Lloyd's Maritime and Commercial Law Quarterly
THE DEMISE CLAUSE IN AMERICAN COURTS
Russell W. Pritchett
Messrs Graham & James, Attorneys at Law, Anchorage, Alaska
I. Introduction
It is not infrequently said that the “demise clause” is unenforceable in the United States. In the wake of this seemingly prevailing view, some liner companies have been advised to excise the clause from their bills of lading as a matter of housekeeping. However, it is apparent that the clause has not yet wholly foundered, and, indeed, may be entering a period of refloatation.
II. Background
The “demise clause” typically reads as follows and is still often inserted by liner companies into their bills of lading.
“If the ship is not owned by or chartered by demise to the company or line by whom this bill of lading is issued (as may be the case notwithstanding anything that appears to the contrary) this bill of lading shall take effect only 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 acts as agent only and shall be under no personal liability whatsoever in respect thereof”.
Frequently, and more properly, the demise clause is labeled an “identity of carrier clause”.1 The history of the clause leads one to early 20th century British jurisprudence. From the time of its enactment until 1958, charterers were unable to limit their liability in Britain under the Merchant Shipping Act 1894, s. 503.1a In cases such as
1 Unlike the clause quoted in. the text (which identifies the shipowner or demise charterer as the carrier), occasionally a liner company’s bill of lading provides that only the time charterer is the carrier. A shipowner may attempt to protect itself by requiring in the charter-party that bills of lading contain such a clause.
1a Section 503 provides:
“503. Limitation of owner’s liability in certain cases of loss of life, injury, or damage—(1) The owners of a ship, British or foreign, shall not, where all or any of the following occurrences take place without their actual fault or privity; (that is to say,)
(a) Where any loss of life or personal injury is caused to any person being carried in the ship;
(b) Where any damage or loss is caused to any goods, merchandise, or other things whatsoever on board the ship;
(c) Where any loss of life or personal injury is caused to any person not carried in the ship through the act or omission of any person (whether on board the ship or not) in the navigation or management of the ship or in the loading, carriage or discharge of its cargo or in the embarkation, carriage or disembarkation of its passengers, or through any other act or omission of any person on board the ship;
(d) Where any loss or damage is caused to any property (other than any property mentioned in paragraph (b) of this subsection) or any rights are infringed through the act or omission of any person (whether on board the ship or not) in the navigation or management of the ship, or in the loading, carriage or discharge of its cargo or in the embarkation, carriage or disembarkation of its passengers, or through any other act or omission of any person on board the ship;
be liable to damages beyond the following amounts; (that is to say,)
(i) In respect of loss of life or personal injury, either alone, or together with such loss, damage or infringement as is mentioned in paragraphs (b) and (d) of this subsection, an aggregate amount not exceeding an amount equivalent to 3,100 gold francs for each ton of their ship’s tonnage; and
(ii) In respect of such loss, damage or infringement as is mentioned in paragraphs (b) and (d) of this subsection, whether there be in addition loss of life or personal injury or not, an aggregate amount not exceeding an amount equivalent to 1,000 gold francs for each ton of their ship’s tonnage.
(3) The limits set by this section to the liabilities mentioned therein shall apply to the aggregate of such liabilities which are incurred on any distinct occasion, and shall so apply in respect of each distinct occasion without regard to any liability incurred in another occasion”.
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