INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 1
I. INTRODUCTORY
 Seller and buyer in different countries.
 Seller will not part with the good without receiving payment. (Solution: Some sort of security for payment)
 Buyer is equally reluctant to pay for goods before he has received them. (Solution: Some sort of legal right over them).
 Another country another jurisdiction.
 Import: Bringing of goods and services to port of one country. Export: Shipping or sending goods or services out of the port of the country.
 International trade law relate to the exportation of goods or services from one country.
 Carriage by sea, air, road.
 Global integration of international trade.
II. FOOD FOR THOUGHT
 Busiest seaport in the world.
 What are major seaports available to Nepal for use in India and Bangladesh?
 Major ports of entry to Nepal and where are the dry ports in Nepal located?
 When did Nepal enter into WTO?
INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 2
UNIT I: CONCEPT OF INTERNATIONAL TRADE LAW
I. MEANING AND CONCEPTS
 What is trade?
 Trade is transfer of ownership over goods and services from one person/entity to another.
 Involving persons from another country, another jurisdiction: “International Trade”
 Cross-border, transfer and parting of goods.
 International trade law comprises of set of laws, rules and regulations that regulate cross-border exchange of goods and services.
 International trade law is also a framework of law that enables countries to integrate their domestic market into international market.
II. GENESIS
 At the turn of 10th century, Europe was emerging from a long period of economic stagnation. Trade rose from being non-existent to one of the factor for economic development.
 There is an uncorroborated story about a merchant named Mercatorious bartering donkey for peppercorn while travelling through Tuscany hills.
 New towns were developed: markets, fairs, and banks and rapid development of maritime and overland trade let to large commercial centers that had a need for law to govern their business transactions.
 The Romano-Germanic legal system were only best suited for rural and agrarian society and did not contain legal concepts which suited the needs of the commercial community.
 The guilds and merchant‟s associations began to follow their own practices and they set up their own courts (Pepoudrous Courts)
 Pepoudrous literally means “dust feet”
 In English referred as “piepowder courts”
 These courts framed their own rules and procedures and decided case ex aequo et bono (from equity and conscience).
 Soon these rules were being applied by Pepoudrous Courts were applied by government courts. These rules were not enforced by sovereigns (kings and monarchs). Sovereign were not involved in these sort of commercial disputes.
 Sea-faring merchants also started to applied these rules, law and courts for quick resolutions of dispute and they were termed as “lex mercatoria”
 When trading began across the Mediterranean Sea, lex mercatoria got entrenched even more. Disputes that were regular were: goods being undelivered, ships not arriving.
 The merchants used to abide by the judgment because, their reputation would be at stake. No longer able to participate in commerce and trade.
INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 3
 Eventually, lex mercatoria (translation of Latin: law merchant or merchant law) became an international body of generally accepted commercial rules that transcend national boundaries.
 It evolved through rules and customs practiced by merchants and traders.
 There were slight variations in its application in different towns across Europe.
 It proved to be very influential than even the civil law, spreading to England, which had long resisted the Civil law traditions.
 Many of the concepts contained in merchant law (lex mercatoria) are incorporated in modern commercial law codes, such as the UN Convention on Contracts for the International Sale of Goods, the US Uniform Commercial Code.
III. IMPORTANCE
 No country is solitarily standing; economy of one country is dependent on the economy of another country. Global financial crisis.
 Global integration of international trade
 Regional trade integration: Free trade areas, Economic Union.
 ASEAN, SAFTA, NAFTA, EU,
 A consequential fall out global integration of international trade law:
 UN Convention on Contract for International Sale of Goods (ratified by 77 countries).
 UNCITRAL Model Law on Procurement.
 UNCITRAL Model Law on Arbitration.
IV. SOURCES
4.1 The sources are:
 Lex mercatoria
 Common law
 International conventions and treaties, which largely is codification of lex mercatoria. Examples: UNCISG, The Warsaw Convention, 1929, Hague-Visby Rules (International Convention for the Unification of Certain Rules of Law relating to Bills of Lading, 1924), WTO Agreement, SAFTA.
 Rules framed by international organizations and bodies. Eg. International Chamber of Commerce and UNCTAD (United Nations Conference on Trade and Development) and UNCITRAL. These organizations are involved in harmonization and formulation of uniform law texts.
 ICC Uniform Customs and Practice for Documentary Credits.
 ICC Incoterms.
 UNCTAD/ICC Rules for Multimodal Transport Documents.
 UNCITRAL Arbitrations Rules, UNCITRAL Model Law on Arbitration.
 Domestic Statutes:
 Export-Import (Control) Act, 2013 (1956).
INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 4
 Multimodal Transport Act, 2063 (2006).
 Contract Act.
 Customs Act, 2064 (2007).
 Judgments of international and national courts/arbitral tribunals.
V. FOOD FOR THOUGHT
 The top 5 world largest economies.
 What is Silk Route?
 Briefly, what is spice trade?
 Trade and colonization.
INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 5
UNIT II: INCOTERMS
I. PRELIMINARY
 Let‟s revert to my first lecture for this course and again make an attempt to answer the following questions:
 What is so special about international trade?
 What are the problems peculiar to international trade?
 Does seller (exporter) and buyer (importer) bear additional risks than those incurred in domestic sales?
 The following are some of the special features of international trade:
 Parties deal at a distance and are not in a regular relationship.
 Parties do not trust each other:
 Whether the seller will part with the goods unless he is assured that he will be paid.
 And buyer will not part with the goods unless he is reasonably satisfied that he will receive the goods within the stipulated date and in proper condition.
 Parties know nothing of each others‟ solvency: Seller cannot check the credit standing of an overseas buyer.
 Not sure which law will be applicable to the international sale contract and there is desire to avoid disputes in courts of other countries.
 Range of ancillary contract in conjunction with sale contract will be necessary viz. insurance contract, contract for transportation of goods, finance contract etc.
 Additionally, the seller (exporter) and buyer (importer) bear some additional risks:
 Goods exposed to risks inherent in transportation of various means.
 Parties may be adversely affected by fluctuations in exchange rates.
 Additional risks may arise from political stance or instability of the government.
II. PURPOSE OF INCOTERMS
 Since parties deal at a distance, it is always better to agree at the outset on responsibilities of the parties:
 Who‟s doing what?
 Assigning obligations and allocating duties between the contracting parties in advance will lessen the complications later.
 Parties thus assign responsibilities inter se. For example:
 Who will deliver the goods and where?
 Who will arrange for loading of goods?
 Who will work for the export/import clearance?
 Who will arrange for the transportation and pay for it?
 Who will arrange for the insurance?
INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 6
 In sum the matter relating to the rights and obligations of parties to contract of sale with respect to delivery of goods needs to agreed on beforehand. Such trade terms covers:
a. the point of delivery of goods.
b. when the risk passes.
c. who arranges and pays for the insurance.
d. terms of shipment.
 Through international trade practice and customs, numerous trade terms have been developed to describe right and duties of parties with respect to delivery of goods.
 In different countries and jurisdiction, the trade terms may have different meaning.
 And, therefore in order to avoid uncertainties, reduce confusions, eliminate doubts as to the usage of such trade terms in different countries, the ICC developed the Incoterms.
 These are standardized rules to avoid confusion and ambiguities.
 To eliminate doubts as to the meaning of the terms.
 These Incoterms have to be built into the contract, if the parties wish to apply them. In the contract of sale express reference is to be made to current version of the Incoterms.
 These development of these pre-defined trade terms dates back to 1921.
 In 1936, it was published for the first time.
