What Is a Demise Clause
Interlink編集部What Is a Demise Clause?
A Demise Clause is a provision that aims to designate the shipowner or bareboat charterer as the Contracting Carrier under the contract, rather than the company that issues the Bill of Lading (B/L).
In a Bill of Lading, the issuing company, the shipowner, the bareboat charterer, the time charterer, the voyage charterer, the shipping line’s agent, the NVOCC, and the freight forwarder may not always be the same entity. In such cases, when cargo incidents occur, it becomes an issue who bears the contractual responsibility as the carrier.
The Demise Clause positions the B/L issuer merely as an agent, seeking to place the substantial liability on the shipowner or bareboat charterer.
Terminology Used in This Article
In this article, “carrier” is used as a general term referring to the party whose liability is considered under the B/L. The “Contracting Carrier” refers to the party responsible under the contract of carriage with the shipper or claimant. The “Actual Carrier” means the party performing the actual vessel transport or carriage.
“Shipping line” primarily denotes the ocean carrier issuing the Master B/L or Ocean B/L. The “B/L issuer” refers to the entity shown on the front or signature section of the B/L and does not always coincide with the Contracting Carrier.
“Shipper” means the party on the shipper side who provides shipment instructions, cargo information, packing details, and dangerous goods declarations. “Cargo owner” is used when referring to the party holding the economic interest in the cargo, the insured party receiving marine cargo insurance proceeds, or the party bearing loss for subrogation claims.
Scope Covered in This Article
This article organizes the basic meaning of the Demise Clause, its differences from the Identity of Carrier Clause, typical clause wording, perspectives based on charter party types, and key points for cargo claims, subrogation, and NVOCC practice.
| Item | Content Covered in This Article | Content Covered in Other Articles |
|---|---|---|
| Basic Structure of the Demise Clause | The mechanism by which the shipowner or bareboat charterer, not the B/L issuer, is designated as the Contracting Carrier | The overall structure of B/L reverse side terms is covered in “What Are the Terms and Conditions on the Back of a Bill of Lading” |
| Differences from the Identity of Carrier Clause | The characteristic shift of liability under the Demise Clause among carrier identity clauses | The full overview of carrier identity clauses is covered in “What Is the Identity of Carrier Clause” |
| Perspectives by Charter Party Type | Points to check for bareboat charter, time charter, voyage charter, and agent-issued Bills of Lading | Details of charter party contracts themselves are covered in articles related to charter parties |
| Claims Handling in Case of Cargo Incidents | Whether to claim against the B/L issuer, shipowner, bareboat charterer, or agent | Overall initial response to cargo incidents is covered in the article on cargo incident handling |
| House B/L and Master B/L | NVOCC practice of separately managing cargo owner claims and recourse claims against the Actual Carrier | Comprehensive organization of House B/L and Master B/L is covered in related B/L articles |
| Subrogation | Risks of incorrectly identifying the party to claim against when insurers pursue subrogation | Details of insurance claims and subrogation are covered in marine cargo insurance-related articles |
| Governing Law, Jurisdiction, and Time Limits for Filing Suit | Surrounding clauses that should be reviewed alongside the Demise Clause | Details of governing law, jurisdiction, and filing deadlines are covered in respective dedicated articles |
| Key Points for Initial Responses | Approach to denying liability at the stage where the responsible party is not yet identified | Detailed handling of Claim Letters is covered in damage notification and claims handling articles |
Why the Demise Clause Becomes an Issue
In cargo incidents, the first step is to identify the party to be held liable.
The issuer named on the front of the B/L may not actually own the vessel. In cases involving time charters, voyage charters, bareboat charters, B/Ls issued by shipping line agents, or House B/Ls issued by NVOCCs, the B/L issuer and the party bearing carriage responsibility could be different entities.
When a Demise Clause is included, the B/L issuer may claim that they are merely acting as the agent of the vessel owner or bareboat charterer, and are not the Contracting Carrier under the contract of carriage.
Therefore, the claimant needs to review the front of the B/L, the signature block, any agent designations, the reverse side terms and conditions, charter party relationships, and the actual transaction circumstances to clarify who truly undertook the contract of carriage.
