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Lesson 7 - The Buyer wants a "clean" Bill of lading

(1) When the buyer obtains a bill of lading, they want that document to state the weight/number of goods shipped and to state the goods were shipped in “apparent good order and condition”. This is so that if the goods arrive in a damaged condition or short, the buyer can prove his loss against the carrier. Bills with the phrase "apparent good order and condition" and which are otherwise unqualified are called  “clean” bills of lading.  One that is qualified is called a "claused" bill of lading. 

(2) Whether a seller is bound to tender to the buyer  a “clean” bill of lading, depends on the sale contract. Accordingly, many sale contracts expressly require the tender of a clean bill of lading. But even in the absence of such an express term there is authority that one is implied into such contracts. In short, the seller has to tender a clean bill of lading.

(3) The bills of lading could be tendered directly to the buyer against cash. Or they could be tendered by the seller's bank under a letter of credit. If bills of lading are tendered under a letter of credit (rather than against cash directly with the seller), there is a similar requirement for the bills to be clean in the Uniform Customs & Practice 600, Article 27 (UCP 600).

(4) Where the phrase “apparent good order and condition” is used,  the bill remains clean even if the carrier has added contradictory statements in addition like “weight, quality, condition unknown”. (Compania Naviera Vasconzada v Churchill & Sim; see also The Tromp and The Skarp; Libeau Wood Company v H Smith & Sons, Ltd )  In short, English courts will construe attempts by carriers to negative earlier representations very restrictively. But c.f. The Galatia, where the original representation was already qualified.   

(5) Whether a carrier is bound to issue a bill of lading at all depends on: (a) the terms of the contract of carriage; and (b) whether the Hague/Hague-Visby Rules have been incorporated. The contract of carriage might require the carrier to issue a bill of lading expressly. But if, not, and if the Hague/H-V Rules apply, then Article III(3) gives the shipper the right to demand a bill of lading. Article III(3) also requires the bills to state: (a) number/quantity/weight of the cargo; and (b) apparent order and condition. 

(6) The dynamic PowerPoint below, shows that the buyer can either pay the seller for the bill of lading (or other document of title) themselves, or they can do it through a bank. What we have been talking about here, is the contents of that document and what the buyer needs/wants it to say (or not say!). 

Dynamic POwerpoint
Showing the transfer of money in exchange for a doc of title. 
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