 The 1936 Incoterms was used till 1953. Amendments, additional changes have been made in 1967, 1976, 1980, 1990, 2000.
 Successive revision is required because the use of Incoterms should be contemporaneous with changing commercial practice.
 The eight and the current version of Incoterms rules were published on 1 January, 2011.
 There are a total of 11 Incoterms in the latest Incoterms 2010. The trade terms are divided into four groups.
a. One E-term (ex works), in which seller has no responsibility for delivery to a carrier, or even for loading the goods on to the buyer‟s vehicle.
b. Three F-terms, in which the seller‟s duty is to deliver to the carrier but the freight is payable by the buyer.
c. Four C-terms, in which seller is responsible for arranging the carriage of goods from his own country at his own expense.
d. Three D-terms, under which the contract is an arrival contract, requiring the seller to deliver the goods to an agreed delivery point in the buyer‟s country.
III. INCOTERMS – A PRIMER
 As reference earlier trade terms like the Incoterms impose identified obligations upon either buyer or the seller.
 One whom onerous obligations and more responsibilities are placed is influenced by many factors: commercial position of the parties, bargaining power of the parties, access to cheap insurance, access to good shipping rates etc.
 This automatically conditions the purchase price of the goods.
INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 7
 If more obligations are imposed upon the seller or if he provides more services, then he can quote higher price for the goods.
 The buyer on the other hand may find it cheaper to collect the goods at seller‟s warehouse (ex works) and make his own transportation arrangements rather than pay the seller a price which includes the seller‟s transportation cost.
A. Scope of Incoterms
 From a particular Incoterms used in the sales contract, the parties can get a clear picture of what the purchase price does or does not cover and of the point at which the seller‟s delivery obligation is to be considered fulfilled.
 But one should bear in mind the following:
a. Incoterms is built intood or incorporated into sales contract and not in the contract of carriage.
b. It is only small part of the sales contract and does not encompass all duties, rights and obligations of the parties in relation to the contract of sale.
c. It does not deal with purchase price and the method of making payment.
IV. MODES OF TRANSPORT AND INCOTERMS
 Various modes of transportation are available for transporting goods between (or within) countries:
a. Sea-freight
b. Air-freight
c. Overland: Lorry (Truck), Rail
d. Post
e. Multimodal Transportation
 Not all Incoterms are suitable to all the various modes of transport. It is different as to sea or inland waterway transport and other modes of transport.
 Out of the 11 Incoterms only 7 Incoterms are applicable to any mode(s) of transport including carriage by sea vessel and multimodal transport: They are:
a. EXW - Ex Works
b. FCA – Free Carrier
c. CPT – Carriage Paid To
d. CIP – Carriage and Insurance Paid To
e. DAT – Delivered at Terminal
f. DAP – Delivered at Place
g. DDP – Delivered Duty Paid
 The following four terms are specific to shipment. These terms can only be used for sea or inland waterway transport:
a. FAS – Free Alongside Ship
b. FOB – Free On Board
c. CFR – Cost and Freight
INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 8
d. CIF – Cost, Insurance and Freight
 Thus shipment specific Incoterms are not applicable to other modes of transport and should not be used.
V. INCOTERMS EXPLAINED
 See annexes slide for more details.
DUTIES OF SELLER1 Loading on truck (carrier) Export-Customs declaration Carriage to port of export Unloading of truck in port of export Loading charges in port of export Carriage to port of import Unloading charges in port of import Loading on truck in port of import Carriage to place of destination Insurance Import customs clearance Import taxes EXW No No No No No No No No No No No No FCA Yes Yes Yes No No No No No No No No No FAS Yes Yes Yes Yes No No No No No No No No FOB Yes Yes Yes Yes Yes No No No No No No No CFR Yes Yes Yes Yes Yes Yes No No No No No No CIF Yes Yes Yes Yes Yes Yes No No No Yes No No DAT Yes Yes Yes Yes Yes Yes Yes No No No No No DAP Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No CPT Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No CIP Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No No DDP Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes
1 Sourced from Wikipedia.
INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 9
FOOD FOR THOUGHT
 Suez Canal and Panama Canal: History, Relevance and Significance
 Setusamundram Shipping Canal Project: Your Perspective
 Airbus-Boeing WTO Dispute
INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 10
UNIT III: STANDARD FORM CONTRACT
I. DEFINITION
 A standard form of contract is a type of contract which contains standardized terms and conditions which are set by one of the parties and the other party is left with little or less room to negotiate the clauses and therefore has to take or leave the contract.
 The contract terms are framed and formulated in advance and is presented by offeror (issuer) to other party for entering into the contract.
 The terms are pre-formulated by the issuer.
 The party making the offer to enter into a contract includes standard terms in the offer with the intention that these terms become part of the contract.
II. FEATURES OF STANDARD TERM CONTRACT
 The typical features of standard term contract are:
 Provider of goods or services presents the contract on take-it-or-leave-it basis. At times, the presenter of the contract has no authority to negotiate the contract with the other party.
 A typical consumer lacks the capability to understand the language used in the contract.
 Competitors usually employ similar terms.
 The risks mentioned in contract have remote possibility of materializing.
 The expectation of the consumer that the contract will be enforced at the exclusion of the offensive terms.
 Consumer under pressure to sign the contract quickly.
 Cost-benefit analysis: The cost of understanding the legal implications of the standard terms outweigh the benefits of doing so and thus the consumer hesitates to read the terms carefully.
III. THE NECESSITY AND BENEFITS OF STANDARD TERM CONTRACT
 Industrialization and huge production of goods and services.
 The mass production of was accompanied by proliferation in the use of standard form of contract.
 It was found that certain elements and clauses of contract are implicit in every contract: requirements for entering into and performing of contract; delivery of the goods; transfer of risk; the method of payment; scope of warranties; and termination provisions.
 Commercial and business sense dictate that people spend only requisite time in negotiation of contract.
 Utmost impossible to negotiate or renegotiate each term for every transaction with different individuals. Company cannot afford to do business without standardization of its terms of contract.
INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 11
 Contract can be entered into much more quickly as there will no negotiation or the duration of the negotiations will be shortened.
 Examples: sale of goods, insurance policy, loan agreement with bank, cargo agreement, construction contract (FIDIC).
IV. IMPORTANT CLAUSES INCORPORATED INTO STANDARD FORM CONTRACTS
 The indicative list of contractual terms covered in a standard form contract of sale of goods include the following:
 General clause: Subjects the contract of sale to either seller‟s or buyer‟s condition of sale;
 Retention of title clause: A clause providing that until the seller receives the purchase price fully in cash:
 The seller retains the legal right of title in the goods and is given the irrevocable right to enter the premises of the buyer at any time and without notice in order to retake possession of the goods;
 Details of performance and payment clause: When the buyer will be under an obligation to make the payment.
 Price escalation clause: That the seller will be entitled to increase in the agreed prices and charges, including the cost of labor to be paid or borne by the seller, have increased between the date of the quotation and the date of delivery;
 Interest: A clause providing that where the payment is made after the agreed date, interest shall be paid at a specified rate;
 Force majeure clause: It is wiser to introduce a clause in agreements defining in advance mutual rights and duties if certain events beyond control occur, whether or not such events result.
 Choice of law clause: The law governing the contract. Eg. Nepalese law.
 Arbitration clause: A clause providing that any disputes between the parties are to be settled by arbitration;
 Jurisdiction clause: Providing the contract to be enforced in Nepalese courts/courts of other countries.
V. RISKS ASSOCIATED WITH STANDARD FORM CONTRACT
 The main problems associated with standard form contract are:
 The issuer of standard terms stands in a position where the terms dictated can be imposed upon the other, notwithstanding the will of other party.