Unique Clause Structure of the Demise Clause
The Demise Clause is not simply a provision defining the “carrier.” It sometimes establishes a structure where, if the B/L issuer is neither the ship owner nor the demise charterer, the contract evidenced by the B/L is with the ship owner or demise charterer, and the B/L issuer acts only as their agent.
| Clause Element | Meaning | Practical Points to Confirm | Common Issues |
|---|---|---|---|
| If the vessel is not owned by the company | Assumes the B/L issuer is not the ship owner | Confirm whether the issuer and the ship owner are the same entity | Relying solely on the company name shown on the B/L front |
| or chartered by demise to the company | Assumes the B/L issuer is not the demise charterer either | Verify whether the vessel is demise chartered, time chartered, or voyage chartered | Confusing time charterers with demise charterers |
| the contract is with the owner or demise charterer | Assigns contractual carriage responsibility to the ship owner or demise charterer | Confirm if the intent is to direct claims to the ship owner’s side rather than the B/L issuer | Delay in identifying the correct party for claims |
| the company acts only as agent | Restricts the B/L issuing company’s status to an agent | Check if the signing section indicates agency and is consistent with the front of the B/L | Contradictions arise if the issuer is presented as the principal |
| all rights and defenses are reserved to the carrier | Concentrates all defenses with the Actual Carrier or Contracting Carrier | Review how limitation of liability, exemptions, and deadlines for suit apply | Uncertainty about who can assert defenses |
As shown, the Demise Clause directly affects whether the B/L issuer is regarded as the carrier or merely as an agent.
Difference from the Identity of Carrier Clause
Both the Demise Clause and the Identity of Carrier Clause serve to identify the carrier named on the Bill of Lading (B/L). However, their roles differ.
| Comparison Item | Identity of Carrier Clause | Demise Clause | Practical Considerations |
|---|---|---|---|
| Main Purpose | To specify who the Contracting Carrier on the B/L is | To treat the B/L issuer as an agent and designate the ship owner or bareboat charterer as the carrier | Both relate to carrier identification but focus on different aspects |
| Key Issue | The relationship between Contracting Carrier, Actual Carrier, B/L issuer, and agent | Whether the B/L issuer’s liability can be excluded and shifted to the ship owner | The Demise Clause strongly implies shifting liability |
| Details to Confirm | B/L front side, Carrier field, signature section, reverse side terms | Ownership, bareboat charterer, "as agent" notation, ship ownership relationship | Always read both front side notations and reverse side terms together |
| Impact on Claim Handling | Affects whom to send the Claim Letter | Claims may need to be directed to the ship owner or bareboat charterer rather than the B/L issuer | Incorrect claim target can affect notice and litigation deadlines |
| Impact on NVOCC Practice | Contracting Carrier is confirmed separately for House and Master B/Ls | Affects identification of recourse target on the Master B/L side | Manage shipper liaison separately from recourse against the Actual Carrier |
| Validity Assessment | Determined by clause wording, front side notations, and actual transaction practice | Conflicts with front side notations or signature section are often problematic | The presence of the clause alone does not automatically remove issuer liability |
While the Identity of Carrier Clause broadly clarifies “who the carrier is,” the Demise Clause tends to support the argument that “the B/L issuer is merely an agent, not the carrier themselves.”
Interpretation by Charter Party Type
When reading a Demise Clause, it is important to confirm the type of charter party. This is because the degree of control and operational management of the vessel differs among the shipowner, demise charterer, time charterer, and voyage charterer.
