Which charterparty is being incorporated into a bill of lading

• It is important to identify exactly which charterparty the bill of lading has incorporated, as some of the terms of the charterparty will apply to the bill of lading.
• A charterparty is incorporated into a bill of lading by way of reference in the bill of lading to the charterparty.
• There are rules for identifying which charterparty has been incorporated where a charterparty has been described in the bill of lading but more than one charterparty fits that description.
• There are rules for determining which charterparty has been incorporated where no charterparty has been described in the bill of lading.
• Not all the terms of the incorporated charterparty will apply to the bill of lading.
• To incorporate law and jurisdiction and/or dispute resolution clauses, the bill of lading must contain wording which specifically refers to those clauses.

Why is it important to identify which charterparty has been incorporated into the bill of lading?

Where a bill of lading provides for the incorporation of a charterparty, such a provision can have the effect of making the charterparty terms part of the bill of lading so that they govern the legal relationship of the parties to the bill of lading.

The terms of the charterparty that the bill of lading seeks to incorporate may stipulate, for example, the freight payable, the payment terms, as well as which law governs the bill, and which jurisdiction and modes of dispute resolution disputes are to be referred to. The wording the bill of lading uses to incorporate the charterparty will determine which of the charterparty terms are incorporated -explained in more detail below.

Accordingly, in order for the parties to a bill of lading to understand what terms govern it, it is important to be able to identify exactly which charterparty the bill of lading has incorporated.

How is a charterparty incorporated into a bill of lading?

Not all bills of lading seek to incorporate a charterparty.

Where a bill of lading seeks to incorporate a charterparty, it will usually contain a section on the front page where details of the charterparty, normally the date of the charterparty, should be set out. A clause on the reverse or face of the bill of lading may also operate to incorporate a charterparty.
A charterparty is incorporated into a bill of lading by way of reference in the bill of lading to the charterparty.

Which charterparty has been incorporated into the bill of lading?

As set out above, it is important to be able to identify exactly which charterparty a bill of lading seeks to incorporate. This will not always be straightforward and various sets of circumstances may arise:

The parties have inserted charterparty details in the bill of lading

Where there is reference in a bill of lading to a particular charterparty, the bill of lading will incorporate that charterparty.

If the charterparty is specified by date only -and there is more than one charterparty with the same date – the general rule under English law is that the bill of lading incorporates the head charterparty in the chain, to which the ship-owner is a party. This is on the basis that the law presumes the party issuing the bill of lading (the ship owner), must contemplate incorporating a charterparty to which it is party, rather than any other.

However, the general rule in favour of incorporation of the head charterparty does not apply if there is both a time charterparty and a voyage charterparty in the chain and both charterparties fit the description in the bill of lading. In these circumstances, under English law, the bill of lading will usually be deemed to have incorporated the voyage charterparty.

The parties have not set out charterparty details in the bill of lading
Where the parties have omitted the charterparty details, this will not necessarily prevent the relevant charterparty from being incorporated. Where this is the case, English law seeks to determine which charterparty the parties intended to incorporate.

Where there is only one charterparty governing the voyage, the position is simple: that charterparty is treated as having been incorporated. Where there is more than one potentially relevant charterparty, the position is as set out above: the head charterparty will take precedence unless there is a voyage charterparty in the chain, in which case the voyage charterparty will be deemed to be incorporated.

Identifying what terms of the charterparty have been incorporated into the bill of lading

The fact that a bill of lading seeks to incorporate a charterparty does not automatically mean that all of the terms of that charterparty will be incorporated into the bill of lading.

Precisely which terms of the charterparty the bill of lading incorporates, will depend upon the following factors:

Whether the bill of lading uses specific or general words of incorporation
If the bill of lading uses general words of incorporation, such as ‘all terms as per cp dated….’, or ‘other conditions as per charterparty dated…’ then the bill of lading will only incorporate the charterparty terms that relate directly to shipment, carriage and delivery. In order for the bill of lading to incorporate any of the charterparty terms that are not applicable to carriage or delivery of the cargo, the bill of lading must contain specific words of incorporation.

General words of incorporation, such as above, will not be sufficient for the bill of lading to incorporate, for example, the charterparty law and jurisdiction clause or dispute resolution clause. In order for the bill to incorporate terms such as these, the bill must contain wording which specifically refers to these terms.

For example, the CONGENBILL 2016 contains the following, specific, wording:
‘All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration clause/Dispute resolution clause, are herewith incorporated.’

This type of wording is sufficient to incorporate into the bill of lading the law and arbitration/dispute resolution clauses.
(ii) Whether the charterparty that the bill of lading seeks to incorporate (a) has been concluded, (b) is in writing and (c) has been amended

Where the bill of lading seeks to incorporate a charterparty that has not been concluded/finalised by the parties, the position under English law is that the incorporation will not be effective.

However, the parties can circumvent this by inserting wording into the bill of lading that shows it is their intention to incorporate a charterparty that the parties have not yet concluded.

English law provides that a bill of lading can only incorporate the terms of a written charterparty. In this respect, a recap telex will suffice as long as the terms of the charterparty can be readily ascertained.

A bill of lading cannot incorporate an oral charterparty.

Where the terms of the charterparty that the bill of lading seeks to incorporate have been amended, the charterparty terms as they were at the date the bill of lading was issued will be incorporated, and not any later amended version(s).

Whether the terms of the charterparty are consistent with the terms of the bill of lading

If any terms of the charterparty are inconsistent with the express terms of the bill of lading, the bill of lading will generally not incorporate those terms.

However, if specific words of incorporation have been used, such as ‘including the arbitration clause’ the incorporation will, in the first instance, be effective despite the inconsistency.

However, a Court determining the overall effect of the two inconsistent provisions may well conclude that the clause was not, in fact, incorporated.

Whether a term would make sense if incorporated into the bill of lading
It has been held by the English Court that a charterparty clause that requires only slight manipulation of its wording in order to make sense in the context of the bill of lading, may be incorporated. However, a clause which would not make sense within the bill of lading without extensive re-drafting, will not be deemed to be incorporated.

Furthermore, a clause which would be contrary to commercial sense, such as one with the effect of transferring to a consignee of part of the cargo liability for all demurrage incurred by the vessel, is unlikely to be deemed incorporated.