 The terms can be imposed in such a way to burden the other party with all the risks.
 Clauses may limit or exclude offeror‟s liability for performance or non-performance or other breaches of contract. It can also permit for example the seller to increase the prices or supply alternative goods.
 Also take the example “No refund will be available if the event is abandoned”.
 The standard terms are biased toward the offeror/issuer.
INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 12
 It gives a unique opportunity to the giant company to exploit the weakness of the individual by imposing upon him terms which often look like a kind of private legislation and which may go to the extent of exempting the company from all liability under the contract.
VI. IS LEGAL PROTECTION AVAILABLE?
 The question arises whether the law will enforce the standard form of contract in its entirety. Can all the clauses of the standard form contract be enforced strictly:
 How can the court protect the weaker party?
 The two primary statues that protect the weaker party/customer/party agreeing to standard form contract are: Contract Act and Customer Protection Act.
 The provisions of Contract Act are:
 Section 13 – Void Contract
i. Section 13 (f): A contract concluded for immoral purpose or against public morality or public interest.
 Section 14 – Voidable Contract
i. Standard form of contract can be challenged as being concluded under: coercion, undue influence, fraud, deceit.
 Also under certain conditions laid down under the Consumer Protection Act.
 Some theories are developed by English/American/Indian courts:
 Democratic Contract Argument
 Standard form contracts are at times struck down by arguing that they are not made democratically.
 The contract should be entered into in accordance with the desires of the immediate parties to contract. This is not the case with standard form contract.
 In usual scenario, the consumer never ever reads the contract, or reads it only after he or she has become bound by the terms.
 The Unconscionability Doctrine
 Courts have held that contractual terms unilaterally imposed by one party upon the other can, in certain circumstances, be held to be unconscionable and therefore unenforceable.
 Courts have interfered in cases where there is evidence of unequal bargaining power.
 The courts have relieved the weaker party to a contract from unconscionable, oppressive, unfair, unjust, and unconstitutional obligations. (Delhi Transport Corporation v. DTC Mazdoor Congress, AIR 1991 SC 101.
 The Notice Theory
 The notice theory is again evolved by common law jurisdictions.
INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 13
 The principle states that a clause in a printed form is not binding unless the attention of the other party is drawn thereto, and such clause is brought to his or her notice.
INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 14
UNIT IV: INTERNATIONAL TRANSPORTATION OF GOODS AND BILL OF LADING
I. PRELIMINARY
 In previous lectures, discussions were focused more on the relationship between seller (exporter) and buyer (importer). For instance take the case of Incoterms and Standard Form of Contracts.
 In this unit we venture into the carriage of goods.
 As one of the parties either exporter or importer in accordance with the trade terms especially the Incoterms have to arrange for carriage of goods to the agreed destination.
 You‟ve also learnt that not all Incoterms are suitable for all the various modes of transport. It is different as to sea or inland waterway or other modes of transport.
 Out of the 11 Incoterms only 7 Incoterms are applicable to any mode(s) of transport including carriage of goods by sea vessel and multimodal transports.
 Take for the instance FOB and CIF, who is responsible for arranging the contract of carriage.
 Various modes of transportation are available for transporting goods between (or within) countries:
a. Sea-freight
b. Air-freight
c. Overland: Lorry (Truck), Rail
d. Post
e. Multimodal Transportation
 Thus in this Unit we will discuss the relationship between carrier and the party responsible for arranging the carriage of goods.
 Contract of carriage of goods is an auxiliary to the central contract of sale.
 The legal rules, the transport documents that apply to these different modes of transportation goods vary. In relation to international carriage of goods, the legal rules governing the carriage are international convention and treaties.
 There are different international conventions for the various modes. But not all conventions are ratified by Nepal.
II. CARRIAGE BY AIR
 International carriage of goods by air is governed in Nepal almost entirely by international conventions.
 The liability of air carriers for loss or damage to baggage and cargo, as well as for bodily injury or death of passengers is governed by host of international treaties and conventions.
INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 15
 But, we‟ll only address the liability of air carriers for damage to baggage or cargo moving in international air transport. Thus injury or death of passengers and damage to baggage or cargo within domestic travel will not be covered.
 The amount of cargo carried by air is very small when compared with vast bulks carried by sea.
 However, there is no single system of rules for the carriage of goods by air since any one of three possible sets of rules may apply, depending on the position of states in which carriage begins and ends.
The set of international conventions having applicability
 The three pertinent convention having applicability are:
 The Warsaw Convention of 1929 (Referred as the “Original Convention”)
 Since 1929, the liability of airlines has been governed by a series of international conventions.
 The first was the Warsaw Convention, 1929 (formally the Warsaw Convention on Carriage by Air).
 There are 151 parties to the Convention.
 Nepal is also party to this Convention.
 The Warsaw Convention as amended in The Hague, 1955 (Referred to as the “Amended Convention)
 The Warsaw Convention (the “Original Convention”) is amended by several protocols.
 The most important of this is The Hague Protocol. Nepal is also the Party to this Protocol.
 The amended Warsaw Convention was supplemented by the Guadalajara Convention 1961.
 Further amendments of the Warsaw Conventions took place by virtue Guatemala City Protocol, 1971 and the Montreal Additional Protocols 1975 Nos 1 – 4. But Nepal has not acceded to any of these Protocols.
 The Montreal Convention of 1999
 The most important change to air transportation of law in 70 years occurred with the adoption of the Montreal Convention for the Unification of Certain Rules for International Carriage by Air (1999).
 It replaces the outdated Warsaw Convention where ratified.
 As of July 2010, 97 countries signed the Montreal Protocol (Source: www.wikipedia.com).
 Nepal is not party to the convention yet.
 These conventions apply only to international air ticket.
When do the various regimes apply?
 The “Original Convention” applies when:
INTERNATIONAL TRADE LAW
Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 16
 The departure and destination points set out in the contract of carriage are in the territories of two states which are both parties to the Original Convention but are not both parties to the amended Convention.
 The “Amended Convention” applies when:
 The departure and destination points set out in the contract of carriage are in the territories of two states which are both parties to the Amended Convention.
 So will the Montreal Convention apply to Nepal.
A. Carriage governed by the original Warsaw Convention (1929)
 In 1929, it was adopted when the airline industry was its infancy and the risk of an air disaster was so great that investors feared that their fortunes could be wiped in one air disaster.
 So when the signing this government, more protection were afforded to the air line company from catastrophic loss in order to flourish.
 Thus airlines were protected from liability in the following ways:
i. They were not liable if they could prove that they used “all necessary measures” to avoid the damage (Art. 20(1) of the Original Convention).
ii. It limited their liability to a specific amount.
 In case of passenger the limit is 125,000 francs (8500 Special Drawing Rights (SDR)).2
 In case of registered luggage and goods the limit is 250 (17 SDR) francs.
 The conventions standardized procedures for issuing documents of carriage. Documents of carriage include: Passenger ticket, luggage ticket and Air Consignment Note. (Chapter II: Documents of Carriage)
 Similarly, the convention governs the carrier liability while the goods are in his charge, whether at airport or not. (See Art. 18 of the Original Convention).
a. The Air Way Bill
 The document is referred to in the original Convention as an “Air Consignment Note”, but more modern term “Air-Way Bill (AWB)” is generally used.
 It is document of carriage or carriage of goods.
 Each AWB must be in three original parts (Art 6 of the Original Convention):
 The first part is marked “for the carrier”: signed by the consignor.
 The second part is marked “for the consignee”: signed by the consignor and the carrier and accompanies the goods.