| Charter Party / Issuance Type | Overview | Relationship with Demise Clause | Points to Confirm |
|---|---|---|---|
| Demise Charter | The charterer rents the vessel hull and assumes responsibility for crew and vessel operations | The demise charterer may be regarded as the carrier, close in position to the shipowner | Whether the B/L issuer is the demise charterer, and under what status the signature is made |
| Time Charter | Use of vessel space for a fixed period, but vessel and crew management generally remain with the shipowner | The time charterer is not always the Contracting Carrier | Under whose name and on whose behalf the B/L was issued |
| Voyage Charter | Use of vessel space for a specific voyage | The shipowner/operator side may be considered the carrier | Whether the voyage charter contract aligns with the B/L representation |
| Issuance by Shipping Line Agent | Agent issues and signs the B/L | Whether the agent assumes liability as principal or acts merely as agent becomes an issue | Check for as agent notation in the signature block, Carrier designation, and consistency between front and back of the B/L |
| B/L in Time Charterer's Name | The company using the vessel for a fixed period is shown on the B/L | Whether the time charterer is indicated as the Contracting Carrier is a key concern | Cross-check the front Carrier box, signature block, and the Demise Clause on the reverse side |
| NVOCC House B/L | B/L issued to the shipper by the NVOCC | The contractual relationship normally centers between the NVOCC and the shipper | Verify separately from the Demise Clause on the Master B/L side |
Demise Clauses are especially important regarding demise charterers. In a demise charter, because the demise charterer holds operational control closer to that of the shipowner, they may be contractually regarded as the carrier.
Not Always Automatically Valid
Even if a Demise Clause is printed on the back of a Bill of Lading (B/L), it is not always automatically effective as is.
The validity may vary depending on factors such as the court where a lawsuit is filed, mandatory laws, the carrier indication on the B/L front, the signature block, agent representation, the actual transaction circumstances, or which party the shipper reasonably recognized as the contracting carrier.
| Item to Check | Circumstances Supporting the Demise Clause | Circumstances Likely Contradicting the Demise Clause | Practical Perspective |
|---|---|---|---|
| Carrier Indication on B/L Front | Shipowner or bareboat charterer is shown as the carrier | The B/L issuer is prominently shown as the carrier | The front indication influences the claimant’s recognition |
| Signature Block | Clearly signed "as agent for the owner" or "as agent for the carrier" | The B/L issuer appears to sign in their own name | The signature block is a key point to confirm agency status |
| Terms and Conditions on Back | Clauses naming the shipowner or bareboat charterer as carrier are included | Other clauses treat the B/L issuer as the carrier | Check consistency with the Identity of Carrier Clause |
| Actual Transaction | The shipper was aware the issuer was acting as an agent | The shipper understood they contracted directly with the B/L issuer | Review quotes, bookings, freight invoicing, and email records |
| Incorporation of Terms | Back-side terms were properly provided or referenced | Full terms were not shown and contradict front-side wording | Confirm that the terms form part of the valid contract |
| Governing Law and Jurisdiction | The dispute arises in a jurisdiction recognizing Demise Clauses | Mandatory laws or court rulings impose restrictions | Verify applicable law and competent court for the case |
For example, if the issuing company’s name is prominently displayed on the B/L front and that company signs the B/L front as the carrier, the Demise Clause alone on the back may not fully exclude the issuer’s liability.
On the other hand, if the signature block clearly states "as agent for the carrier" or "as agent for the owner," and the back terms include clauses naming the shipowner or bareboat charterer as the carrier, the issuer may argue they are only acting as an agent.
Impact in Case of Cargo Incidents
When a cargo incident occurs, the Demise Clause can affect who is held responsible for claims.
From the cargo owner's perspective, even if they intend to claim against the company that issued the B/L, that company may argue, "I act only as an agent, and the contracting carrier is actually the vessel owner or the demise charterer."
On the other hand, the claimant may argue that the issuer itself should bear responsibility as the carrier, based on the information on the B/L face, the party with whom the contract negotiations took place, the party billing the freight, the signature block, and the issuer’s practical handling of the B/L.
Therefore, when handling incidents, both the front and reverse sides of the B/L must be reviewed together. It is important to organize and compare whether a Demise Clause appears on the reverse, who is designated as the carrier on the front, and who actually undertook the transport.
Reviewing House B/L and Master B/L
When an NVOCC or freight forwarder issues a House B/L and the shipping line issues a Master B/L, the impact of the Demise Clause should be evaluated separately for each B/L.
Between the cargo owner and the NVOCC, the carrier named on the House B/L is the relevant party. Conversely, between the NVOCC and the shipping line, the carrier on the Master B/L is the focus.
If a Demise Clause is included in the Master B/L, it can become an issue in determining the proper party for the NVOCC to seek recourse from the shipping line.
Differences in the terms and conditions between the House B/L and the Master B/L may result in inconsistencies between the NVOCC’s liability to the cargo owner and its right of recourse against the Actual Carrier. This discrepancy presents a practical risk for NVOCCs and freight forwarders.
