Bank's Correct Decision: Rejection of Payment for Inaccurate Bill

A ship owner wishes to transport 7000 coils but the shipper has overstamped the bill and made it out for 8000, which is not acceptable by the bank due to incorrect legal documents. The bank's decision to reject the payment is deemed correct as the documentation does not meet the required standards.

MARITIME LAW

Table of Contents
Introduction.....................................................................................................................................3
Main Body.......................................................................................................................................3
Conclusion.......................................................................................................................................6
References........................................................................................................................................7
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INTRODUCTION
Maritime law is the body that regulates the maritime activities. It looks upon the
operations related to vessels on the oceans. It is the field that deals with marine commerce,
marine salvaging, transportation of passengers and goods by sea. Present report is based on the
Bart Shipping Pty Ltd which is engaged in the marine shipment business that transfer the goods
from one place to another (Mandaraka-Sheppard, 2014). Current assignment will discuss the
rights and liabilities of Bart Shapping Pty Ltd and Yeung. Individual issues of both parties will
be illustrated in this study and law related to this case will be presented in this report. In addition,
it will describe why the claim is not justified and legal principals will be described in this report.
MAIN BODY
A contract is made between Bart Shipping Pty ltd and Mr. Yeung is made in Adelaide on
voyage terms for carrying the 7000 steel coils from Adelaide to Hong Kong (Maraist and et.al.,
2016). It was decided in the terms that 75% payment will be made on shipment and remaining
25% on the true delivery of cargo. It was decided that cargo on board and discharge the cargo
will be free of expense to the vessel.
Arbitration clause is also here which explains that in case of any dispute arbitration
process will be followed and issue will be resolved by the arbitrator (Robertson and Sturley,
2013). The contract has been made between both parties which explains that condition,
exceptions and terms of the written contract between both parties. In the bill of lading over-
stamped was done by shipper. Himalaya clause is also here which is for the benefit of third party
who is not involved in the contract. It is for the benefits of crew, employees, agents related to the
maritime matters (Hong, 2015). Master of the ship was unfamiliar with the carriage of steel that
is why this clause is applicable.
Banks always accept the clean bills and if there is any mistake in the bills then financial
institutes do not pass the bill. Here in the case there is problem in the bill of lading and that is
why bank has rejected the bill. As it was the agreement of 7000 steel coil shipment built it was
over stamped by the shipper at 8000 steel coils (Sohn and et.al., 2014). After negation Yeung has
accepted the goods at reduced price from the Bart Shipping Pty. After Ernest arrived in the Hong
Kong then it was noticed that there were only 6000 coils and rest were damaged.
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Issues, Rule and regulations
From the point of view of Bart Shipping Pty ltd the main issue that can be taken place is
related to bills of lading (De Santo, 2015). Liability of carriers varies between port to port.
There was situation in which bill was over stamped without giving notification to the buyer. At
the end it was the condition in front of Yeung and individual had to accept the goods at reduced
price. Apart from this there was Himalaya clause that shows that servants are protected and if
any loss occur due to dangerous good transportation then company will be liable for that. Master
was unfamiliar with the carriage so it can create the trouble situation for the party and individual
will have to pay compensation if any big accident occurred (Mason and Stephenson, 2015).
It was found by the Yeung that there is only 6000 coils in the board that is the issue for
the Bart Shipping Pty ltd because it was the responsibility of the entity to safely deliver the
goods to the buyer and if any damage take place then individual will be liable to pay the
compensation (Kałduński and Wasilewski, 2014).
It is the right of Bart Shipping Pty ltd that it can demand for the compensation from the
Yeung if any loss occur to the master of the ship because individual was unfamiliar with the
goods. Coil transportation is the risky because it can harm the individual. Personal injury cases
are overned by the law of Maritime that raise issue (Coles and Watt, 2013). This law defines the
legal rights of the passengers that if they get hurt by the negligence of cruise line then it may
create problem for the Bart Shipping Pty Ltd. The Doctrine of Unseaworthiness impose the duty
on the ship owner to maintain their vessels properly. Jones act applies here if crew member get
hurt then individual will have rights to get compensation for the loss. Vaughan V. Atkinson, 369
U.S 527 (1662) is the great example in which seaman has claimed against the shipowner. It is the
duty of owner to recover the maintenance (Takei, 2013).