 The third part is signed by the carrier and handed to the consignor after the goods have been accepted for carriage.
2 Special drawing rights (SDRs) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF). It is updated every 5 years. Currently, the value of one SDR is equal to the sum of 0.423 Euros, 12.1 Yen, 0.111 pounds, and 0.66 US Dollars.
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Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 17
 However, the absence of an AWB will not affect the validity of the contract or the application of the Convention but may prevent the carrier from enjoying the benefit of various exclusions and limitations of liability given by the Convention. (See Art. 9 of the Original Convention).
 Art 8 of the Original Convention lays down various items that must appear on the air-way bill. The important ones are: nature of the goods; the method of packing and marks or numbers on them; the weight, quantity and volume or dimensions of the goods; the apparent conditions of the goods and their packing and statement that carriage is subject to the Convention‟s rules on the liability of the carrier. However, in case non-mentioning of these particulars, the carrier cannot take advantage of the provisions of the Convention.
 AWB is not a document of title:
 It is a proof of ownership of the property.
 A document of title enables its holder (possessor) or to receive, retain, sell, or otherwise dispose of the document, and the goods or property listed therein.
 AWB is prima facie evidence of the conclusion of carriage of contract by air, the acceptance of the cargo and the conditions of carriage stated therein.
b. The carrier’s liability
 The carrier is liable for all loss or damage to goods in his charge and for damage occasioned by delay unless he proves that he or his agents have taken all necessary measures to avoid the damage or that it was impossible for him or them to take such measures. (See Arts. 19 and 20 of the Original Convention).
 “All necessary measures”: Several case laws have defined the meaning. It means the obligation of disproving negligence lies with the carrier.
 Also, the carrier is not liable if he can prove that “the damage occasioned by negligent pilotage or negligence in the handling or the aircraft or in navigation and that in all other respects and his agents have taken all necessary measures to avoid the damage. (Art. 20(1)).
c. Rights of consignor and consignee
i. Consignor
 Has the general right to dispose of goods while they are in transit by withdrawing them, stopping them en route or by requiring the carrier to return to the departure airport to deliver them to a party other than the original consignee at the destination or at an intermediate point. (Art. 12 (1)).
ii. Consignee
 Has the right to require the carrier to hand over goods and the air consignment note on arrival at the destination on payment of proper charges and compliance with any other conditions set out in the air consignment note. (Art. 13).
d. Procedure in the event claim
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Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 18
i. Limitation of action
 Where goods have suffered damage the consignee or other party concerned must give the carrier written notice of it within seven days of his receipt of the goods. (Art. 26).
ii. Jurisdiction for bringing the claim
 Art. 28 provides that an action for damages must be brought in the territory of one of the contracting states, either in the jurisdiction of the carrier‟s ordinary residence, or where the carrier has his principal place of business, or has an establishment by which the contract was made, or the place of destination.
B. Carriage governed by the amended Warsaw Convention (1955)
 There some major changes made to the original convention by this amended convention, which are set out below:
i. The Air Way Bill
 The expression Air-Way Bill is specifically used.
 The required particulars are fewer and considerably less onerous. (See. Art. VI of the Amending Convention).
ii. The Carrier’s liability
 The defense of negligent pilotage or negligence in the handling or navigation of the aircraft is dropped. (Art. X of the Amending Convention).
iii. The limit of liability
 The levels of limitation are identical but limits will not apply on the basis of “willful misconduct‟ but on „intention to cause damage or to cause damage recklessly and with knowledge that damage would probably result.‟ (Art. XIV of the Amending Convention).
iv. Limitation of action
 The consignee or the party concerned has fourteen days (as opposed to seven under the original convention) to give written notice to the carrier of loss or damage to the goods.
C. The Montreal Convention
 It consolidates, updates and unifies the provisions of the Warsaw Convention with all amendments.
 It modernizes the provisions on issuing of ticket, baggage claims, and air waybills and provides for the use of electronic documents.
 It requires the airlines to be adequately insured for loss to baggage or cargo, or for bodily injuries or death to passengers. (Art. 50 of the Montreal Convention).
i. Limitation of liability
 In case of death and injury of passengers: 100000 SDR
 In case of baggage: 1000 SDR
 In case of cargo: 17 SDR, but consignor can declare a higher sum.
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III. CARRIAGE BY LAND
 It is expected and assumed that Nepal being a landlocked country international transport of goods by overland either by road and rail should play large part in international trade.
 Both modes of transport are regulated by international conventions. Currently, there aren‟t existing national statues on carriage of goods by road and land.
 However, there is chapter in the Contract Act on “Contracts Relating to Transportation of Goods”, which to certain extend cover carriage of goods and land. It is primarily for domestic transportation of goods.
A. Carriage by Road
 International transport of goods by road is governed by the Convention on the Contract for the International Carriage of Goods by Road (CMR) signed at Geneva on May 19, 1956.
 Nepal is not a state party to this convention.
 The convention applies to contracts for carriage by road when the place of taking over the goods and the designated place of delivery are in different countries, at least one of which is party to the Convention.
 Neither China nor India is party to the CMR Convention.
B. Carriage by Rail
 International transport of goods by rail is governed by the International Convention concerning the Carriage of Goods by Rail (CIM) of February 25, 1961.
 The CIM was initially concluded in 1961 and remains in force although it is now an integral part of the Convention concerning the International Carriage of Goods by Rail (COTIF), 1980
 All the member states to COTIF 1980 constitute the Intergovernmental Organization for International Carriage by Rail called OTIF.
 Nepal, India and China are not state parties to this Convention.
 The CIM applies to the carriage of goods under a through consignment note for carriage over the territories of at least two contracting states on railway lines designated as international.
IV. CARRIAGE BY MULTI-MODAL TRANSPORT
 During the Incoterms lecture, I‟d said that transportation of goods can be divided into three segments:
 Pre-Carriage: seller‟s location to the point where the cargo would leave from the seller‟s side. Eg. inland carrier to make delivery to a port or airport.
 Main-Carriage: segment from the seller‟s side to the buyer‟s side. Eg. ocean or sea carriage
 On-Carriage (Pos-Carriage): segment from the point of arrival from the buyer‟s side to the designated ultimate receiver. Eg. inland carrier to make delivery from the seaport/airport or arrival to the ultimate receiver.
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 It was also clear that some of Incoterms assume one contract of carriage by one mode of transport. However, it other modes will be involved as well and these incidental modes will have some relevance.
 Take for instance the CIF terms, the CIF clearly says that the main carriage, the carriage of goods by sea ought to be carried out by seller. However in addition to the main carriage the seller will also have to make a contract of carriage in order to get the goods to the dock for shipment but this will be a matter for the seller alone.
 Thus under CIF, or other sales contract based on CIF, there will be in addition to the main contract, further and separate contract concerned with the movement of goods over those sections of transit.
 But, it will be more in practice to arrange from the outset for one contract of carriage which will cover the entire transit of goods from seller to the buyer.
 Thus in multi-modal transport, a freight forwarder (forwarding agent), container transport or multi-modal transport operator concludes a single contract of carriage to ship the goods to their destination by using at least two or more different forms of transport.
 Multi-modal transport is also referred to as combined transport and container transport.
 Multi-modal transport must be distinguished from “through transport” where on uni-modal carrier is responsible for his leg of the journey, but contracts the other stages only as agent for the cargo owner.
 Thus in multimodal transport, there is single contract of carriage for the various stages or modes in the transportation. All carriage arrangement is made by the multi-modal transport operator.
A. The increase in multimodal transport
 Containers are suitable for multimodal transport and with the increasing use of containers there has been a significant rise in multimodal transportation.
