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Bill of Lading – Disputes over wrong representation date and quantity (PDF)

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     Bill of Lading – Disputes over wrong representation (date and quantity)
                                       By Igor Sterzhantov @ 2010
                                           www.lawandsea.net

When goods have been loaded on board of the vessel and signed bill of lading handed by the master
to the shipper, such bill of lading begins its existence in a role of master's receipt for shipper's goods.
The master’s signature on the bill confirms conformity of the quantity and quality of the cargo
loaded with that description represented in bill of lading. If the master signs the bill knowing that the
statement as to apparent quality and quantity of the goods or the date of shipment is incorrect, he
makes the owners vicariously liable in fraud to anyone who suffers loss by relying on the
presentation. Therefore an importance of great care on the part of ship’s master when signing the bill
of lading can hardly be exaggerated.

Bill of lading defines mutual liabilities between the shipowner and the holder of bill of lading (the
cargo owner), whereas contractual relations between the shipowners and the charterers documented
in form of either time or voyage charterparty. Therefore if the charterers are not the cargo owners
they are not the party to the bill of lading contract – thus theoretically have no influence over the
provisions and statements represented in the bill of lading. On the other hand the charterers, while
operating the vessel, have a direct command over the vessel and her master in commercial matters
and therefore usually do have authority to insist on certain the provisions in bill of lading, even when
they are not the cargo owners. This is a complex matter, but in very simplified form position of
English law can be expressed in a way that the master is bound within definite limits to sign any bill
of lading presented by the charterer, if the terms of the charterparty contract between the charterer
and shipowner are not to be altered by this signature, or if altered, the shipowner shall not be
exposed to greater liability than under the charterparty.

Therefore when in some instances, the charterers require the master to sign bills of lading ‘for any
cargo in such form as charterers direct’ the question of extent of such authority may be brought up.
In Mendala III Transport v Total Transport Corp (The Wilomi Tanana)[1993] 2 Lloyd's Rep 41,
where 7 bills of lading were issued with a wrong date, it was held that ‘provided that the owners do
not go so far as to issue fresh bills of lading and to do so in a form that is inconsistent with the
charter-party or the instructions that have been given by the charterers … charterers cannot forbid
the owners to correct an error in a bill of lading with the concurrence of the shippers or so as to
protect themselves from a potential liability to a subsequent holder of the bill of lading’.

Another important practical and commercial problem of ship’s delay and liability for it, usually
comes up when the master notes inconsistency in bill of lading as to the date or the cargo description
(quality/quantity) and the shippers are reluctant to correct their representation. Upon completion of
loading bill of lading quantity of crude oil or product loaded assessed by measurements done ashore,
at the terminal. On the other hand ship’s figures ascertained on board by way of measurement of
ship’s tanks and concomitant calculations done by especially appointed surveyor together wish
responsible ship’s officer. These figures, obtained ashore and on board of tanker, as a rule, differ
from each other. There are many factors contributing to these discrepancies such as superseded
tables used by the terminal in the calculation of Bill of Lading quantities, inaccurate vessel


                                              Igor Sterzhantov@2010
                                                 www.lawandsea.net
                                                info@lawandsea.net
                                   Bill of Lading – Disputes over wrong representation (date and quantity)                                          page 2 of 3


experience factor, Cargo Custody transfer practices and the competency of Cargo Inspectors (see
more in OIL CARGO LOSSES AND PROBLEMS WITH MEASUREMENT).

When ship’s measurements show less cargo than stated in bill of lading, the charterers are facing
potential liabilities for cargo shortage at the discharge port. Therefore they usually specifically
provide in their voyage instructions for actions required from the owners and the master of the vessel
in such circumstances. These instructions, normally subject to tolerable margin1, because small
discrepancy is practically inevitable, but sometimes not2, disallow the master to sign bill of lading
until he first communicate with the charterers. Similar but much more comprehensive wording one
can find in EMV 2005 form voyage charter:
17. CARGO MEASUREMENT.                                                                                                                                291
(a) Prior to loading, Master shall measure the on board quantities of oil cargo, water and sediment residues which are segregated in all              292
holding tanks and slop tanks and those which remain in cargo tanks and, if requested, shall advise supplier(s) and Charterer of                       293
such quantities. After loading, Master shall determine the cargo quantities loaded, expressing these cargo quantities in barrels at                   294
standard temperature (60oF), using for such calculations the latest Manual of Petroleum Measurement Standards issued by the                           295
American Petroleum Institute (API MPMS) or similar standards issued by the American Society for Testing and Materials. A written                      296
tank-by-tank ullage report containing all measurements of oil cargo, water and sediment residues on board prior to loading and quantities             297
of cargo loaded shall be prepared and promptly submitted by Master to Charterer.                                                                      298
(b) If Master's calculations of cargo loaded (oil, water and sediment residues on board excluded), after applying the Vessel's                        299
Experience Factor (VEF), show any deficiency from the Bill of Lading figures, Master shall, if investigation and recalculation verify                 300
such deficiency, issue a Letter of Protest to supplier(s) (which should, if practical, be acknowledged) and shall advise Charterer of                 301
such deficiency immediately by electronic mail, telex or radio and thereafter shall send a copy of the Letter of Protest to Charterer.                302
Vessel shall have on board sufficient historical information for the calculation of a VEF using the latest edition of the API MPMS.                   303
Master shall calculate and apply the VEF as so determined during all loadings.                                                                        304
(c) Prior to discharging, Master shall measure the quantity of each grade of cargo on board, expressing these quantities in barrels                   305
at standard temperature (60oF), using the same calculation procedures specified in Paragraph (a) of this Clause. Before and after                     306
discharging, Master shall cooperate with shore staff to ascertain discharged quantities. Vessel shall be obliged to discharge all liquid              307
oil cargo and, if ordered by Charterer, any residues of oil cargo, water and sediment. Vessel's just-mentioned obligation shall not in any way be     308
qualified or limited by any purported custom of the trade which is based on a stated in-transit loss or which otherwise would excuse                  309
Vessel from discharging all liquid cargo and residues.                                                                                                310
(d) An inspector may be employed by Charterer at its expense to verify quantities and qualities of cargo and residues on board                        311
Vessel at both loading and discharging port(s) and/or place(s). If Vessel is equipped with an Inert Gas System, depressurization                      312
of tanks to permit ullage measurements shall be allowed in accordance with the provisions of the most recent Inert Gas Systems                        313
for Oil Tankers publication issued by the International Maritime Organization (IMO). Any time used solely for such inspections                        314
and/or measurements shall count as laytime or, if Vessel is on demurrage, as time on demurrage.                                                       315


