Evidence of contract of carriage
The bill of lading is evidence of the contract of carriage but is not the contract itself. The reason for this is that the contract will have been formed before the bill of lading is issued. In practice, however, its terms will often constitute the contractual terms, either because the shipper will be regarded as knowing the terms by virtue of a course of dealing, or as agreeing to the goods being carried on the terms of the bill of lading whatever they are. However, where the bill of lading is transferred by endorsement to a third party, it is clear that the contractual relationship between the third party and the ship-owner is governed by the bill of lading.
Receipt for goods
Since the bill is (typically) signed on behalf of the owner, it is evidence against him that goods were shipped as described. Thus, if the goods do not arrive, or arrive damaged, the inference will be that they were lost or damaged on the voyage.
Document of title
A transfer of the bill of lading acts as a transfer of rights in the goods (Lick barrow v Mason (1784)). What rights are transferred? Strictly speaking, it is not necessary to transfer the bill of lading in order to transfer ownership. In practice, however, the transferee would have difficulty in collecting the goods off the ship without a bill of lading with appropriate endorsements. What the bill of lading transfers, therefore, is the right to possession. Possession is usually being transferred as part of the act of transferring ownership but not necessarily so.
The bill of lading as a transferable contract
The transfer of a bill of lading may transfer the goods, but it does not, at common law, transfer the contract of carriage. Hence, the Bill of Lading Act 1855 provided that the transferee of the bill of lading could sue and be sued on the contract contained therein as if it had been made with himself. However, the wording of s 1 of the 1855 Act, because it only transferred the contractual rights where the property in the goods passed by consignment or endorsement, and so did not apply where it passed before consignment or endorsement (for example, on shipment) or after (as where there is a bulk cargo not separated until arrival). Most of these difficulties have been removed by the Carriage of Goods by Sea Act 1992.
Other documents used for sea carriage
Other documents which are used for sea carriage include the following:
(a) Short form bills of lading;
(b) Mate’s receipts;
(c) Delivery orders;
(d) Through and combined transport bills of lading;
(e) Non-negotiable sea waybills.
The bill of lading has three functions: to act as evidence of the contract of carriage; to act as a receipt for the goods; and as a document of title.