Section 2 of The Bills of Lading Act 2025 Rights under bills of lading to vest in consignee or endorsee
Original Section Text
Visual Summary
Rights Transfer
The right to sue over the goods moves to the new owner.
Liability Transfer
The new owner also inherits the responsibilities for the goods.
New Contract Party
It’s as if the new owner signed the original shipping contract themselves.
Executive Summary
This is the most important section of the Act. It establishes a simple, powerful rule: whoever legally owns the goods also owns the shipping contract. When a bill of lading is transferred to a new person (a consignee or endorsee) and they become the owner of the goods, they automatically get all the legal rights (like the ability to sue the carrier) and all the legal responsibilities (like paying fees) that were part of the original contract.
In-Depth Analysis of the Section
Introduction
Section 2 modernizes commercial law by connecting the rights and duties of a shipping contract directly to the ownership of the goods. Before this, the contract often remained with the original shipper, creating complicated legal situations for the actual owner of the goods. This section solves that problem.
Breakdown of the Section
Let’s break down the key terms:
- Consignee: The person or company named in the bill of lading to receive the goods.
- Endorsee: A person or company to whom the bill of lading has been transferred (like endorsing a cheque). This happens when the goods are sold while they are still in transit.
- Rights of suit: This is the legal power to take someone to court. For example, if the goods are damaged, the new owner has the ‘right of suit’ to sue the shipping company.
- Liabilities: These are the legal responsibilities or debts. For instance, if there are unpaid port charges, the new owner becomes responsible for them.
The core principle is that the contract ‘travels’ with the goods. The moment ownership of the goods passes to the consignee or endorsee, the entire contract—both its benefits and its burdens—is transferred to them.
Practical Example
A company in Mumbai buys a shipment of electronics from a supplier in Japan. The Japanese supplier ships the goods and endorses the bill of lading to the Mumbai company. During the sea journey, the container is handled negligently, and the electronics are damaged. Because of Section 2, the Mumbai company, as the endorsee and new owner, can directly sue the shipping line for the damages. They don’t need to involve the original Japanese supplier. At the same time, if the Japanese supplier had not paid certain shipping fees, the Mumbai company would now be liable to pay them.
Conclusion
Section 2 is the engine of the Act. It simplifies international trade by ensuring that the person who has the most at stake—the current owner of the goods—has the legal power to protect their investment and is also accountable for the associated obligations.
Related Provisions
This section establishes the main rule, but other sections clarify its limits and effects:
- Section 3: Right of stoppage in transit or claims for freight not to be affected – This section outlines specific rights that are *not* affected by the transfer of the contract under Section 2.
- Section 4: Bill of lading in hands of consignee, etc., conclusive evidence of shipment as against master, etc. – This strengthens the position of the new owner (who gained rights under Section 2) by making the bill of lading powerful evidence.
Learning Aids
Mnemonics
- Remember ‘R&L follow the B/L’: The Rights and Liabilities of the contract follow the Bill of Lading to the new owner.
Frequently Asked Questions
If I buy goods that are already on a ship, can I sue the shipping company if they get damaged?
Yes. Section 2 transfers the ‘right of suit’ to you as the new owner of the goods, allowing you to take legal action directly against the carrier.
Does this mean I also have to pay any fees the original seller didn’t pay?
Yes, along with the rights, you also inherit the liabilities. If freight or other charges related to the contract are unpaid, you could become responsible for them.
Test Your Knowledge
Quiz: According to Section 2, what is transferred to a consignee or endorsee when they become the owner of the goods?
A) Only the goods themselves.
B) Only the right to sue.
C) All rights of suit and all liabilities under the shipping contract.
Show Answer
Correct Answer: C) The section explicitly states that both rights and liabilities are transferred as if the contract was made with the new owner.
More Quiz
Quiz: The transfer of rights and liabilities under Section 2 is conditional on what?
A) The goods arriving safely.
B) The property (ownership) in the goods passing to the consignee/endorsee.
C) The original shipper giving written permission.
Show Answer
Correct Answer: B) The text says ‘to whom the property in the goods therein mentioned shall pass’. The transfer of the contract is linked to the transfer of ownership.