Carriage of Goods by Sea Act (COGSA) is applicable here, it is related with the bill of
lading and it limits the liability of the ship owner to $500 per container, as long as ship do not
reach in the proper condition as it was prior to departure. So it because the liability of the Bart
Shippment Pty Ltd and individual is liable to pay the compensation to the Yeung because of the
damaged goods (Amirell, 2016).
Another issue that can be arise here is concerned with the salvage award. That involves
vessels that have been recovered from the bottom of the ocean. This law defines that rescuer has
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right to get award because of taking the risk which was necessary to conduct the salvage. Court
may decide the award amount as per the risk involved in the activity (Curtis, 2014).
FIOS or liner terms explains that it is the responsibility of ship owner to undertakes
arrange and bear the cost of loading. The issue may get arisen if any risk arise to the goods at the
time of loading, discharge. That would be liability of the Bart Shipment Pty Ltd and in this case
Yeung will have right to sue the case against the shipment company (Lorca, 2016).
Carriage of Goods by Sea Act 1992 is the legal principle related with the case scenario.
The famous case Love and Stewart Ltd. v Rowtor Steamship Co. Ltd explain this point deeply.
That reflects that issue may be taken place between charterer and shipowner. It is the contract
between ship owner and buyer that owner will deliver the coils to the Yeung at particular time
duration. In case if ship owner fails to carry the goods safely then it will be liability of the ship
owner and it will be breach of contract (Gutteridge, 2015). Apart from this, it is legal principle
that master is not liable to modify the bill of lading, as in the case bill was modified from 70000
to it was over stamped 8000 coil which was completely wrong and unethical.
Art III Rule 3 of the Hague Rules is another legal principals that is related with the
Maritime law. That shows the obligation to issue a bill of lading, it arises the issue “ On demand
of Shipper” that explains that bill will contain information related to the bills. That shows that it
is the duty of carrier to make a correct statement that is in the apparent order and condition of
goods. Then shipper cannot make changes in the bill without informing the buyer (Bill of Lading,
2017).
Explanation and justification for rejecting the claim
It is legal principals that bill of lading must be clear and there should not be any issues in
the bill. It is called as Hague rule and Hague Visby rule. It clarifies that bill must be clear
otherwise it will not get cleared or passed by the banks. III Rule 3 which oblige the carrier "on
demand of the shipper" to issue a bill of lading containing certain particulars of the goods, as
furnished in writing by the shipper, unless the proviso applies (UCP 600 - How the new rules on
documentary credits may affect contracts of carriage, 2007). As it was found that bill of lading
was refereed to the 8000 steel coils. Because it was over stamped by the shipper. The bank of
Yeung who has financed the entire selling contract under the letter of credit has refused to accept
the bills. The legal principal of documentary credit is the independent contract of sale
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(Gutteridge, 2015). The bank obligation can be defined by the terms LC alone and in this section
contract of sell in not considered. The fundamental principals said that it deals with the credit sell
not with the goods as per the Article 5 of UCP600. If goods are not as accordance to the contract
then bank can say no to pass the bill. In such condition it may create huge economic problem for
the buyer because due to this individual will have to bear loss. Under the previous rules for
Letters of Credit (up to UCP 500) the documents tendered under the credit must not deviate from
the language of the credit otherwise the bank is entitled to withhold payment, even if the
deviation is purely terminological or even typographical (Amirell, 2016).