Specific Examples of Shortfall Risk
Consider a case where an NVOCC issues a House B/L and assumes responsibility as the Contracting Carrier toward the cargo owner.
Suppose a cargo incident results in a loss of 10 million yen to the cargo owner. Under the House B/L, the NVOCC is held liable as the Contracting Carrier and, depending on the incident details and terms interpretation, is determined to owe the cargo owner 3 million yen.
Subsequently, the NVOCC attempts to claim indemnity from the Actual Carrier under the Master B/L. However, if the Master B/L contains a Demise Clause, and it is asserted that the Contracting Carrier is not the issuer of the B/L but the shipowner or bareboat charterer, identifying the correct party for indemnity can take considerable time.
| Item | Example Amount | Issue Arising | Points to Confirm |
|---|---|---|---|
| Loss to Cargo Owner | 10 million yen | Claims from cargo owner or owner of goods | Check scope of liability under the House B/L |
| Amount NVOCC Pays to Cargo Owner | 3 million yen | NVOCC responds as Contracting Carrier | Verify limitation of liability, exemptions, and cause of incident |
| Amount Recoverable from Actual Carrier | 1 million yen | Recovery limited due to Master B/L liability restrictions and identifying indemnity party | Confirm Master B/L terms, Demise Clause, and litigation deadlines |
| Shortfall Remaining with NVOCC | 2 million yen | Gap between amount paid to cargo owner and amount recovered from Actual Carrier | Manage indemnity parties and deadlines from the initial stage |
The causes of this shortfall include the separation of liable parties under the Master B/L, misidentification of the recipient of the Claim Letter, mismanagement of filing and notification deadlines, and recovery limitations due to liability caps and exemptions.
Common Practical Issues
The Demise Clause tends to cause problems more often in practice regarding the party to be billed, notified, pursued for recourse, or deadlines management, rather than the clause content itself.
| Case | Reason It Causes Problems | Potential Disadvantage | Practical Response |
|---|---|---|---|
| Claim Letter sent only to the B/L issuer | There is a risk the issuer may be claimed to act only as an agent under the Demise Clause | Notification to the true Contracting Carrier is delayed | Simultaneously confirm the B/L issuer, ship owner, and Demise Charterer |
| Overlooked “as agent” notation at signature | It affects whether the issuer acts on their own behalf or as an agent | Mistakes arise regarding the party to claim or held responsible | Review the B/L front, signature section, and reverse side terms together |
| Checked only the Identity of Carrier Clause | Because the Demise Clause may separately shift responsibility | Misjudging whether the B/L issuer is liable | Read the Identity of Carrier Clause alongside the Demise Clause |
| Confused time charter with demise charter | Degree of vessel control and operation management differs | Misunderstanding who can be the Contracting Carrier | Verify the charter type, ship owner, and Demise Charterer |
| Decided on recourse only from the House B/L | Master B/L is relevant when pursuing claims against the shipping line | Overlooking the appropriate party and deadlines on the Actual Carrier side | Confirm House B/L and Master B/L separately |
| Mistaken addressee on subrogation claim letter | If the insurer pursues the wrong party, deadline management may be affected | Disadvantageous for damage notification and filing deadlines | Confirm the insurer and the Contracting Carrier on the B/L |
| Determined no issuer liability based only on reverse side terms | Judgment can vary depending on front-side B/L details and trade practice | Overlooking claimant’s position | Check front-side notations, signature section, emails, and freight billing |
| Delayed confirmation of lawsuit filing deadlines | Excessive time spent identifying the proper party causes deadlines to progress | Legal or arbitration action against the correct party may become untimely | Manage deadlines simultaneously while confirming the claim party |
Comparison Table of NVOCC and Freight Forwarder Involvement
NVOCCs and freight forwarders can assist in organizing information on B/L issuers, shipping lines, ship owners, bareboat charterers, agent notations, and the relationship between House B/L and Master B/L. However, they should avoid independently determining the final legal liable party or the validity of the Demise Clause.
