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Does your bill of lading fall short?

Posted: December 5, 2018 by Alan S. Cofman

A “lading” is nothing more than an archaic word for cargo, but continues to be used when it comes to the all-important bill of lading – a carrier’s contract to carry cargo.

This is the document that includes the obligations and terms for delivering goods to a named consignee. In practice, it also limits the liability for cargo damage.

Provinces regulate the required content, such as the names of the shipper and consignee, description of the cargo and its weight, conspicuous language about the carrier’s limitations of liability, and space to note any “declared value”. With the exception of Manitoba, which mandates a specific form, there is rarely a template to follow. Any form will suffice as long as the documents meet all legislative requirements.

But many bills of lading fall short of these regulated demands.

For example, we often see bills that refer to U.S. tariffs or legislation; or forms that refer to decades-old Canadian legislation that no longer exists. We also regularly see bills of lading that have not been fully completed or signed. Perhaps carriers have relied on shippers or others to prepare the documents, drivers haven’t completed the form, or someone has been careless with software.

Whatever the reason, these are all inappropriate practices.

We also regularly see bills of lading with Incoterms – the International Chamber of Commerce rules that define the responsibilities of sellers and buyers when it comes to delivering goods under sales contracts. They tend to be an awkward fit when it comes to trucking and we caution against using them.

Limitations of Liability

Generally, those who issue a bill of lading are subject to “strict liability” for any damage to cargo. In other words, the carrier is presumed to be liable for any damage to cargo that was received in good order and condition. In court, that places the onus on a carrier to prove their innocence.

In exchange for their exposure to this strict liability, carriers are generally entitled to rely on limitations of liability, typically $2 per pound ($4.44 per kg) unless the goods have a “declared value”.

In some provinces, failing to comply with the local legislation doesn’t necessary affect a carrier’s right to limit liability. In Ontario, for example, any missing information that ought to have been in a contract of carriage is deemed to have been included; the $2 per pound liability limit applies if the document is silent on the point or no document is issued at all.

That said, it’s still dangerous not to issue a document.

For example, the Ontario legislation does not apply to goods carried solely within a single municipality. Nor does it apply to certain types of diverse cargo including everything from skim milk to ready-mix concrete. And someone could argue that a different document like a commercial invoice, load confirmation sheet, or even an email exchange was actually a contract of carriage.

Non-compliance with local legislation is much more problematic in other provinces. In British Columbia, for example, carriers are required to issue bills of lading with a $2/lb. limitation unless there’s an agreement for a higher amount or a declared value. But the province’s courts have ruled that failing to issue a proper bill of lading – or failing to do it properly – will prevent the carrier from relying on any limitation.

In other words, a carrier on the west coast could be liable for the full value of the goods if no bill is issued.

Interprovincial Carriage

For interprovincial moves, the law of the originating jurisdiction will apply.

A truck starting in Ottawa and its counterpart in Kelowna, B.C., could each be loaded with $1 million in widgets weighing 10,000 lb., without any bills of lading. If those two trucks crashed in Saskatchewan and both loads were total losses, the carrier that began its trip in Ottawa would be on the hook for $20,000 for its customer. The carrier that began its trip in Kelowna would be liable for the full $1 million.

As common as bills of lading have become, shippers, carriers and consignees often pay little attention to them. The inattention to detail can be costly, particularly for the carrier. A little prudence can go a long way.

— Alan S. Cofman is an associate with Fernandes Hearn LLP in Toronto, and can be reached at 416-203-9500. This article is intended for information purposes only and does not constitute legal advice.

 

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