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  • Title to and endorsement of a bill of lading

     
     

    When bills of lading are made out, or endorsed, to a named consignee, then only that consignee can take delivery of the shipment. A B/L made out to a named consignee can be endorsed only by that consignee, not the shipper. Once a consignee has been named the original shipper no longer has any power to alter the B/L in connection with title to the shipment.

    If the consignee is not known at the time the shipper instructs shipment on a particular vessel then the bills of lading may also be made out to order. In this case, only the party to whom they are endorsed with the words 'deliver to …' or 'deliver to the order of …' can take delivery. This endorsement is made by the shipper who is named on the B/L. Occasionally buyers stipulate in their shipping instructions that the goods be consigned to order.

    A bill of lading is a negotiable instrument and can be passed from a shipper through any number of parties, each party endorsing it to assign title to the next party. The only condition is that title can be assigned only by the party shown on the bill as having title at the time. Any failure to respect this condition breaks what is known as the chain of title; all purported assignments of title after such a break are invalid. Before paying for documents a buyer will therefore carefully examine the bill of lading to see that they are named on it as consignee, either on the face or on the reverse in an endorsement. In the latter case, the buyer will also make sure that the endorsements show an unbroken chain of title through to them.

    There is one exception to the general rule that a consignee must be named on a bill of lading to take delivery of a shipment. This is when the bill is a bearer bill. In this case, anyone holding (or bearing) the bills (or one bill of the set) can take delivery. Bills are considered bearer bills when the word bearer is entered in the space marked consignee when the bills are first made out. Alternatively a title-holder endorses the bills with the words deliver to bearer, or a named title-holder endorses the bills in blank, i.e. by stamping and signing them without naming any other party in his endorsement. Although this may be simple and convenient, it means that anyone who obtains all or any of the originals (including a thief or a buyer who has not yet made payment) can take delivery of the shipment. Bills of lading are therefore usually made out to or endorsed to a named consignee.

    The greatest security of all is afforded by issuing or endorsing a bill to a buyer nominated bank with an instruction to the bank to endorse and hand the bill over to the buyer when, and only when, payment has been made.

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