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ACCA Applied Skills · Corporate and Business Law (Global) · Transportation documents and means of payment

A carrier issues a bill of lading to Wexford Ltd stating the goods were received 'in apparent good order and condition'. On loading, the master noted that several cartons were visibly water-damaged, but the bill was still issued without any note. The bill is then endorsed to Harlow Ltd, a buyer who relies on it in good faith. What is the legal position?

The carrier will probably be estopped from denying the statement of good condition against Harlow Ltd. A good-faith transferee who relies on a clean bill of lading can hold the carrier to it, even if the master privately knew the cartons were damaged.

  1. AThe carrier is likely to be prevented from denying the stated condition against Harlow Ltd, who relied on the billCorrect
  2. BThe carrier may deny the condition because the master knew the cartons were damaged
  3. CThe bill has no effect because it was not a clean bill
  4. DHarlow Ltd is bound by the master's private knowledge

Explanation

A clean bill is a statement by the carrier about apparent condition. A transferee who takes it in good faith and relies on it can hold the carrier to the statement through estoppel, even though the master knew otherwise. The master's private knowledge is not imputed to the innocent holder.

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