 This is referred to as containerization goods.
 Thus if, the goods have to pass through three stages of transportation, they are carried by land from an inland depot to the port of loading, then by sea, and finally again by land to an inland destination. And, in all these stages, the goods will travel in the same container, from the place of loading to that of discharge.
 Containers are reusable steel modular box.
 Container load can be of two types:
 Full container load (FCL): If the exporter intends to stuff a full container load, the exporter may get a door-to-door container which will be filled at has premises and unloaded at the business premises of the buyer.
 Less than a full container load (LCL): In this case, the exporter will have to send the goods to the container freight station, where it will be consolidated with the goods of other exporters in one group. On arrival at the place of destination, it
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will be taken to a container freight station, where the parcels will be separated and delivered to the various consignees.
a. Advantages
 There are some advantages in containerization of goods. They are:
 The physical labor as well as the cost of conveying them from one vehicle of transportation to the next is reduced.
 The danger of theft is reduced as is the risk of damager through repeated handling of goods.
b. Problems of multimodal transport
 Though multimodal transport has advantage, it has some peculiar legal problems too:
 As discussed, earlier, the law on carriage of goods is governed by separate and independent legal regime.
 The international conventions which deal with carriage of goods by air, sea, land (road and rail) apply various liability standards to the carrier. The liabilities of the carrier in the event of loss of or damage to the goods under the various conventions which respectively apply to different modes of transport govern the carrier liability differently.
 If goods have been exported in a container under a multimodal transport contract, it will be difficult to discover in which leg or segment any loss or damage occurred and which convention liability should apply. As there are different legal rules governing the different legs of transport.
 This is even more compounded because there isn‟t a widely accepted regulation on multimodal transport.
B. International Regulation on Multimodal Transport
 In order to address the problem of different international convention applying to different legs and modes of transport, it was recognized that an international agreement on multimodal transport was necessary.
 Therefore, UN Convention on International Multimodal Transport for Goods was adopted in Geneva on 24 May 1980.
 This Convention is not yet in force.
 However, International Chamber of Commerce and United Nations Conference on Trade and Development (UNCTAD) have jointly developed the UNCTAD/ICC Rules for Multimodal Transport Documents. It is merely rules and not an international treaty or convention and it came into force in 1 January 1992.
 These Rules apply when they are incorporated into a contract of carriage by reference to the “UNCTAD/ICC Rules for multimodal transport documents”. Thus these rules do not apply when they are not referred to.
C. National legislation on Multimodal Transport
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Nepal has passed a legislation which governs transportation of goods by multimodal transport.
 The Act is called “Multimodal Transportation of Goods Act, 2063”. (MTG Act)
 From the preamble, it can be concluded the object of the MTG Act:
 To enact legal provisions to govern multimodal transportation.
 Increase and enhance the trade capacity of the country.
 Develop the operation of multimodal transportation service.
 To integrate Nepal into international trade.
a. Definition
 “multimodal transportation” means carriage of goods on the basis of a multimodal transportation contract. (Sec 2(b))
 “multimodal transport contract” means a contract entered into by a consignor and a multimodal transport operator whereby the multimodal transport operator undertakes to take charge of goods from the consigner in any place of the State of Nepal and deliver the goods to any specified place outside the State of Nepal, by using two or more modes of transport. (Sec 2(c)).
b. Licensing of Multimodal Transport (MT) operator
 Multimodal transport service cannot be operated without obtaining a license.
c. Documents
 In taking the charge of goods form the consignor for transportation, the multimodal transport operator should issue or multimodal transport (MT) document.
 The MT document is an evidence to show that the multimodal transport (MT) operator has taken charge of the goods. (Sec. 14 MTG Act) It also shows that the MT operator undertakes the responsibility to transport and deliver such goods in accordance with the MT contract. (Sec. 2(g))of the MTG Act.
 The MT operator must sign the MT document. (Sec. 8 MTG Act).
 The manner by which the MT document must be issued is given under Sec. 10 of the MTG Act.
 The MTG Act provide for the issuance of MT document which can be issued either in a negotiable or in a non-negotiable form:
 Negotiable MT Document: It is a MT document which is made out to either the “person so directed” or to the “bearer”. If made out “person so directed” it is transferable by endorsement. And, if made to the “bearer” is transferable without endorsement. (Sec. 2(h) r/w Sec 10 of the MTG Act).
 “endorsement” means the signing by the consignee after adding a direction on the front or back of a multimodal transport document to pass the property in the goods mentioned in the multimodal transport document to a specified person in accordance with the multimodal transport contract.
 Non-negotiable MT Document: If MT document is issued in non-negotiable form it shall indicate the name of the consignee.
i. MT Document is document of title
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 The MT Document is document of title because (See Sec. 7(3) of the MTG Act):
 Where the consignee is named in the multimodal transport document, such consignee is considered to have property in the goods mentioned in such transport document.
 Where a negotiable multimodal transport document is issued and is transferred to an endorsee by endorsement, such endorsee, or the bearer of such transport document shall be considered to have property in the goods mentioned in such transport document.
d. Delivery of Goods by the MT Operator
 Delivery of goods as different connotations depending upon the type of MT document (See Sec 11 of the MTG Act).
 In case of negotiable MT document, the delivery will be treated as complete if the MT operator or its agent or representative delivers the goods to any consignee or his or her agent or representative.
 In case of non-negotiable MT document, the MT operator or its agent or representative, after obtaining written authorization of the consignor can deliver the goods to any other person named in such authorization.
i. Modalities for delivery of goods
 The modalities of delivering goods is set out in Sec 16 of the MTG Act, in reference to the two types of MT document: Negotiable MT document and Non-Negotiable MT document. Thus:
 When the MT document has been issued in a negotiable form “to bearer”, to the person producing one original copy of the document.
 When the MT document has been issued in a negotiable form “to person so directed”, to the person producing one original copy of the document duly endorsed.
 When the MT document has been issued in a non-negotiable form, to the person who produces a reasonable evidence that he or she is the consignee named in the written authorization of the consigner.
e. MT operator’s liability
 The liability of the MT operator extends from the time it takes charge of the goods from the consignor and lasts until it deliver the goods. (Sec. 17(1)).
 Under the Act, the MT operator can be held liable for loss or damage of goods and sometimes even in cases of delayed delivery.
i. Limitation of liability
 The liability of the MT operator under the MTG Act for any loss or damage to the goods is limited to 666.67 SDRs. (Sec 21(1) of the MTG Act.)
 However, if the actual nature and value of the goods are declared and stated in the MT document, then the liability can exceed above 666.67 SDRs.
ii. Loss of benefit of the limitation
 The MT operator cannot avail of the limitation, if it is proved that the loss, damage, destroy or delay in delivery of the goods to be transported in accordance with the multimodal transport contract resulted because of an
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intentional act or omission or malicious recklessness of the multimodal transport operator, its employee or agent.
f. Limitation of action
 The limitation period for instituting an action under the MTG Act is six months. (Sec. 29 of the MTG Act).
g. Jurisdiction
 As per the MTG Act, the courts having jurisdiction are as follows:
 A court situated in the habitual residence of or the principal place of business of the defendant;
 A court situated in the place where the multimodal transport contract was made;
 A court in the place of taking charge of the goods or the place of delivery thereof, in accordance with the multimodal transport contract;
 Where the parties have specified any other place in respect of institution of action in accordance with the multimodal transport contract, a court in such place.
V. CARRIAGE OF GOODS BY SEA
 A reminder: contract of carriage of goods is auxiliary to the central contract of sale.
