Bills of Lading

Summary

This video explains the crucial role of the Bill of Lading (B/L) in international transactions, focusing on its purposes and types. It details how the B/L serves as evidence of the seller's performance, provides legal title to the goods, and outlines the carrier’s contractual obligations. The video contrasts negotiable B/Ls, which can be transferred for payment, with non-negotiable ones. Through case studies like Hughley’s vs. Expert Concrete, it illustrates the potential legal issues when B/Ls are misused or incorrectly handled. Ultimately, the video emphasizes the importance of accuracy and the carrier’s responsibility when issuing B/Ls to prevent disputes.

Takeaways

• 😀 The Bill of Lading (BOL) is a crucial document in international transactions, serving as evidence of the seller's performance, proof of ownership, and a contract of carriage.
• 😀 The BOL must be presented to the buyer or their bank for payment in transactions involving a letter of credit (LC), with complying presentation being necessary for payment.
• 😀 A negotiable Bill of Lading allows the holder to claim the goods, similar to a negotiable instrument like a check, with endorsement passing the right to the goods along the chain of custody.
• 😀 Non-negotiable Bills of Lading are not suitable for transactions requiring payment against documents, and only negotiable versions are used in this context.
• 😀 The Federal Bills of Lading Act regulates the use of negotiable and non-negotiable Bills of Lading in the U.S.
• 😀 In legal cases, a Bill of Lading can serve as the key piece of evidence, as demonstrated by the Hughley's vs. Expert Concrete case, where the carrier improperly gave a pump to the buyer based on a Bill of Sale rather than the Bill of Lading.
• 😀 In the Hughley case, the court found that the carrier was wrong to release goods without the correct documentation, and the seller successfully sued for non-payment.
• 😀 The Westway case illustrates that the carrier is liable for missing goods if it issues a Bill of Lading that represents the total amount received, which in this case, was 20 tons of missing coffee.
• 😀 The carrier can protect itself from liability by using 'magic words' like 'said to contain' or 'contents unknown' in the Bill of Lading, which limits responsibility for the quality of goods but not for quantity discrepancies.
• 😀 Carriers are expected to count goods but are not obligated to evaluate the quality or condition of items unless there is a clear reason (e.g., red flags) to suspect issues.
• 😀 Electronic Bills of Lading have not been widely successful due to concerns about fraud and a lack of consistency in electronic document systems like C Docs and Bolero.

Q & A

What is the Bill of Lading used for in international transactions?

The Bill of Lading serves as proof that the seller has delivered the goods to the carrier, acts as a document of title allowing the holder to claim the goods, and outlines the contractual obligations of the carrier for delivery of the goods.

How does a Bill of Lading facilitate payment in international trade?

The seller can present the Bill of Lading to the buyer or the buyer's bank (through a letter of credit) to receive payment. If the buyer fails to pay, the seller may retain the Bill of Lading and prevent the goods from being delivered to the buyer.

What does a 'complying presentation' mean in the context of a Bill of Lading?

A 'complying presentation' means that all required documents, including the Bill of Lading, must be presented as stipulated in the terms of a letter of credit for payment to be made.

What are the three main purposes of a Bill of Lading?

The three main purposes of a Bill of Lading are: (1) it serves as proof that the seller has fulfilled their contractual obligation by delivering the goods, (2) it provides legal title or the right to claim the goods, and (3) it contains the terms of the contract between the seller and the carrier.

What is the difference between a negotiable and a non-negotiable Bill of Lading?

A negotiable Bill of Lading allows the holder to transfer the rights to the goods to another party, typically through endorsement. A non-negotiable Bill of Lading does not allow the transfer of these rights in the same way and is generally not used for transactions involving payment against documents.

What legal protections exist for the holder of a negotiable Bill of Lading?

The holder of a negotiable Bill of Lading has the right to claim the goods, and the carrier is required to deliver the goods only to the person holding the endorsed Bill of Lading.

What was the main issue in the case of Hughley’s vs. Expert Concrete?

The issue was whether the carrier improperly delivered the fourth pump to the buyer based on a Bill of Sale instead of the Bill of Lading. The seller had retained the Bill of Lading for the fourth pump, and the court ruled that the carrier should not have released it without the proper Bill of Lading.

How does the carrier limit its liability when issuing a Bill of Lading?

The carrier limits its liability by using phrases like 'said to contain' to avoid responsibility for any concealed defects or discrepancies in the goods, as long as there are no red flags or indications that the goods differ from what is stated.

Why is the Bill of Lading considered a critical document in international trade?

The Bill of Lading is essential because it establishes the legal title to the goods, facilitates payment and transfer of ownership, and governs the contractual obligations between the seller and the carrier in international shipping.

What is the significance of 'said to contain' in a Bill of Lading?

The phrase 'said to contain' is used by carriers to protect themselves from liability for misdescription of goods, especially when they have not packed or inspected the goods themselves, as long as no obvious discrepancies (red flags) are present.