1. Seminar 29.9.06 Bills of Lading and Charter-Parties Associate Professor Kristina Maria Siig

2. (c) Kristina Maria Siig 2006 2 Freedom of Contract NMC § 322, sec.1 NMC § 322, sec. 2 (Only voyage charters) NMC § 322, sec. 4: B/L when in the hand of a good faith holder prevails over freedom of contract NMC § 322, sec. 3: When NMC Chp. 13 could have been applied to a contract of carriage, it may not be agreed that no B/L should be issued for the goods. NMC §§ 325, 347 and 383

3. (c) Kristina Maria Siig 2006 3 Recourse etc. Avoid problem by using corresponding documents – but may not help due to mandatory application. In that case: Recourse. NMC §§ 338, sec. 3 and 382, sec. 1. Baltime cl. 9, Gencon cl. 10.

4. (c) Kristina Maria Siig 2006 4 Example: OwnerCharterer 1: Baltime, 10 yrs. Charterer 1Charterer 2: NYPE 93, 2 yrs. Charterer 3Charterer 3: Gencon, 1 voyage. Owners issue Bs/L for the cargo to Charterer 3. – Legal effect of Bs/L? – Assuming the goods are damaged, against whom may Charterer 3 claim? Under which rules? Charterer sells half the cargo to the Consignee. – Legal effect of Bs/L? – Assuming the goods are damaged, against whom may the Consignee claim? Under which rules?

5. (c) Kristina Maria Siig 2006 5 The contract of carriage and the sales contract - incoterms Incoterms (shortcuts for Seller and Buyer. Parts of the sales contract) E/F/C and D terms Ex Works FOB CIF DDU Thus: describes, what the buyer has paid for. Further implications, however: Who fixes the ship (who has the contract with the Carrier), when does the risk for the goods pass, who has the claim as against the carrier for cargo damage, etc.)

6. (c) Kristina Maria Siig 2006 6 The contract of carriage and the sales contract – Letters of Credit The international sale – buying goods you have not seen from a person, you don’t know / offering a credit to a debtor far away, the credentials of which are hard to check

7. (c) Kristina Maria Siig 2006 7 The contract of carriage and the sales contract – Letters of Credit Letter of Credit (L/C) The parties: – Buyer: Normally applies for the L/C – Issuing bank: Bank at buyer’s place – normally buyer’s bank. Opens the L/C – contacts a bank at the seller’s place, the – Advising bank: Checks the documents and pays out the monies under the L/C – Seller: Brings the correct documentation to the advising bank. Receives purchase price if documentation is correct.

8. (c) Kristina Maria Siig 2006 8 The contract of carriage and the sales contract – Letters of Credit Doctrine of strict compliance 1: Monies under a L/C should only – and can only – be paid out if the DOCUMENTS are strictly correct. Doctrine of strict compliance 2: If documents are correct, monies should be paid out no matter what the ”reality” is, reservation being made for fraud, however. May provide for strong pressure on the Carrier to issue CLEAN bills of lading (hence back letters)

9. (c) Kristina Maria Siig 2006 9 The contract of carriage and the sales contract – Stoppage in transitu Article 71 (1) A party may suspend the performance of his obligations if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations as a result of: (a) a serious deficiency in his ability to perform or in his creditworthiness; or (b) his conduct in preparing to perform or in performing the contract. (2) If the seller has already dispatched the goods before the grounds described in the preceding paragraph become evident, he may prevent the handing over of the goods to the buyer even though the buyer holds a document which entitles him to obtain them. The present paragraph relates only to the rights in the goods as between the buyer and the seller. (3) A party suspending performance, whether before or after dispatch of the goods, must immediately give notice of the suspension to the other party and must continue with performance if the other party provides adequate assurance of his performance.

10. (c) Kristina Maria Siig 2006 10 The contract of carriage and the sales contract – Stoppage in transitu § 307??