Section 3 of The Bills of Lading Act 2025 Right of stoppage in transit or claims for freight not to be affected

Section 3 of The Bills of Lading Act 2025 Right of stoppage in transit or claims for freight not to be affected

Visual Summary

Executive Summary

This section acts as a safety net, clarifying that the main rule in Section 2 doesn’t cancel out certain fundamental rights. It specifies three key things that remain unchanged by this Act: (1) An unpaid seller’s right to stop the goods from being delivered, (2) the shipping company’s right to demand freight charges from the original shipper, and (3) the new owner’s own liabilities that arise from receiving the goods.

In-Depth Analysis of the Section

Introduction
While Section 2 creates a major shift by transferring the contract to the new owner, Section 3 ensures this shift doesn’t create unfair situations. It preserves pre-existing rights and liabilities that are crucial for the original parties to the contract, acting as a set of important exceptions.

Breakdown of the Section
The section lists three specific areas that are ‘not prejudiced or affected’:

• (a) Right of stoppage in transit: This is a traditional right of a seller. If a seller ships goods on credit and then discovers the buyer is bankrupt, the seller can order the carrier to stop the delivery. This section confirms that the Bills of Lading Act does not take away this vital protection for sellers.
• (b) Right to claim freight against the original shipper: The shipping company’s contract was originally with the shipper. This clause allows the carrier to still go after the original shipper for payment of the freight, even though the new owner is also liable. It gives the carrier two potential parties to claim from, increasing their security.
• (c) Liability of the consignee or endorsee: This clarifies that the new owner is not just inheriting liabilities from the contract, but is also responsible for any liabilities that arise simply because they are the new owner or because they took delivery of the goods (e.g., paying customs duties or port fees upon arrival).

Practical Example
A merchant in India sells spices to a buyer in Germany. The spices are shipped, and the bill of lading is sent to the German buyer. Before the ship arrives, the Indian merchant learns the German buyer has gone out of business and cannot pay. Thanks to Section 3(a), the Indian merchant can exercise their ‘right of stoppage in transit’ and instruct the shipping line to return the goods, even though the bill of lading is with the German company. This right is not affected by the Act.

Conclusion
Section 3 provides balance and fairness. It ensures that while the new owner gains significant power under Section 2, the legitimate interests and protections of the original seller and the shipping carrier are not unfairly dismissed. It maintains a stable and predictable legal environment for all parties involved in the shipping transaction.

Related Provisions

This section directly qualifies the main rule of the Act:

• Section 2: Rights under bills of lading to vest in consignee or endorsee – Section 3 lists the key exceptions to the transfer of rights and liabilities that occurs under Section 2.

Learning Aids

Mnemonics

• Remember ‘S.O.S.’ for the original parties: The Act doesn’t affect the right to Stop the shipment, the right to claim from the Original Shipper, or the new owner’s separate liabilities.

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