Module: | MODULE A: INTERNATIONAL BANKING
Q110: Consider the following statements regarding a Charter Party Bill of Lading:
Statement 1: A transport document containing an indication that it is subject to a charter party contract is acceptable only if the Letter of Credit specifically permits it.
Statement 2: Banks are legally required to examine the underlying private charter party contracts to verify the terms of carriage before accepting the transport document.
Statement 3: A charter party bill of lading may be signed by the master of the vessel, the owner of the vessel, the charterer, or their specifically named agents.
Statement 2: Banks are legally required to examine the underlying private charter party contracts to verify the terms of carriage before accepting the transport document.
Statement 3: A charter party bill of lading may be signed by the master of the vessel, the owner of the vessel, the charterer, or their specifically named agents.
✅ Correct Answer: B
The correct option is B. Only 1 and 3 are correct.
Concept Definition: A Charter Party Bill of Lading is a document used when a shipper leases an entire ocean vessel for their exclusive use through a private lease agreement called a charter party.
This is common for massive bulk shipments like crude oil or grain.
Structural Breakdown: Because it is a private lease rather than a scheduled public bus route for cargo, the legal liabilities are highly customized.
Banks are extremely wary of these private contracts because they do not know the hidden terms of the lease.
Historical/Related Context: Article 22 provides strict safeguards.
Banks will automatically reject a charter party document unless the buyer explicitly accepted the risk and authorized its use in the original Letter of Credit.
Causal Reasoning: Statement 1 is correct.
The checking bank will reject the document unless the credit explicitly says charter party bills of lading are acceptable.
Statement 3 is correct.
Article 22 allows the master, the owner, or the charterer themselves to sign the document, reflecting the highly private nature of the vessel operation.
Statement 2 is entirely incorrect.
Article 22 explicitly states that banks will not examine charter party contracts.
Even if the private contract is handed to the bank with the documents, the bank must legally ignore it.
This preserves the core principle that banks deal only with standard financial documents, not underlying operational contracts.
Concept Definition: A Charter Party Bill of Lading is a document used when a shipper leases an entire ocean vessel for their exclusive use through a private lease agreement called a charter party.
This is common for massive bulk shipments like crude oil or grain.
Structural Breakdown: Because it is a private lease rather than a scheduled public bus route for cargo, the legal liabilities are highly customized.
Banks are extremely wary of these private contracts because they do not know the hidden terms of the lease.
Historical/Related Context: Article 22 provides strict safeguards.
Banks will automatically reject a charter party document unless the buyer explicitly accepted the risk and authorized its use in the original Letter of Credit.
Causal Reasoning: Statement 1 is correct.
The checking bank will reject the document unless the credit explicitly says charter party bills of lading are acceptable.
Statement 3 is correct.
Article 22 allows the master, the owner, or the charterer themselves to sign the document, reflecting the highly private nature of the vessel operation.
Statement 2 is entirely incorrect.
Article 22 explicitly states that banks will not examine charter party contracts.
Even if the private contract is handed to the bank with the documents, the bank must legally ignore it.
This preserves the core principle that banks deal only with standard financial documents, not underlying operational contracts.