| Category | Support Easily Provided | Should Not Decide | Practical Response |
|---|---|---|---|
| B/L Notation Verification | Organize B/L front side details, Carrier field, signature clause, and as agent notation | Determine the Contracting Carrier based solely on front side notations | Review together with reverse side terms and signature clause |
| Demise Clause Confirmation | Extract clause wording, owner, demise charterer, and agent notations | Conclude that the B/L issuer is exempt from liability just because the clause exists | Check governing law, front side notations, and actual trade practices |
| Chartering Relationship Confirmation | Organize information on ship owner, bareboat charterer, time charterer, and voyage charterer | Determine liability party based only on type of charter | Consult shipping line, overseas agents, or specialists as needed |
| House/Master Comparison | Line up the carrier notations, terms and conditions, and deadlines of House B/L and Master B/L | Assume that the liability on the House B/L side and the right of recourse on the Master B/L side automatically match | Manage shipper claims and recourse against the Actual Carrier separately |
| Subrogation Claim Handling | Organize and present B/L, signature clause, Demise Clause, and possible claim parties to the insurer | Accept the insurance payout amount as the carrier’s liability amount | Confirm limitation of liability, exemption clauses, and suit filing deadlines together |
| Initial Response | Prepare wording indicating liability is unclear, terms under review, and reservation of rights | Prematurely determine liability of the issuer, ship owner, or bareboat charterer | Clearly state that investigation is ongoing and avoid admitting liability |
Practical Scenario 1: When the B/L Issuer Claims to Be Merely an Agent
Consider a situation where, after a cargo incident, the cargo owner sends a Claim Letter to the company named as the issuer on the front of the B/L, only to receive a response from that company stating, "We are merely the agent of the vessel owner and are not the Contracting Carrier under the contract."
In this case, it is necessary to review not only the Demise Clause on the back of the B/L but also the Carrier notation on the front, the signature blocks, any "as agent" indications, the name of the vessel owner, whether there is a bareboat charterer, and the Identity of Carrier Clause. It is crucial to determine whether the issuer was presented as the principal party or clearly as an agent.
The claimant should also examine dealings with the issuer such as quotations, bookings, freight invoicing, email communications, and B/L issuance practices to reasonably establish who was recognized as the carrier. At the initial stage, it is advisable to consider notifying not only the issuer but also the vessel owner or bareboat charterer, while simultaneously managing the statute of limitations deadlines.
Practical Scenario 2: When the NVOCC Has Paid the Shipper and the Indemnity Party on the Master B/L Side Is Contested
For example, there are situations where the NVOCC, as the Contracting Carrier on the House B/L, compensates the shipper for damages and then seeks indemnity from the shipping line under the Master B/L.
At this point, if the Master B/L contains a Demise Clause, and the party issuing the B/L asserts that the Contracting Carrier under the contract is the ship owner or bareboat charterer, not the issuing party, identifying the proper party for indemnity claims becomes complicated. The NVOCC needs to separately verify its liability under the House B/L and the indemnity relationship under the Master B/L.
If confirming the indemnity party takes time, it may affect the notification of damage, Claim Letter submission, Time Bar extension, and management of deadlines for litigation or arbitration. NVOCCs and freight forwarders should simultaneously handle shipper communication and review the Master B/L, Demise Clause, Identity of Carrier Clause, governing law, jurisdiction, and deadlines for filing suit.
Practical Scenario 3: Issues with the Claim Party in Subrogation by Insurance Companies
For example, when a marine cargo insurance company pays the insured cargo owner and then seeks subrogation against the carrier named on the B/L, mistakes in identifying whether to claim against the B/L issuer, shipowner, demise charterer, or Actual Carrier can impede the recovery process.
If a Demise Clause is present, the B/L issuer may be argued not to be the Contracting Carrier. However, depending on the wording on the B/L face or the signature section, there may also be claims that the issuer itself bears carrier liability.
Insurance companies and subrogation handlers should review the House B/L, Master B/L, signature blocks, agent notations, Demise Clause, Identity of Carrier Clause, governing law, jurisdiction, and deadlines for filing suit. Since the amount paid by the insurer and the carrier’s liability on the B/L are separate issues, it is also necessary to confirm any liability limitations and exemption clauses.
Documents to Confirm
When reviewing the Demise Clause, organize and examine the following documents.
