Consignee conundrum

A ship was headed to a port of discharge to carry a petroleum product cargo. The charterparty contained a clause which allowed the charterers to change the port of discharge and subsequently the bills of lading in exchange for a Letter of Indemnity (LOI). The charterers invoked this clause. The owner prepared new bills of lading and sent these to the shipbroker to pass on to the charterer. However, the shipbroker forgot to pass on the new bills to the charterers.

In the meantime, charterers authorised the Master to sign the new bills of lading on the assumption that everything else, except the new port of discharge, had stayed the same. However, in the new bills the consignee name had, for unknown reasons, also been changed.

The new consignee collected the cargo before the error had been spotted. The actual consignee and the bank who had provided the letter of credit took action which delayed the ship.

These delays caused an initial loss to the charterer in the region of US$ 400,000.

The charterers claimed against the shipbroker for not passing the amended bills to them for review, as this, they say, lost them the chance to spot the error. ITIC reminded charterers of their duty to mitigate their losses and pointed out that it was the charterers who had authorised the Master to sign the new bills without actually having seen them.

After the charterers’ mitigation of the claim, the damages amounted to US$ 75,000 which were then split three ways between charterers (as they had authorised the signing without seeing the bill of lading), owners (as they made the error with the consignee name) and shipbrokers (for failing to pass the document to the charterers for review). ITIC paid US$ 25,000 in respect of the shipbroker’s share.