TT Talk - What is "apparent good order and condition"?
We have written before how disadvantageous it can be to carriers if the shipment details entered on a bill of lading do not correspond to the actual state of the goods received. Most bills of lading or transport documents for international sale and carriage are subject to the Hague or Hague-Visby Rules. Article III Rule 3 of the Hague-Visby Rules stipulates that carriers must at least state on the bill of lading the "apparent order and condition" of the goods shipped if the shippers so demand. In this article, we discuss how Members can balance their duty to customers and their right to protect themselves from cargo claims.
"Apparent order and condition" refers to the condition of the goods as would be apparent on reasonable examination, and not the internal condition of the goods on shipment or their quality. It was established in the 2021 English case “Tai Prize”, endorsing earlier decisions, that this means reasonable examination of the cargo by or on behalf of the master at the time of shipment. It is not relevant in this context that damage might have been apparent to the shipper or anyone else, who may have had other means of examining the cargo at an earlier time. And the master is not expected to interrupt normal loading procedures in order to undertake any scrutiny or tests. This may appear unjust in some circumstances, and the position where the shipper actually knew that a cargo was damaged, but the master could not see this, was left open in the 2021 case.
"The master is not expected to interrupt normal loading procedures in order to undertake any scrutiny or tests."
If you receive consignments in irregular or doubtful condition, the Club recommends the following guidelines:
Firstly you should note that when a shipment is stated to be in "apparent good order and condition", it is also taken to mean it is properly packed and in such condition as to withstand the ordinary incidents of the voyage. If you receive a consignment which is obviously insufficiently packed, you must not issue a bill of lading without reservation.
Secondly, the terms of reservation must be as clear as desirable. If they are too general or ambiguous, the courts may presume that the goods are represented to be in apparent good order and condition. For example, in the 1946 case of Potts (AE) v Union Steamship Company of New Zealand, the packages of a shipment were damaged and it was subject to pilferage. The carriers had only claused the bill of lading "packages insufficient" and this was held an ineffective qualification of apparent good order and condition. The Club recommends that clausing or reservation be as specific as possible (say "58 cartons crushed"), though sometimes it is necessary to give fair estimates (for example "about 20% torn").
"The Club recommends that clausing or reservation be as specific as possible."
Moreover, any reservations or clauses must be placed on the front of the bill of lading, and not elsewhere. In an old 1935 case, The Skarp, the carriers received a shipment of damaged timber and entered a correct qualification but only on the reverse of the bill of lading. This was held not enough to contradict the status of the document as a "clean" bill. A Member recently advised us that they recorded the damaged condition of the goods only on their warehouse receipts, believing that the documents could be used to defend any subsequent cargo claims. This approach clearly would not help! Neither should you follow the example of another Member who entered reservations about the state of the cargo on the bill, and then stamped it "CLEAN ON BOARD".
In a nutshell, the whole requirement is an "accurate statement of fact" by exercising judgement on the appearance of the cargo so as give the shipper, the consignee and anyone else who becomes a holder of the bill reasonable notice that there is some defect or shortage in the goods.
Finally, most bills of lading contain a printed clause such as "all particulars as furnished by the shippers but unknown to the carrier"; or "weight, measure, quality, quantity, condition, contents, and value unknown" (see the Club's 100 series model B/L, available on request). These statements are helpful to protect the carriers when the cargo details cannot be verified by reasonable shipping practices, as highlighted in the “Tai Prize” discussed above, and Members should make sure that their standard transport documents do contain such clauses.
Of course, if you are unhappy about the state of cargo received in your warehouse for shipment, it is probably better to discuss your concerns with the shipper at that stage, rather than stuff the items into a container and give the shipper a claused bill.
We hope that you have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.
We look forward to hearing from you.
Risk Management Director, TT Club