- House B/L front side
- House B/L reverse side terms and conditions
- Master B/L front side
- Master B/L reverse side terms and conditions
- B/L signature section, agent designation, issuer’s title
- Identity of Carrier Clause
- Demise Clause
- Documents identifying the ship owner
- Documents identifying the bareboat charterer, time charterer, or voyage charterer
- Booking documents
- Shipping Instructions
- Contract of carriage agreement
- Freight invoices and payment records
- Claim letter
- Survey report
- Subrogation documentation
- Documents indicating the section where the incident occurred
- Communication records with shipping lines and overseas agents
By reviewing these, clarify whether the B/L issuer bears personal responsibility, acts merely as an agent, or if claims should be directed to the ship owner or bareboat charterer.
Four-Column Checklist
When reviewing a Demise Clause, organize the process by separating the situation, the party to confirm with, the details to verify, and the response if issues arise.
| Situation | Party to Confirm With | Details to Verify | Response if Issues Arise |
|---|---|---|---|
| Upon Receiving the B/L | NVOCC, Shipping Line, Overseas Agent | B/L front side, signature block, Carrier designation, as agent notation | Clarify whether the issuer is the principal or an agent |
| When Confirming the Demise Clause | Shipping Line, B/L Issuer, Overseas Agent | Terms such as owner, demise charterer, agent, contract with owner | Cross-check with the Identity of Carrier Clause |
| When Verifying Chartering Details | Shipping Line, Overseas Agent, Experts as needed | Shipowner, bareboat charterer, time charterer, voyage charterer | Confirm the charter type and organize potential liable parties |
| When a Cargo Incident Occurs | Shipper, NVOCC, Shipping Line, Surveyor | Incident segment, relevant B/L, responsible party, notification recipients | Consider whether multiple parties need to be notified |
| When Matching House and Master B/L | NVOCC, Shipping Line, Overseas Agent | Carrier designation, terms, and deadlines on House and Master B/L | Separate handling of shipper claims and claims against the Actual Carrier |
| When Handling Subrogation Claims | Insurance Company, Cargo Owner, NVOCC, Shipping Line | Insurance payout amount, claim targets, Demise Clause, litigation deadlines | Distinguish between insurance payout amounts and liability limits on the B/L |
| When Preparing Initial Responses | Shipper, Insurance Company, Shipping Line, Overseas Agent | Expressions of liability acceptance, reservation of rights, under investigation statements | Clearly state that liability is not yet determined |
| When Managing Deadlines | Shipping Line, Lawyers, Insurance Company, Overseas Agent | Damage notification deadlines, litigation deadlines, Time Bar extension | Consider extensions of deadlines in parallel with confirming claim targets |
Important Considerations for Initial Responses
In cargo incidents involving the Demise Clause, it is crucial not to definitively assign responsibility in the initial response.
Depending on whether the claim is directed at the B/L issuer, shipowner, demise charterer, NVOCC, or agent, the allocation of liability and possible defenses may differ.
The initial reply should clearly state the receipt of the claim or notice, confirm that the B/L terms and the Demise Clause are being reviewed, verify the relationships among the B/L issuer, shipowner, demise charterer, and agents, indicate that responsibility is undetermined at this stage, confirm that limitations, exemptions, and deadlines will be checked, and clarify that the response does not imply acceptance of liability.
Expressions to Use When Confirming in English
When confirming with overseas agents or shipping lines, avoid admitting responsibility. Instead, use expressions that clarify the position of the B/L issuer, the relationship with the vessel owner or demise charterer, and identify the Contracting Carrier.
