Legal Implications of a Bill of Lading

by G. Spencer Mynko, Esq.

The bill of lading is a document used by carriers and shippers regarding the transportation of freight. It is a contract determining the rights, duties and liabilities of the parties. It is a receipt for the goods containing the description, quantity and condition of the property to be transported. A Bill of Lading is an important document with significant legal consequences

 
The Interstate Commerce Act (ICA) requires motor carriers to “issue a receipt or bill of lading” for property received for transportation, 49 USC § 14706. (In practice, the shipper usually prepares a bill of lading on its own form and presents it to the driver for signature.)
 
Theoretically, this requirement can be waived, if the parties expressly agree in writing, 49 USC § 14101, but it is always a good practice to have a written receipt for shipments. While various forms of Bills of Lading exist, the function served by a bill of lading is even more significant when attempting to resolve a dispute. Bills of lading can serve as contracts of carriage, receipts for goods, documents of title, or any combination of the foregoing. Thus, the significance of any particular bill of lading is context-dependent, and not every bill of lading serves all of the aforementioned functions.
 

The Law

The ICA does not specify any particular form of the receipt or bill of lading, but the Federal Motor Carrier Safety Administration regulations prescribe the minimum requirements, 49 CFR Part 373.
373.101 Motor Carrier bills of lading:
Every motor common carrier shall issue a receipt or bill of lading for property tendered for transportation in interstate or foreign commerce containing the following information:
* Names of consignor and consignee.
* Origin and destination points.
* Number of packages.
* Description of freight.
* Weight, volume, or measurement of freight (if applicable to the rating of the freight).
In the U.S., the multi-part, non-negotiable UNIFORM DOMESTIC STRAIGHT BILL OF LADING is the most commonly used form. Shippers often use preprinted forms which often contain not only a description of their commodities and applicable class(es) but, in addition, make a reference to the carrier’s filed tariff.  Since the filing of tariffs is no longer mandated by law, Shippers and carriers have since had the opportunity to negotiate the terms and conditions of the bill of lading contracts since this deregulation took place. Individual shippers and carriers as well as shipper and carrier trade organizations hire lawyers to draft Bills of Lading that protect their interests first. While the “filed rate doctrine” has been abolished with deregulation, compliance with the carrier’s tariff and the terms and conditions of the bill of lading can still be required under ordinary principles of contract law. This is why it is so important for shippers and carriers to understand the terms of the their agreement regarding hauling freight.

Carmack Amendment and Other Laws Affecting BOLs

The governing statutes are the Carmack Amendment of 1906 (“Carmack Amendment”), the Motor Carrier Act of 1980, the Trucking Industry Regulatory Reform Act of 1994, and the Interstate Commerce Commission Termination Act of 1995 (“ICCTA”).  Carriers can provide either Section 14706 (common carrier) carriage or Section 14101(b) (contract) carriage within the United States.
a. Section 14706 (Common Carrier) Carriage
A carrier in today’s period of deregulation need not file tariffs with DOT’s Surface Transportation Board.  Under Section 14706, carriers are liable to the person entitled to recover under a motor carrier bill of lading or a receipt for the goods. The liability regime is a Carmack Amendment liability regime. Under this liability regime, a carrier is liable for the actual loss or damage to the cargo caused by the receiving carrier, the delivering carrier, or an intermediate carrier over whose route the cargo is transported either (1) in interstate transportation within the United States or (2) from a place in the United States to a place in Canada or Mexico, provided the transportation takes place under a through bill of lading.
The Carmack Amendment prohibits a carrier from limiting or exempting itself from liability, except under certain specified circumstances prescribed by the Motor Carrier Act of 1980. A carrier may limit its liability if that limit would be reasonable under the circumstances surrounding the transportation. The ICCTA is not specific as to who determines reasonableness. Consequently, this issue has been left to the courts to determine.
A civil action can be brought either in a federal or a state court against the delivering carrier or the carrier that caused the loss, damage or delay. Claims must be filed within 9 months, and the law suit must be brought within 2 years.

The General Rule of Bills of Lading

Regarding bills of lading, 49 U.S. Code § 80107 applies a general rule. Under the general rule of bills of lading the person who negotiates or transfers a bill warrants that the bill is genuine; that the holder has the right to transfer the bill and title to the goods described in the bill; the holder doesn’t know of anything that would adversely affect the value of the goods; that the goods are fit for their purpose when merchantability and fitness would have been implied in an agreement for transfer of the goods without a bill of lading.
“The mere delivery of the goods to a carrier for transportation does not necessarily import an absolute promise by the shipper to pay the freight charges. To ascertain the contract, the bill of lading must be looked to primarily, as this serves both as a receipt and a contract. Ordinarily the person from whom the goods are received for shipment assumes the obligation to pay the charges, and this obligation is ordinarily a primary one. The shipper is presumably the consignor, and the transportation ordered by him is presumably on his own behalf, and a promise to pay may be inferred therefrom. This inference may, however, be rebutted, and it may be shown by the bill of lading or otherwise that the shipper was not acting in his own behalf, that this fact was known to the carrier, and that the parties intended not only that the consignee should assume an obligation to pay but that the shipper should not assume any liability whatsoever, or that he should assume only a secondary liability.” New York C. R. Co. v. Frank H. Buck Co., 2 Cal. 2d 384.

Why every Motor Carrier, Broker, and anyone else involved in transportation needs to understand BOLs

A major concern these days is that there is no uniform or standard form of bill of lading used throughout the industry. Every carrier, shipper, broker, freight forwarder and other party involved in transportation often will use their own form of bill of lading. Many of these bills of lading are deficient because they do not contain a nonrecourse provision (or any terms and conditions for that matter), a Section 7 box, or places to mark if the shipment is “prepaid” or “collect.” Transportation contracts generally avoid these problems by demoting bills of lading to receipts. Parties also must take care in preparing their own form of bill of lading and using it whenever there is no contract. Finally, parties must know how to protect themselves if a different, deficient bill of lading is used. If a nonnegotiable bill of lading is not conspicuously marked “nonnegotiable,” a holder who purchased the bill of lading for value supposing it to be negotiable may treat the bill of lading as imposing upon the bailee the same liabilities it would have incurred had the document been negotiable. As you can see, this simple and commonly used document can be a source of traps for the unwary.
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