Demise and identity of carrier clauses

Demise and identity of carrier clauses

Most reputable liner container operators have discontinued the practice of including a demise clause or identity of carrier clause in their bill of lading terms but shippers should be on their guard against such clauses. They may in practice make it much harder to bring a successful claim for loss or damage to goods. The historical justification for such clauses is said to be that until the Limitation Convention of 1957, charterers could not benefit from the same overall limitation of liability for all claims as could owners of vessels.

Demise clauses state that if the "carrier" is not the owner of the vessel or the demise charterer, it merely acts as agent for the vessel owner and has no liability at all as a carrier albeit that it may have issued the only bill of lading in relation to the goods. Identity of carrier clauses have similar effect, stating that all contracts are made with the ship owner and not the person the shipper regarded as the carrier. The ship owner may be a one vessel operator under a flag of convenience in a faraway place and prove difficult to pursue for any claim.

Typical bill of lading terms concerning demise and identity of carrier

"If the ship is not owned or chartered by demise to the company or line by whom this bill of lading is issued, the bill of lading shall take effect as a contract with the owner or demise charterer as the case may be as principal made through the agency of the said company or line who act as agents only and shall be under no personal liability whatsoever in respect thereof."

"The contract evidenced by this bill of lading is between the merchant and the owner of the vessel named herein (or substitute) and it is therefore agreed that the said ship owner only shall be liable for any damage or loss due to any breach or non-performance of any obligation arising out of the contract of carriage."

Position under international conventions

Under the Hague and Hague-Visby Rules it has been argued that these clauses are unenforceable constituting non-responsibility clauses, which are outlawed by the Rules. Courts in a number of countries have taken this view but such clauses have sometimes been enforced by English courts. English common law may make both owner and charterer responsible in some circumstances and some authorities have argued that the Hague Rules system may recognise dual responsibility because the "ship" always has responsibility under the Rules but so does the "carrier". It may also be possible to argue that there is no true agency on behalf of the ship owner, by the carrier who declines to accept responsibility by using these clauses.

Under the Hamburg Rules, both the contracting carrier and actual carrier have responsibility under the Rules. Demise and identity of carrier clauses may therefore be expressly in derogation of the Hamburg system and unenforceable.

Practical measures by shippers

Contract stage

UCP 500 requires the apparent carrier to be clearly identified on the face of a bill of lading so by accepting a demise or identity of carrier clause, a shipper could in some circumstances end up in breach of letter of credit requirements. This is a further reason for seeking to avoid the inclusion of such clauses. However, a carrier who seeks to include such clauses in bill of lading terms may be best avoided altogether as this may indicate an attempt to secure nil liability for any of its actions.

Claim stage

These clauses have sometimes been struck out by the courts. The pursuit of any claim against the issuer of the bill of lading will be complicated where a demise or identity of carrier clause appears. It is normal practice in maritime claims, however, to name the vessel, its owners, charterers and the ostensible carrier on the writ in the first instance anyway and then to proceed against the party most likely to be held liable, following full investigation of the facts.

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