A. Contract of carriage of goods by sea
 So what is a contract of carriage of goods by sea?
 The contract of carriage by sea is the contract concluded by shipper (the exporter or the importer, as the case may be) with the carrier which is a ship-owner (the shipping line company), whereby the latter undertakes to carry the goods in his/her ship from one port to another port.
 The remuneration to be paid to the ship-owner is the freight, the ship-owner is the carrier and the exporter/importer as the case may be is the shipper.
 Intermediaries are generally involved for arranging the contract of carriage: Freight forwarder or a forwarding agent from the shipper side and loading broker from the carrier side.
 Forwarding agent‟s job is to secure freight space for the cargo and ascertain the date and place of sailing as per the instruction of the shipper.
 Loading broker obtains cargoes for the ship-owner. Loading broker communicates the name of the ship, details of and closing date for loading to the forwarding agent or the shipper. This is referred to as sailing card.
B. Types of contract of carriage of goods by sea
 There are mainly two types of carriage by sea, namely:
 Contracts contained in Charterparty
 Contract evidenced by Bill of Lading
 The use of one particular transport arrangement depends upon the amount and type of cargo.
Charterparty/Charterparties
 Charterparties are contracts for hire of an entire ship or vessel for a specified voyage or period of time.
 Where the cargo is to be carried in bulk the whole vessel in chartered.
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 Commodities such as agricultural products (eg grain, rice sugar, cocoa, coffee, tea) and raw materials (eg metals, ores, oils) are typically carried in bulk.
 Voyage charterparties: The charterer takes the vessel for a certain point-to-point voyage.
 Time chartperparties: The charterer acquires the use of the vessel for a certain amount of time and pays the “hire” for this.
 For an average exporter who exports lesser quantity of goods, the hire of whole ship will not be profitable and thus of no interest to him/her.
Bill of lading
 Thus if a lesser quantity of goods or individually packaged goods are to be exported it is mostly done under a bill of lading.
 For smaller consignment instead of hiring the entire vessel, space is obtained for the cargo in a ship.
C. Typical contract of carriage of goods by sea evidenced by bill of lading
 Take for instance a CIF contract, where goods are to be exported by a Nepali exporter.
1. Shipper directly or through a forwarding agent obtains space allocation for the cargo. The loading broker or the ship-owner directly advises the shipper or his agent of the name of the ship that is to carry the goods and where the goods are to be sent for loading.
2. When the shipper sends the goods to the docks, he includes: (a) shipping instructions for the carrier, (b) a shipping note for the superintendent of the docks.
 The shipping instructions for the carrier contain the particulars of the intended shipment.
 The shipping note for the superintendent of the docks states the details of the goods and name of the ship for which they are intended.
3. Where and mode of delivery of the goods to the ship-owner depends upon the agreement or the usual tradition of the port. Generally it is to place the goods alongside the ship.
4. When the goods are at the docks for loading on board the ship, they are inspected by the tally clerks. The tally clerks record the date of loading, note down the particulars and conditions of the goods, the quantity (the number of packages or the weight) and any other identification marks etc. Also any defects or markings are noted. On this basis the mate‟s receipt is issued.
5. When the loading is complete the ship‟s officer in charge signs the mate‟s receipt. The issue of mate‟s receipt has two consequences:
a. It is an acknowledgement by the ship-owner of having received the goods in the stated condition.
b. It evidences that the goods are in his possession and his risk.
c. However, it is not a document of title and only is a prima facie evidence of the ownership of goods.
6. The signed mate‟s receipt is taken to the ship-owner clerks to be compared with the draft bill of lading sent by the shipper to the ship-owner‟s office. The bill of lading used by the shipping company can be obtained from a stationer.
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7. Any qualifications of the mate‟s receipt are added onto the bill of lading is then signed on behalf of the ship-owner/carrier and handed to the shipper.
8. Bills of ladings are usually issued in set of two or more original parts, all of the same tenor and date. The bill of lading can be issued in two forms: clean and claused.
a. If the bill of lading is issued “clean”, that is stating the goods to be in good order and condition.
b. If the bill of lading is issued “claused”, then it includes qualifying remarks relating to their condition.
9. While the ship is on its journey – unless the payment is arranged under a letter of credit – the bill of lading together with the other transport documents is transferred by the shipper (exporter) to the consignee (buyer/importer).
10. Once the ship has arrived at its destination, the goods are handed over to the consignee on production of the bill of lading.
D. The applicable laws
 The laws applicable to contract of carriage depends upon the type of the carriage contract.
Charterparties
 Charterparties are mainly governed by the rules and principles of common law.
 So right and duties of the charterer and the carrier is governed by common law.
Bill of lading
 The law relating to contracts for carriage of goods by sea under bills of lading in response to power imbalance in bargaining between the carrier and the shipper.
 This is because shipper consigning smaller quantity of goods is in a less strong bargaining position than a charterer wishing to hire an entire ship.
 Because of the higher negotiating strength of the shipping companies, they could impose terms not favoring the shipper.
 Thus shippers found themselves with minimal rights against the ship-owners for loss of or damage of goods.
 Also, in the high seas, when the goods are in sailing in the ships, the ship‟s captain and its crew had the exclusive control over the goods extending up to the duration of months.
 It was very difficult for the shippers to prove that the good were lost or destroyed as a result of natural disaster, the negligence of the carrier, or from the crew‟s pilferage or theft.
 In response to these state of affairs initiatives were undertaken at international level to cure this imbalance.
 The contracts evidenced by bill of lading is governed by various international conventions:
1. The International Convention for the Unification of Certain Rules Relating to Bills of Lading of 25 August 1924.
 Because it was done in Brussels it is referred to as Brussels Convention.
 It is also at times referred to as Hague Rules because it was first formulated at a meeting of the International Law Association at The Hague in 1921.
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 Covers rights, duties, immunities of the carrier in relation to the shipper and consignee.
 Nepal is not a state party and thus no enabling or implementing legislation in Nepal.
2. The Protocol to Amend the International Convention for the Unification of Certain Rules Relating to Bills of Lading 1924, 23 February 1968.
 Also called the Brussels Protocol of 1968.
 The Brussels Protocol embodies a set of rules known as the Visby Rules.
 It is called the Visby Rules because they resulted from the Conference of the Comite Maritime International (CMI), whose proposals were signed at Visby (the capital of Swedish island of Gotland), in 1963.
 Both the Hague Rules and the Visby Rules are to read and interpreted as a single instrument and they are known as the Hague-Visby Rules.
 Nepal not a state party.
3. The United Nations Convention on the Carriage of Goods by Sea, 30 March 1978.
 It was adopted in Hamburg and is known as the Hamburg Rules, 1978.
 The Hamburg Rules came into force in 1992.
 The Hamburg Rules were intended to replace the Hague-Visby Rules.
 None of the major maritime countries are parties to the Hamburg Rules.
 The reason could be that it significantly increases the carrier‟s liability.
 Again Nepal not a state party.
4. Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea, 11 December 2008.
 Because of the lack of coherency with regard to applicable convention and dissatisfaction with the international legal regime, at the aegis of the UNCIRAL in 2002 some countries began deliberation to introduce a hybrid Hague/Hague-Visby/Hamburg regime.
 In December 2008, the General Assembly of the United Nations adopted this convention.
 Because the first signing ceremony was held in Rotterdam on 23 September 2009, it is also known as the Rotterdam Rules.
 The convention has not come into force yet.
 It attempts to create a new legal regime covering not only carriage by sea in isolation but multimodal contract involving a sea leg.
 Nepal is not a state party.
