By Section 19. s.s. 3, Sale of Goods Act, :—" Where the seller of goods draws on the buyer for the price, and transmits the bill of exchange and the bill of lading to the buyer together to secure acceptance or payment of the bill of exchange, the buyer is hound to return the bill of lading if lie does not honour the bill of exchange, and if he wrongfully retains the bill of lading, the property in the goods does not pass to him." Instead of sending bills of lading direct to the consignee, the consignor may draw a bill of exchange upon the consignee for the value of the goods despatched and ,attach the bills of to the bill. Those docu ments may then be sent by the consignor's bankers to their correspondents in the town where the consignee lives. with a request to present the bill to the consignee for accept ance ; and instructions are often given that the bills of lading may be handed to the consignee upon his accepting the bill. The consignee can then obtain the goods, sell them and be in a position to meet his acceptance at maturity.
Frequently the consignor draws a bill upon the consignee and discounts it at his bankers, pledging the indorsed bills of lading as security, and the banker has to send forward the bill to his correspondents to obtain the drawee's acceptance (see D ocumENrA RY BILL) ; or the consignor may under in structions, draw upon the consignee's banker, the bills of lading being attached to the bill of exchange.
When bills of lading are given as security, a memorandum of deposit, or note of hypo thecation, is taken, which provides that, in default of payment, the banker may sell the goods represented by the bills. The docu ment is usually stamped with a fixed duty of sixpence. In some cases, where an advance has been made upon bills of lading, the bills are handed to the borrower upon his signing a trust receipt. (See TRUST RECEIPT.) Where a bill of lading is taken as security containing such a clause as " all conditions of every character as per Charter Party " (see below), the lender should ascertain what are the conditions in the Charter Party, as that document may reserve to the owners of the vessel the right of lien upon the cargo for payment of freight, demurrage and other charges.
A bill of lading pledged as security should be indorsed either in blank or to the banker. It has been held by the House of Lords that where a bill of lading is indorsed and pledged by way of security, that a banker indorsee is not subject to the same liabilities in respect of the goods as a person to whom a bill of lading is indorsed upon a sale of the goods (Burdick v. Sewell, 1884, 10 A.C. 74). But if the banker claims the goods in order to realise his security, he is then liable for the freight, warehouse charges, and all charges payable in accordance with the terms of the bill of lading.
Where a transfer of a bill of lading takes place, upon a sale of the goods, Section 1 of the Bills of Lading Act, 1855, enacts : "Every consignee of goods named in a bill of lading, and every indorsee of a bill of lading to whom the property in the goods therein mentioned shall pass, upon or by reason of such consignment or indorsement, shall have transferred to and vested in him all rights of suit, and be subject to the same liabilities in respect of such goods as if the contract contained in the bill of lading had been made with himself," Where a banker, by instructions of a customer, accepts a bill drawn by a client of that customer against bills of lading, the banker will not be liable if the bills of lading should afterwards prove to be forgeries.
Bills of vary somewhat in form, but the general effect is the same. The following is a specimen of a simple form, though some bills of lading are much more elaborate :