Taxation

Where a charterer has failed to fulfil his contract to provide a full cargo the shipowner has a good cause of action against him for dead freight i.e. damages. The charterer must pay freight for the space not used. For such damages no lien on goods actually carried in the ship actually exists at common law but such a lien may be given by usage or express contract of the parties. A demise or bareboat charter is a charter in the nature of a lease by which the owner grants or demises the entire control and possession of the ship to the charterer. The demise charterer takes over all the responsibilities for the vessel. He employs a crew and provisions bunkers and runs the ship as his own. He is the “disponent owner” and could be regarded as the lessee of the ship. The charterer takes over almost all of the owners’ functions except for the payment of capital costs. Sometimes a second-hand sale has been disguised as a bareboat charter with an option to buy in order to avoid taxation. Bareboat charters usually cover a certain period of time, sometimes a very long period and is often connected to a purchase option after the expiration of the charter period or during the charter period. Whether or not the charter amounts to a demise must turn on the particular terms of the charter. The question depends on whether the owner has, by the charter, parted with the whole possession and control of the ship. In Baumwoll Manufactur Von Carl Scheibler v Furness (1893) a charter party provided for the hire of a ship for 4 months the charterer to find the ship’s stores and pay the master and crew, insurance and maintenance of the ship to be paid by the shipowners who reserved power to appoint the chief engineer. The master signed bills of lading in respect of goods shipped by shippers who were ignorant of the charter party. The Court held that the charter amounted to a demise because the possession and control of the ship was vested in the charterers. The shipowner was not liable for the loss of the goods.