Disclaimer: This essay has been written by a law student and not by our expert law writers. View examples of our professional work here.

Any opinions, findings, conclusions, or recommendations expressed in this material are those of the authors and do not reflect the views of LawTeacher.net. You should not treat any information in this essay as being authoritative.

A Seller Is Required to Transfer as a Condition of Obtaining Payment

Info: 5581 words (22 pages) Essay
Published: 9th Jul 2019

Reference this

Jurisdiction / Tag(s): International Law

The shipping documents are those documents which a seller is required to transfer as a condition of obtaining payment [1] . Usually and generally the shipping documents consist of three individual documents; such as – a bill of lading [2] , a policy of insurance [3] and a commercial invoice [4] . Though there three are the main instruments of shipping documents but still customization is not uncommon regarding these letters [5] . Substituting, bill of lading with delivery order is a common phenomenon and again requiring additional documents such as inspection certificates are not utterly rare, however such substitution is not a real good choice as a delivery order [6] or sea waybill does not contain any information about the third party rights of action on the contract between the CIF seller and carrier [7] . One important factor regarding this issue is, substituting one document with another does not necessarily mean that, the seller is at his wish to substitute or to not include any other document altogether. e.g. If a bill of lading gets substituted by Delivery order the other instruments like invoice or insurance policy should and must be tendered as no further directions regarding other documents has ever been received by the seller [8] . If no substitution like a sea waybill or delivery order made instead of a bill of lading then the seller is bound to tender a bill of lading, regardless whether it has been asked or not [9] . Cases reported on the issues of Shipping Documents has proved that, although all these documents are important for the trade yet most the problems arises are concerned with Bill of Lading [10] .

Duty of the seller in relation to contract of affreightment:

By law a c.i.f. seller is bound to procure and tender both bills of lading and contract of affreightment [11] . As these two are separate duties, as a matter of fact, the seller has to tender a Contract of Affreightment even if he has been exempted from procuring bills of lading and has been asked for a delivery order instead and the buyer himself has booked for the carriage [12] .

Requirements of Bill of Lading:

Bill of Lading is a document for the goods actually shipped rather than a document for the products ready for shipment [13] . A valid and effective Bill of Lading must be issued ‘On Shipment’ agreeing with the original terms of Contract such as following a specific route or delivering to a specific port and covering the products only sold [14] . The positive side of this rule is that, it makes sure that, the carrier may not find an excuse and say the goods actually got damaged before they got shipped [15] . Again the risk of damage before the goods are loaded on board remains with the seller in a CIF transaction [16] . The bill must also be genuine, valid and effective to be a good one. [17]

Continuous Documentary Cover:

Under the principle of continuous documentary cover, a buyer is entitled for a procured and tendered bill of lading protecting his rights from shipment to destination, even though may be he is in no actual need of such a document [18] . The issue came into light with the case of Hansson v. Hamel and Horley Ltd [19] . In this case, the seller shipped some cod from Braatvag, Norway to Yokohama, Japan. The cargo was at first carried by a ship called Kiev from Braatvag to Hamburg, Germany and then transhipped in a ship called Atlas Maru bound for Yokohama. But while drawing the contract and bill of lading with the latter ship it was stated that, ‘lying in or off the port of Braatvag and bound for Hamburg for transhipment into the Atlas Maru … to be delivered at the port of Yokohama.’ Such a bill of lading proved no protection for the buyer from Braatvag to Hamburg [20] and thus failed to prove a continuous documents cover. According to Lord Sumner, it was called a real through bill of lading if the owners of the Atlas Maru had taken responsibility of the shipment of the goods from Braatvag to Yokohama. In the case of transhipment such lapse in the bill of lading may lead the seller into further obligation [21] as the buyer do not have protection against the career in respect of discharging operation.

Liberty of Tranship and Transhipment:

Transhipment of goods does not mean that, the buyer cannot have continuous documentary cover. Though in Hansson v. Hamel and Horley Ltd [22] it was held that, the lack of actual knowledge of the buyer arose of the transhipment, may well constitute a breach of continuous documentary cover, but yet, if one of the ships could have been held for any damages during the whole transportation process then the buyer would have that protection [23] and there was no reason to decline the delivery just because of transhipment [24] .