ICC's UCP 600 defines that bank will pass the bill only in such condition when all
documents are clear and having no fraud. In case if any complication and mistake found in the
documentation then bank can refuge to made the payment. In this case initial the contract was
made on the term of 7000 coils but when it was reached to Hong Kong to the buyer then it was
found that shipper has over stamped the bill and made it of 8000 coils and in this section buyer
expect that he will receive the same goods as it was maintained in the contract at starting time
and bank will pass the payment easily (Lorca, 2016). But it is found that bill of payment is very
differed from the actual terms and condition of the written contract. So it was right decision of
the bank and financial institute will not pass the bill in such condition.
It is the duty of buyers bank to reimburse the amount of selling, but before passing the
payment bank has to check all documents and terms and conditions clear fully so that no mistake
done in this respect. If all details are right then issuing bank request the corresponding bank to
conform the payment, otherwise they reject the bill of lading in case of any default (Mason and
Stephenson, 2015).
CONCLUSION
From the above report it can be concluded that it is the duty of seller and buyer that to
follow the terms and condition of each contract carefully. In case if they do not follow the
instruction then that would be breach of contract and in such condition concern person will be
liable for the same. It was the duty of ship owner that to transport the 7000 coils but shipper has
over stamped the bill and made it of 8000 which was not acceptable by the bank because legal
documents are not correct. So it is the right decision of the bank that to reject the payment.
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REFERENCES
Books and Journals
]Mandaraka-Sheppard, A., 2014. Modern maritime law and risk management. CRC Press.
Amirell, S. E., 2016. Global maritime security studies: The rise of a geopolitical area of policy
and research. Security Journal. 29(2). pp.276-289.
Coles, R. and Watt, E., 2013. Ship registration: law and practice. Taylor & Francis.
Curtis, S., 2014. The law of shipbuilding contracts. CRC Press.
De Santo, E., 2015. The marine strategy framework directive as a catalyst for maritime spatial
planning: internal dimensions and institutional tensions.Governing Europe’s marine
environment. Europeanization of regional seas or regionalization of EU policies.
Gutteridge, H. C., 2015. Comparative law: an introduction to the comparative method of legal
study and research (Vol. 1). CUP Archive.
Hong, N., 2015. China’Maritime Law Enforcement Reform and Its Implications on the Regional
Maritime Disputes. Asia Maritime Transparency Initiative, Center for Strategic and
International Studies. April, 1.
Kałduński, M. and Wasilewski, T., 2014. The International Tribunal for the Law of the Sea on
maritime delimitation: the Bangladesh v. Myanmar case.Ocean Development &
International Law. 45(2). pp.123-170.
Lorca, B. L., 2016. Harmonisation of National Criminal Laws on Maritime Piracy: a Regulatory
Proposal for the Crime of Piracy and its Penalties.European Journal on Criminal Policy
and Research. pp.1-18.
Maraist, F. L. and et.al., 2016.Cases and Materials on Maritime Law. West Academic.
Mason, A. T. and Stephenson, G., 2015. American constitutional law: introductory essays and
selected cases. Routledge.
Robertson, D. W. and Sturley, M. F., 2013. Recent Developments in Admiralty and Maritime
Law at the National Level and in the Fifth and Eleventh Circuits.Tul. Mar. LJ. 38. pp.419.
Sohn, L. B. and et.al., 2014. Cases and Materials on the Law of the Sea. Martinus Nijhoff
Publishers.
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Takei, Y., 2013. Agreement on Cooperation on Aeronautical and Maritime Search and Rescue in
the Arctic: an assessment. Aegean Review of the Law of the Sea and Maritime Law. 2(1-2).
pp.81-109.
Online
[Online] Available through: http://www.gard.no/web/updates/content/52734/ucp-600-how-the-
new-rules-on-documentary-credits-may-affect-contracts-of-carriage. [Accessed on 17th
May 2017].
Bill of Lading, 2017. Online] Available through:
<http://www.lawandsea.net/COG/COG_Bill_of_Lading1.html>. [Accessed on 17th May
2017].
UCP 600 - How the new rules on documentary credits may affect contracts of carriage, 2007.
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