Usually communication between all the parties concerned, i.e. the shippers, the charterers, the
brokers and the owners takes time, sometimes many hours, especially if loading has been completed
on weekend or after office hours. The owners can avoid liability for delays related to such
communication and disputes over the ship/bill of lading discrepancies if they show that the master
acted reasonably and he did not cause or contribute to the delay by any unreasonable act or omission
on his part.




1
  UPON COMPLETION OF CGO LOADING:
AA IF THE B/L QUANTITY EXCEEDS THE SHIP'S FIGURE BUT SUCH DIFFERENCE DOES NOT EXCEED
0.30PCT OF THE B/L QUANTITY THE MASTER WILL SIGN THE B/L AND TENDER LETTER OF PROTEST
BB IF THE B/L QUANTITY IS EQUAL TO OR GREATER BY 0.30PCT OVER THE SHIP'S FIGURE, THE
MASTER SHOULD NOT SIGN THE B/L AND COMMUNICATE IMMDTLY WITH CHARTER FOR SPECIFIC
INSTRUCTIONS.
2
  MASTER TO ISSUE LETTER OF PROTEST TO SHORE/TERMINAL IF SHIP RECEIVED
FIGURES (AFTER APPLYING VESSEL'S VEF) LESS THAN B/L QTY NO MATTER HOW
MINIMAL THE DIFFERENCE IS. MASTER SHOULD CONTACT CHARTERERS PRIOR
SIGNING B/L IF THE DIFFERENCE BETWEEN B/L QTY AND SHIP QTY IS GREATER
THAN 0.50 PERCENT.
                                                                    Igor Sterzhantov@2010
                                                                       www.lawandsea.net
                                                                      info@lawandsea.net
                    Bill of Lading – Disputes over wrong representation (date and quantity)    page 3 of 3


In Boukadoura Maritime Corp. v Societe Anonyme Marocaine de l'Industrie et du Raffinage (the
"Boukadoura") [1989] 1 Lloyd's Rep 393 Evans J gave extensive review of modern law on
respective obligations of all parties concerned:

      It is essential in my judgment to spell out certain assumptions which may be made as to the
      rights and obligations of the parties to a voyage charter-party such as this, although for
      present purposes they may be stated in general terms. The first is that contractual relations
      between the shipowner and charterer remain governed by the charter-party notwithstanding
      the issue of a bill of lading to a third party shipper. Secondly, although the shipper is an
      independent third party, for the purposes of the charter-party he should be regarded as the
      agent through whom the charterer has performed his undertaking to load cargo upon the
      vessel (see for example The Mediolanum, [1984] 1 Lloyd's Rep 136 at p 140, per Lord
      Justice Kerr). Thirdly, when the shipowners through the master or their agents issue a bill of
      lading they undertake responsibilities and potential liabilities to third parties which are
      independent of the charter-party contract. If the document contains a false statement
      knowingly or recklessly made, then there is a potential liability in fraud: Brown Jenkinson &
      Co Ltd v Percy Dalton (London) Ltd, [1957] 2 Lloyd's Rep 1; [1957] 2 QB 621. Fourthly,
      whereas in earlier times the bill of lading may have been regarded as a negotiable receipt
      issued as a favour by the shipowner for the convenience of the charterer, the commercial
      reality today is that the shipowner will invariably be required, and will expect to have to
      issue a bill of lading, which will or may be held by third parties other than the charterer. (It is
      noteworthy that in the present case a bill of lading was required, notwithstanding the special
      delivery provisions. The shippers were to obtain payment for the cargo from the charterers
      through the letter of credit machinery operated by their respective banks.) Fifthly, it is for
      practical purposes inevitable that the liabilities under the bill of lading contract will differ to
      a greater or lesser extent from those undertaken by the shipowner under the charterparty. The
      differences may result from different contractual terms of, in English law at least, from the
      operation of the doctrine of estoppel.

   Visit author’s web page www.lawandsea.net for more articles on various shipping law issues.




                                            Igor Sterzhantov@2010
                                               www.lawandsea.net
                                              info@lawandsea.net

				
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Description: When goods have been loaded on board of the vessel and signed bill of lading handed by the master to the shipper, such bill of lading begins its existence in a role of master's receipt for shipper's goods. The master’s signature on the bill confirms conformity of the quantity and quality of the cargo loaded with that description represented in bill of lading.