Relaxation of requirement of continuous documentary cover:

The provision of continuous documentary cover can be a bit less rigid by the term of the contract of sale or custom or particular methods of the trade [25] . For example, when it is required by the seller to transport the products to a coastal area for ocean shipment and he is asked only to tender an ocean bills of lading then the rigidity of the continuous cover loosen up, as the custom deemed the tender as good tender [26] . But if other customs or expressed terms of contract, like, it is the duty of the seller to arrange transhipment and he fails to do so, then the buyer can reject the products for the failure of the seller to follow the terms of the contract. [27]

Shipped and received bills:

Generally a bill of lading is procured and tendered at the point of shipment of the product [28] rather than at the time the products are ready to be shipped. The reasons behind this rule mainly are, firstly, just a ‘received’ bill does not provide full satisfactory security for the buyer. Secondly, as the products may get damaged or tampered before the original shipment, it provides the buyer with no continuous protection or documentary cover [29] and last but not the least on one hand, where such a bill of lading does not give the buyer any idea about the actual shipment day which is of high importance when the question of international trade or sale arises [30] , on the other hand a bill of lading issued on the point of shipment informs the buyer, whether the seller is duly performing the contract or not [31] .

Though this ‘received bill’ is definitely not a bill of lading but, it can be turned into an effective bill of lading after the product gets shipped [32] . After the shipment with the authentication of or on behalf of carrier such bills can well turn into a valid and effective bill of lading and would regard as a good tender under a c.i.f. contract [33] .


The bill of lading must act upon the original contract and be provided for the destination specified in the contract [34] . Failure to do so well lead into a breach of contract on the part of the seller; however he may have contracted with the carrier for the right and desired destination [35] . Expressed intention of the product to be delivered in the C.I.F. destination in the carriage contract can even be superseded by the wording of the bill of lading. For example, ‘deliver at…or so near as the ship can safely get’ gives the carrier a choice to deliver. By ‘can safely get’ it allows the carrier to deliver to other wharfs using the liberty of safety. And because of this liberty the bill of lading may fail to fulfil the requirement of the delivery to the destination specified by the contract of sale [36] .

Again if the goods are dischargeable from a choice of a number of destinations according to the contract of sale and if that range has been narrowed or widened by the seller then the situation may constitute, a failure of the proper bill of lading by the seller and may bring consequences not favourable for him [37] . On the other hand a bill of Lading would be an effective one even if delivering or discharging product becomes impossible because of some supervening event like storm [38] or strike or any other prohibition [39] .

Route of Shipment:

Generally the route of shipment is not an important clause in a contract of Sales as it makes little difference for the buyer. Generally the ships take usual and customary routes [40] and on any event where the usual and customary route is not available any other reasonable and practicable routes can be used [41] . Though route does not matter match in real world but if the buyer specifies any route in the contract of sale that must be brought into the bill of lading. Failing to do so can constitute a legitimate rejection from the buyer as he has specified the route before and the seller assented towards that [42] . A rejection can be made by the buyer if he can only find that, the specified route is missing in the bill of lading even though the original carrier is following the specific route. This is because, “shipping documents have to be taken up or rejected promptly” [43]

To be issued on Shipment:

A bill of lading must be issued on shipment [44] , but this does not necessarily impose any burden on the seller to tender the document at the precise time of shipment [45] . It just bears the meaning that, the bill must be tendered without undue delays. In a case where several bills of lading are procured for a single bulk of shipment, it is not required by Law to issue bills of Lading one after another [46] . It is good enough to issue the bills after the completion of loading. Here one important factor regarding the issue is that, if the bulk of shipments are to be spilt apart among various buyers then separate bills of lading are needed to be tendered to constitute a good bill of lading [47] .