E. Contract of Carriage of Goods by Sea and Bill of Lading
 As elucidated earlier, contract of carriage of goods by sea is concluded between the shipper and the carrier long before the issue of the bill of lading.
 The bill of lading merely evidences that the carriage contract was concluded before.
 Thus it may contain contractual terms but is not necessary the contract of carriage.
 Thus if a special term is incorporated in the contract of carriage by sea whether orally or in written form, it will the override the terms and clauses printed in the bill of lading.
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 This was laid down in SS Ardennes (Cargo Owners) v SS Ardennes (Owners), The Ardennes, [1951] 1 KB 55.
 Facts:
 The Spanish exporters shipped mandarin oranges in the defendant‟s vessel from Cartagena port relying upon the oral promise of the ship-owner that the ship will would go straight to London and arrive there by 30th November 1947. But they did not arrive until December 5th.
 The arrival date was important because the oranges would deteriorate and also because there was higher import duty to be imposed from December 1st.
 Instead of heading directly to London the ship first went to Antwerp, as a result the delay.
 A clause in the bill of leading allowed the ship-owners to deviate from the voyage.
 Held:
 Bill lading is not in itself the contract between the ship-owner and the shipper.
 It is an excellent evidence to demonstrate that the contract of carriage by sea was concluded prior to its issuance.
 The representation albeit oral amounted to warranty that the ship would sail directly to London and this oral warranty overrode the terms set out in the in bill of lading.
 The shippers were awarded the damages.
F. Properties of Bill of Lading
 The bill of lading has three main features:
 Formal receipt for the goods.
 Represents or evidences the contract of carriage.
 Document of title.
i. Formal receipt of goods
 The bill of lading will acknowledge the quantity of goods put on board, their description and their condition.
 The bill of lading form will usually be completed by the shipper or his forwarding agent and sent o the carrier. As the goods are loaded they will be checked by tally clerks and if the particulars are found to be correct, the bill of lading will be singed for the carrier by his agent, the loading broker.
 The details such as the weight, marks or number of the packages of the goods is inserted in the bill of lading. The bill of lading will also
 The description is most vital because the consignee who wishes to buy the goods normally has no opportunity of verifying the representations of the buyer as to their quantity and quality by examining them.
 The consignee parts with the purchase price in reliance upon the ship-owner‟s description of the goods in the bill of lading.
 Bill of lading can be issued as claused or clean.
 Under the Hague-Visby Rules and even in the Hamburg Rules, the carrier is bound, on the shipper‟s demand, to issue a bill of lading which must show, among other things, the leading marks necessary for identification of the goods,
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the number of packages/pieces or the quantity or the weight of the goods and their apparent good condition. (Art. III(3) of the Hague-Visby Rules and Arts. 14 and 15(1) of the Hamburg Rules).
 By these provisions the shipper is entitled to demand the bill of lading and the owner is obliged is issue it.
 When the ship-owner affirms that the goods are received in “apparent order and condition”, a “clean” bill is issued. When the statement is qualified, the bill is “claused”.
 The bill of lading has implications on both the sale contract and the carriage contract.
 Under the sale contract the buyer can reject the bill of lading if it does not correspond with the goods sold or even the bill of lading is “claused”.
 A “claused” bill of lading bearing a note by the carrier as to some defect in the condition of the goods, will not normally be acceptable to a third party such as a buyer of goods. For this reason a practice has developed whereby the carrier issues a clean bill of lading for goods shipped in a condition which would normally have resulted in the bill of lading being claused. The shipper, in return, agrees to indemnify the carrier in respect of any loss the latter may suffer as a result of this issue.
ii. Evidence of the contract of carriage
 As already discussed, the bill of lading evidences the carriage contract which was concluded between the shipper and the carrier long before the bill of lading was issued.
 See Ardennes case.
 This is clearly the position between the original shipper and the carrier, but the bill of lading will usually be transferred eventually to a third-party, usually the overseas buyer.
 However between the carrier and the third party, usually the consignee, which has become the lawful holder of the bill of lading, the bill of lading constitute the contract of carriage, even though between the carrier and the original shipper it would have been mere evidence of the contract.
 This is because under the bill of lading the consignee takes over the original shipper‟s rights and liabilities under the contract of carriage.
 Because the third party may well be unaware of any terms agreed between shipper and carrier which are not set out in the bill of lading and will not be bound by them.
 As the consignee steps into the shipper‟s rights and liabilities of contract of carriage, he will not be bound by any terms other than those expressed in the bill of lading.
iii. Bill of lading as document of title
 Document of title is a document recognized by law and represents the goods for which it is issued.
 The transfer of the document to a party will vest in that party the right to possession of the goods and possibly ownership over the property too.
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 A document of title enables its holder (possessor) or to receive, retain, sell, or otherwise dispose of the document, and the goods or property listed therein.
 The principal purpose of the goods represented by the bill of lading is to dispose of the goods.
 By mercantile custom possession of the bill is many respects equivalent to possession of goods and the transfer of the bill of lading has normally the same effect as the delivery of the goods.
 The ability to transfer property rights in goods by the transfer of a document is the keystone of international trade practice.
 Two points should be noted here:
 Transfer of the bill of lading is merely deemed to operate as a symbolic transfer of possession of the goods, but not necessarily as transfer of property in them. Thus the right over the goods passes when then bill of lading is transferred.
 Only person holding a bill of lading is entitled to claim delivery of the goods from the carrier.
 The bill of lading also passes to the transferee all the rights and liabilities of the contract of carriage as evidenced by the bill of lading.
G. Types of Bill of Lading
a. Charterparty bills of lading
 The contract of carriage hiring the entire vessel, is called a charterparty.
 But a bill of lading can be issued under a charterparty.
 Therefore in hands of a consignee or indorsee of the bill of lading constitutes the contract of carriage, since they cannot be expected to have knowledge of the terms of the charterparty.
b. Negotiable or non-negotiable bills of lading
 The two types of bills of lading are differentiated on the basis of “transferability”.
 If the bill of lading is transferable then it is a negotiable bill of lading if cannot be transferable by endorsement it is a non-negotiable bill of lading.
i. Negotiable bill of lading
 Bills of lading may be made out to a “bearer” or to “a particular person” or “his order”.
 If made out to bearer it can be transferable without endorsement but bill of lading made out to “bearer” is rarely used.
 If made out to a “particular person” or “his order” they are transferred by endorsement.
 By mercantile usage, a bill of lading is normally regarded as negotiable if it states that delivery of the goods is to be made out “Order or Assigns”.
 If a shipper intends to obtain a negotiable bill he completes this box by inserting “order” and adding as “notifying party” the name of the consignee.
 Thus the name person or the consignee can transfer the bill of lading to another party by endorsement and delivery.
ii. Non-negotiable bill of lading
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Lecture Notes
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 Non-negotiable bills of lading cannot be transferred to a third party and any endorsement is thus ineffective.
 This it cannot be transferred by endorsement.
 The goods are delivered to the named consignee in the document who only has to prove his identity.
 A shipper who wishes to obtain a bill of lading which is not negotiable does not insert the word “order” in the appropriate box of the bill but inserts the name of the consignee in the following box.
 The effect of this procedure is that, although the shipper can transfer title in the goods to the consignee by delivering the bill of lading to him, the consignee cannot further pass on title in them to a third party by transfer of the bill of lading.
c. Clean and “Claused” Bill of lading
 Any qualifier added to the bill of lading as regard the “apparent order and condition” make a bill of lading a “claused” bill of lading.
d. Shipped and received for shipment bills of lading
i. Shipped bill of lading
 The bill must confirm that the goods have actually been shipped onboard and must state the date of loading.