| Situation | Example English Expression | Purpose | Notes |
|---|---|---|---|
| Confirming the Position of the B/L Issuer | Please confirm whether the B/L was issued as carrier or as agent. | To verify whether issued by principal or as agent | Does not admit liability |
| Demise Clause Confirmation | We are reviewing the Demise Clause under the B/L terms. | To indicate the Demise Clause is under review | Useful for initial inquiries |
| Confirming the Contracting Carrier | Please confirm the Contracting Carrier under the B/L. | To identify the Contracting Carrier stated on the B/L | Assumes issuer and Contracting Carrier may differ |
| Clarification on Demise Charter Relationship | Please clarify whether the vessel was owned by or chartered by demise to the B/L issuer. | To confirm the relationship with the vessel owner or demise charterer | Avoid confusion with time charter |
| Request for Full Terms and Conditions | Please provide the full terms and conditions of the relevant B/L. | To review the full B/L reverse side terms and conditions | Request House B/L and Master B/L separately |
| Confirming Parties’ Relationships | Please confirm the relationship between the B/L issuer, the vessel owner and the charterer. | To clarify the relationships among the issuer, vessel owner, and charterer | Used for identifying the party responsible for claims |
| Explicit Statement of No Liability Admission | This response shall not be construed as an admission of liability. | To avoid acknowledging responsibility | Useful in initial responses |
| Reservation of Rights | We reserve all rights and defenses under the applicable B/L terms. | To reserve limitations of liability, exemptions, and time bar defenses | Useful in communications with insurers and shipping lines |
Common Misunderstandings
| Common Misunderstandings | Actual Considerations | Practical Points to Note |
|---|---|---|
| If there is a Demise Clause, the B/L issuer is always exempt from liability | Even if the clause exists, determination depends on the B/L front details, signature block, agent designation, actual transaction circumstances, governing law, and jurisdiction. | Do not deny issuer responsibility solely based on the presence of the clause. |
| It means the same as the Identity of Carrier Clause | Both relate to identifying the carrier, but the Demise Clause specifically aims to transfer responsibility from the B/L issuer to the shipowner or bareboat charterer. | Confirm and distinguish between the Identity of Carrier Clause and the Demise Clause. |
| If issued by a shipping line agency, the agent is always free from liability | Even with an agent designation, judgment may vary according to the B/L front, signature block, and actual transaction history. | Confirm whether the agent clearly acted as an agent. |
| Checking only the House B/L is sufficient | In NVOCC operations, the House B/L is critical for shipper dealings, while the Master B/L becomes relevant for recourse claims against Actual Carriers. | Confirm both the House B/L and the Master B/L side by side. |
| Bareboat charterers and time charterers can be treated the same | Bareboat charterers generally hold positions close to ship operation management, whereas time charterers do not always share the same status. | Verify the type of charter and compare with the wording of the Demise Clause. |
| The reverse side terms always prevail over the front-side B/L statements | Judgment often depends on a comprehensive assessment of front statements, signature block, agent designation, incorporation of terms, and actual transaction circumstances. | Do not reach conclusions based solely on the reverse side terms. |
| It is acceptable to clarify the billing party later if initially unknown | Deadlines for damage notification and filing suit continue running, so delays in specifying the billing party could be disadvantageous. | Advance verification of the billing party and management of deadlines should proceed simultaneously. |
Practical Points to Note
- Do not determine the liable party based solely on the issuer’s name on the front of the B/L.
- Check the signature block, agent designation, and issuer’s title.
- Confirm whether the Demise Clause wording refers to the shipowner or the bareboat charterer.
- Be aware of the differences between bareboat charter, time charter, and voyage charter.
- Read the Demise Clause in conjunction with the Identity of Carrier Clause.
- Review House B/L and Master B/L separately.
- Check the addressees of Claim Letters and subrogation demands.
- In initial responses, avoid admitting liability and limit to confirming the B/L terms and the liable party.
- Simultaneously verify the party to be billed, governing law, jurisdiction, and deadlines for filing suit.
Summary
The Demise Clause is a provision that designates the ship owner or the demise charterer, rather than the Bill of Lading issuer, as the Contracting Carrier under the contract.
This clause is characterized by treating the B/L issuer as an agent and shifting liability to the ship owner or demise charterer.
In practice, it is essential to review together the front-side markings on the B/L, signature section, agent designations, reverse side terms, charter party form, the relationship between House B/L and Master B/L, governing law, jurisdiction, and deadlines for filing claims.
The key point of this article is to understand the Demise Clause not merely as a carrier identification clause but as a provision that seeks to transfer contractual liability from the B/L issuer to the ship owner or demise charterer.
For marine cargo insurance, differences arise based on both premiums and terms. Selection of coverage terms and interpretation of policy wording should be consulted with specialist insurers or brokers.