Genuine bill of lading:

The bill of lading must be “Genuine” [48] , which means the bill tendered must bear some specific characteristic. Containing products which never got shipped [49] , false dates [50] , forged signature by or on behalf of the carrier, false representation of goods makes a tender bad under C.I.F. contract even though the carrier is liable to the buyer for false statements [51] . An internal agreement between the seller and the carrier to carry the goods to any other destination rather than the one prescribed in the bill will also constitute a bad tender [52] . It is assumed that, a bill of lading would rather be fortiori than genuine if the seller and carrier had already rescind the contract of carriage between them and unloaded the product under the contract of sale from the ship [53]

A buyer is entitled to reject a bill of lading on base of falsity and if he has already paid for the goods then he posses a restitutionary right against the seller for the return of the payment [54] . In Kwei Tek Chao v. British Traders and Shippers Ltd [55] a buyer paid against a bill of lading which stated that the goods were shipped in October, whereas the original shipment took place in November 3, which was again the outside the shipment period specified in the contract of sale. On the ground that, even though the bill of lading was not genuine, it was not something utterly null and void, the buyer could not recover the money he paid to consider the bill of lading. This decision is highly in contrast with that of The Raffaella [56] where a bill of lading represented a shipment of some cements for Port Said whereas that particular shipment was made a year earlier to somewhere else. The buyer mistakenly acknowledged the bill and paid thereto. On the complaint of the buyer the court recognized the payment made by mistake and ordered in favour of the buyer. A closer look at both the cases depicts that, a single characteristic (though important) was fraudulent in the first case whereas the whole instrument was forged in the later one as no such delivery was made by the carrier what so ever [57] .


A bill of lading must only contain the description of the specific goods [58] and the specific quantity [59] as per the commercial invoice [60] . In Re Keighley Maxtead & Co. and Bryant, Durant & Co. [61] the buyer ordered for 3000 tons of grain where the seller shipped and prepared a bill of lading with much higher number. Though the seller can ship more goods and he is not in any breach because of this action, but he is bound to tender a bill of lading with correct quantity. So in such a situation the buyer has an option to reject as he has a statutory right to reject if the seller delivers wrong quantity of goods [62] .

The bill of lading must be “Valid and Effective”

The bill of lading, a buyer entitled to receive must be valid and effective. As per law this validity is more concerned with the time of tendering the documents. Two important cases regarding this issues are, Arnhold Karberg & Co. v. Blythe Green Jourdain & Co. [63] and Re Weis & Co. [64] In the first case, a contract of sale was drawn between A English buyer and seller and the C.I.F, destination was Naples. According to the contract exchange for bills of lading and insurance policy was made in London against the money. The goods were shipped in a German ship and German bills of lading were issued. But before tendering such documents, World War I broke out and it became impossible for the ship to delivery at Naples. Though a buyer cannot reject a bill, because of any issue which made it impossible for the carrier to deliver the product [65] , still here, in this case, the buyer was indeed allowed to do such as the bill was tendered after the contract of carriage got frustrated. On the other in the later case the buyer could not reject a bill as the bean oil he ordered was shipped for a Belgian port and at the time of loading, Antwerp the Belgian Port was under the Belgian authority. So, no illegal tendering took place and the buyer could not simply reject because of the supervening forces. [66]

Clean Bill:

According to Salmon J., “I incline to the view … that a clean bill of lading is one that does not contain any reservation as to the apparent good order or condition of the goods or packing” [67] If a bill of lading is not clean the buyer or the bank on behalf of him has the option to refuse or reject it. But a clean bill of lading does not mean a promise or notation that; the products must be of good condition at the point of discharge. In The Galatia [68] case the seller while tendering the bill of lading informed the buyer in the bill that, the products got shipped in an apparent good form and condition and then due to a fire in the ship the products got damaged and unloaded on the same port. It was decided that, the buyer cannot reject the bill as it was properly shipped by the seller and his responsibility is up to that point. The buyer’s right is now with the carrier and the insurance company but not with the seller. Megaw L.J. emphasising on the issue opined that, a bill of lading can be unclear either as a matter of Law (Pre-shipment Damage) or by custom [69] . Actually clean and unclean bills depend more on custom than specific rules.

