Incorporating charterparty terms into bills of lading: don’t get caught out!

The issue of incorporation of charterparties into bills of lading is debated by the English courts on a fairly frequent basis; most recently in the Anna Bo (2015) and the Magellan Spirit (2016). So what’s all the fuss about really and how do you avoid getting caught out? As with many contracts, an omission of a term will not become apparent (or cause a problem) until something goes wrong – but when it does, it can be very difficult (and expensive) to rectify.

This can be seen in the Magellan Spirit where owners sought to rely on exclusive jurisdiction clause in the charterparty (and amend the bill of lading), allowing them an antisuit injunction against cargo interests in Nigeria. The court held that bill should not be rectified to incorporate the charterparty jurisdiction clause as there was no relevant continuing common intention capable of supporting a claim for rectification, and Owners were left fighting a US$15.4million claim in an unfriendly jurisdiction.

Conversely in the Anna Bo, it was cargo interests arguing against the incorporation of the charterparty. Also on a jurisdiction point, cargo interests tried to argue that the incorporation of the charterparty into the bill of lading was limited to freight. The court rejected this argument, holding that the charterparty was clearly incorporated.

So how do you avoid being caught out?

Clearly identify the charterparty on the bill of lading. Rocket science this is not! Most standard short form bills provide a box where you can identify the charterparty by date – fill it out!

Choose your incorporation wording wisely. English law has a number of tests in place to protect the receiver from onerous and/or irrelevant charterparty clauses, so be aware that generally only the terms directly relevant to contract of carriage will be incorporated. Conflicts beware. If there is a discrepancy between your charterparty terms and the bill of lading, then be aware that the clause paramount in the bill will likely override a similar clause in an associated charterparty.

Source: UK P&I Club through the Daily Collection of Maritime Press Clippings