij NV [1928] 2 KB 604; affd [1929] 1 KB 400, CA
Kum v. Wah Tat Bank Ltd [1971] 1 Lloyd’s Rep 439, PC
Landauer & Co v. Craven & Speeding Bros [1912] 2 KB 94
Love & Stewart Ltd v. Rowtor Steamship Co Ltd [1916] 2 AC 527, HL
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MacWilliam Co Inc v. Mediterranean Shipping Co SA, The Rafaela S [2003] 3 All ER 369
Martineaus Ltd v. Royal Mail Steam Packet Co Ltd (1912) 12 Asp MLC 190
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Mediterranean Freight Services Ltd v. BP Oil International Ltd, The Fiona [1994] 2 Lloyd’s Rep 506, CA
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National Petroleum Co v. Athelviscount (Owners) (1934) 48 Ll L Rep 164
Norsk Bjergningskompagni A/S v. Pantanassa (Owners), The Pantanassa [1970] 1 All ER 848
Official Assignee of Madras v. Mercantile Bank of India Ltd [1935] AC 53, PC
Oulu Osakayetio v. Arnold Laver & Co [1940] 1 KB 750, CA
President of India v. Metcalfe Shipping Co Ltd, The Dunelmia [1970] 1 QB 289, CA
Re Denbigh, Cowan & Co & R Atcherley & Co (1921) 90 LJKB 836, CA
Re Keighley, Maxted & Co & Bryan, Durant & Co (No 2) (1894) 70 LT 155
Re Salomon & Co & Naudszus (1899) 81 LT 325.
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Soproma SpA v. Marine & Animal By-Products Corpn [1966] 1 Lloyd’s Rep 367
Spillers Ltd v. JW Mitchell Ltd (1929) 33 Ll L Rep 89
Sterns Ltd v. Vickers Ltd [1923] 1 KB 78, CA
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The Merak [1965] 1 All ER 230, CA
The Nordglimt [1987] 2 Lloyd’s Rep 470
The Orteric [1920] AC 724, PC
The Prinz Adalbert [1917] AC 586, PC
The Skarp [1935] P 134
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Tsakiroglou & Co Ltd v. Noblee Thorl GmbH [1962] AC 93, HL
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Yelo v. SM Machado & Co Ltd [1952] 1 Lloyd’s Rep 183
Table of Statutes
Carriage of Goods by Sea Act 1992
Sale of Goods Act 1979