 Where a ship-owner issues a “shipped” bill, he acknowledges that the goods are loaded on board the ship.
ii. Received for shipment bill of lading
 Where a “received for shipment bill of lading” is issued, the ship-owner confirms only that the goods are delivered into this custody; in this case the goods might be stored in a ship or warehouse under his control.
 It only means that the goods have been received into the custody of the carrier without yet being loaded.
 The “received” bill is thus less valuable than the “shipped” bill because it does not confirm that the shipment has already begun.
H. Sea Way Bill
 A sea way bill is a non-negotiable transport document. And unlike the bill of lading, the presentation of the sea way bill is not required in order for him to take the delivery of the goods.
 It is usually used when the carriage distance is short.
D. Rights and duties of the Sea Carrier and the Shipper
 The parties to the contract of carriage are shipper (the exporter or the importer as the case may be) and the ship owner (sea carrier).
 In this course we‟ll concentrate on the application of Hamburg Rules on Carriage of Goods by sea.
 No major sea faring nations are parties to the convention.
 It was drafted to serve the interests of cargo owners and shippers in developing countries that do not have large carrier fleets.
 It was concluded with the intention to replace the Hague-Visby Rules.
a. Definition of Contract of Carriage
 There is a definition of contract of carriage in the Hamburg Rules.
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Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 32
 Art. 1(6) reads thus: “Contract of carriage by sea” means any contract whereby the carrier undertakes against payment of freight to carry goods by sea from one port to another; however, a contract which involves carriage by sea and also carriage by some other means is deemed to be a contract of carriage by sea for the purposes of this Convention only in so far as it relates to the carriage by sea.
 The application of Hamburg Rules extends to any contract of carriage by sea between two different states whether covered and does not depend upon the issue of bill of lading. Thus it covers transport documents such as sea waybills but does not apply to charter party agreements (See Art. 2(3)).
b. Scope of application
 The Hague-Visby Rules do not apply to a contract from a port located in a non-contracting State to a port of discharge located in a contracting State.
 But Hamburg Rules is applicable where the port of discharge is in a contracting state (See Art. 2(1)).
 Thus Hamburg Rules applies to both imports and exports.
 Also the provisions of the Hamburg Rules are applicable without regard to the nationality of the ship, the carrier, the actual carrier, the shipper, the consignee or any other interested person (See. Art. 2(2)).
c. Duties and Liabilities of the carrier
 The carrier‟s duties and liabilities under the contract of carriage are governed primarily by the terms of the contract and the Hamburg Rules.
 Hamburg Rules creates a distinction between “carrier” and “actual carrier”. Carrier is the contractual carrier with whom the contract of carriage is concluded by the shipper. Actual carriers include any person entrusted by the contractual carrier to perform all or part of the carriage of the goods. (See Art. 1)
i. Period of coverage
 The period of application and responsibility of the carrier under the Hamburg Rules during which the carrier is in charge of the goods at the port of loading during the carriage, and at the port of discharge. Carrier is deemed to be in charge of the goods at the time of receipt of goods to the time of delivery.
ii. Basis of liability
 The liability regime in the Hamburg Rules is based on single concept, the fault of the carrier, which is presumed if the goods are lost or damaged whilst in his or her carriage.
 Thus under the Hamburg Rules the carrier is always liable for loss, damage or delay caused by fault of the carrier, his servants or agents.
 Thus the carrier must provide a seaworthy ship for the entire duration of the carriage.
 However, if the carrier proves that he or she took all necessary measures to prevent the damage or loss, he or she would not be liable anymore, even if the loss or damage were happened to his servants or agents fault. But the burden of proof is on the carrier. (Art. 5(2)).
iii. Types of cargo covered by the Hamburg Rules
 Goods as per the Hamburg Rules include live animals (Art. 1(5)).
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Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 33
 Article 5 (5) of the Hamburg Rules refers to the carriage of live animals subject to the general obligations of care outline in the said article and the carrier will not be liable for loss resulting from any special risk inherent in that kind of carriage.
 Art. 9 of the Hamburg also stipulate provisions for deck cargo.
 The Hamburg Rules mention three situations in which carriage of goods on deck is permitted: when it is in accordance with usage of the particular trade, when it is required by statutory rules or regulations and when it is in accordance with an agreement with the shipper.
 Such an agreement between the carrier and shipper must be included in the bill of lading.
 In case of unauthorized carriage of good on the deck there is loss or right to limit liability on part of the carrier.
iv. Limitation of liability
 For loss resulting from loss or damage to the goods: 835 per package or unit of 2.5 SDR per kilogram whichever is higher. (See Art. 6)
 For delay in delivery of the goods is 2.5 times freight payable for goods delayed.
v. Loss of limitation of liability
 The carrier loses his or her right to invoke the limitation provisions if it is proved that the loss, damage or delay in delivery resulted from an act or omission of the carrier done with the intent to cause such loss, damage or delay, or recklessly and with knowledge that such loss, damage or delay would probably result. (See Art. 8(1)).
vi. Liability of carrier and the actual carrier
 Under Art. 10(1) of the Hamburg Rules, liability is imposed upon the contractual carrier. Thus contractual carrier still remains responsible for the entire carrier.
 The carrier is responsible, in relation to the carriage performed by the actual carrier, for the acts and omissions of the actual carrier and of his servants and agents acting within the scope of their employment.
vii. Application to non-contractual terms
 The defenses and limits of liability provided for in this Convention apply in any action against the carrier in respect of loss or damage to the goods covered by the contract of carriage by sea, as well as of delay in delivery whether the action is founded in contract, in tort or otherwise. (See Art. 7(1)).
d. Obligations and liability of the shipper
 Until now we had discussed the liability of the carrier but the shipper also in conjunction with carrier has obligations under the carriage contract.
 Some general obligations of the shipper include:
 The obligation to pay the freight.
 It is also the duty of the shipper to tender goods to the carrier at the time and place, and of the number, weight and quantity as declared in the contract.
 The obligations and liability of the shipper in regulated in Part III of the Hamburg Rules, particularly under Articles 12 and 13.
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Lecture Notes
B.A, LL.B., Nepal Law Campus International Trade Law Semanta Dahal 34
i. General Rule
 The shipper, his agents or servants are not responsible under the Hamburg Rules for loss or damage sustained by the ship unless any fault or neglect on part of the shipper, his servants or agents. (Art. 12)
ii. Shipper’s liability for dangerous cargo
 What happens if shipper ships dangerous goods? And damage is caused to the ship and other cargo owners whose goods are damaged as a result of the shipment.
 There is an obligation imposed on the shipper to mark or label in a suitable manner dangerous goods as dangerous. (Art. 13(1)).
 Further, there is a duty to disclose to carrier or the actual carrier “the dangerous character of the goods, and, if necessary, of the precautions to be taken”. (Art. 13(2)).
 If the shipper fails to do so, he will be liable to the carrier for any resulting loss from the shipment of such goods. (Art. 13(2)(a)).
 Further, the goods may at any time be unloaded, destroyed or rendered innocuous as the circumstances may require. (Art. 13(2)(b)).
 But the shipper may not be liable if the carrier has knowledge of the dangerous character of the goods. (Art. 13(2)).
iii. Supply description of goods
 The shipper is deemed to have guaranteed to the carrier the accuracy at the time of shipment of the marks, number, quantity and weight as furnished by him, and the shipper must indemnify the carrier against all the loss, damages, and expenses arising or resulting from inaccuracies in such particulars. (Art. 17(1)).
 Failure to declare or incorrect description of goods can invite shipper‟s liability.