‘A bill is not unclean merely because it contains the qualification “weight, quality, condition, contents and value unknown” [70] , nor because it contains an unusual provision purporting to limit or exclude the carrier’s liability. [71] ’ [72]


A C.I.F. seller has no legal binding to provide the buyer, a freight prepaid bill of lading [73] . If according to the invoice the freight is payable at discharge point then the seller is required to make and tender a bill deducting the freight [74] or tender such a bill which would not impose the buyer to make additional payments at the port of discharge. As a result if the seller tenders a bill with full price with wordings like ‘payable as per charter party’ then it would be regarded as a bad tender as it will leave a ‘wide open possibility for the ship-owner to demand the cost of freight at the port of discharge’. [75]

Alteration and Erasures:

According to the general rule, a buyer does not need to accept a bill which has been altered except if there were any minor clerical mistakes [76] . In the famous case of Re Salomon & Co. and Naudzus [77] a bill of lading was tendered with an inspection certificate mentioning that, wheat had been loaded in holds of 2 and 3 of the ship. But actually this position was altered in to holds 3 and 4 and the alteration was made before issuing the bill of lading and circulating the inspection certificate. But in the certificate of insurance it was indicated that the wheat had been loaded in holds 3 and 4. Though in this case the arbitrators spoke in favour of the seller and the Divisional Courts after being equally divided decided to stick in with the decision of the Arbitrators, still Phillimore J. opined that, the buyer do not need a document to satisfy himself may be, as he may re-sell he require a document which can satisfy his potential buyers too [78] . Later the view of the learned judge was approved by in S.I.A.T. did al Ferro v. Tradax Overseas SA [79] case where buyer was allowed to reject a bill. In this case the original bill of lading tendered was not for the C.I.F. destination, but it was later altered and the products reached the desired port. But there was no prove that, such alteration was made on behalf of the carrier and the buyer was at his will to reject [80] . However the buyer cannot reject a tendered bill of lading where the alterations have been done because of some supervening power [81] .

Whether charterparty must be tendered:

In the present world of trade and commerce, it is really a common practice to tender a charter party with the bill of lading. As it becomes a mountainous task for the buyer to determine his precise relationship with the carrier without a charterparty [82] , the incorporation of the charterparty with the bill of lading is not really rare [83] . Judges like Blackburn J. has also opined that, charterparty is one the documents which the seller is required to tender. [84]

Different conditions can bring different situations such as in Finska Cellulosaforenigen v. West Field Paper Co. Ltd [85] it was decided that, the seller was in binding to tender the charter party even after having a express condition that, ‘All conditions and exceptions as per charter-party’, as both parties were dealing with each-other for long time and knew about the conditions. The general rule about tendering the charter party is that, the seller need to tender the charter party, where the instrument is necessary for the buyer to tell whether the bill of lading and other tendered documents are in accordance with the original contract of sale, otherwise the charter-party need not to be tendered even that has been mentioned in the bill of lading. [86]


Form of Invoice:

The description of an Invoice provided by Blackburn J. in Ireland v. Livingstonee [87] , is regarded as a standard of commercial invoice and every seller is bound to make out an invoice as or similar to that [88] . According to the learned judge, “The invoice is made out of debiting the consignee with the agreed price (or the actual cost and commission, with premiums of insurance, and the freight, as the case may be), and giving him credit for the amount of freight which he will have to pay to the ship-owner on actual delivery…” [89] Preparing and tendering such invoice is obligatory for the buyer [90] .

Contents of Invoice:

The content of Invoice has never been put down in black and white with great importance [91] . As a result, the contents can be varied and different from invoice to invoice. Generally it is anticipated that, a commercial invoice should at least contain sufficient particulars so that the buyer can relate it with the subject matter of the contract of sale [92] . It is not essential for an invoice to contain the full contractual description of the goods. [93] In an Australian Case [94] it was decided that, a buyer cannot reject merely because of the wording of the invoice [95] , though they definitely can reject if actions like quantity or the product itself is different in the invoice from the contract of sales [96] .

In a case of express request by the buyer to include any certain condition in the invoice and the failure of seller may lead to a valid rejection [97] . But if such failure has been occurred due to the action of a third party then the seller will get an upper-hand and the buyer’s right to reject would be debarred [98] .

Liability for misstatements in invoice:

Any false or misstatements in the invoice will held the seller liabl

Cite This Work

To export a reference to this article please select a referencing stye below:

Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.

Related Services

View all

Related Content

Jurisdictions / Tags

Content relating to: "International Law"

International law, also known as public international law and the law of nations, is the set of rules, norms, and standards generally accepted in relations between nations. International law is studied as a distinctive part of the general structure of international relations.

Related Articles

DMCA / Removal Request

If you are the original writer of this essay and no longer wish to have your work published on LawTeacher.net then please: