Bill of lading: What it is and what purpose it solves ?

Bill of lading is perhaps the most important document related to the shipping industry as someone can lose money if attention is not given while handling these bills of lading.

To define “bill of lading”

“It is a document issued to the shipper by the Master of the vessel on behalf of the carrier for the goods shipped on board that vessel” 

A Bill of lading serves mainly three functions

• It acts as the receipt of goods
• It is document of title
• It is an evidence of contract of agreement or contract of carriage

To proceed further it is expected that one is well versed with the terms like Shipper, consignee, Receiver, carrier.

Very brief introduction about these three functions

1) It acts as the receipt of goods

Receipt of goods is the straightforward thing.

Whether we leave our car for servicing, pay our utility bills or buy an electronic item, we want a receipt for all these.

Similarly, when we receive the goods on board, we are supposed to issue a receipt.

Bill of lading acts as the receipt of the cargo received on board.

2) It is evidence of contact of carriage

So it acts only as evidence that there is a contract of carriage between shipper and carrier but it is not the contract of the carriage itself.

Q: Can you think of the last time you saw actual contact of carriage?

3) It is document of title

The title means the right to ownership.

In the case of a bill of lading, it implies that whoever has the bill of lading can claim the cargo by presenting the bill of lading to the master of the vessel.

While the ship is in the sea passage, the present owner of the cargo can negotiate with the potential buyer of the cargo and if agreed he can transfer the ownership of the cargo by transferring the bill of lading to him.

This way Bill of lading can change several hands and the final holder of the bill of lading will also be the owner of the cargo.

That makes the bill of lading a negotiable document.

Q: Are all bills of lading negotiable and serves as a document of title? Well not exactly. There are Different types of bill of ladings and some are negotiable too.