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Rajeev Philip Steamship Insurance Management Services Limited. “SUBJECTS” in Charterparty Negotiations - Is there a Contract???. “The concept of a duty to carry on negotiations in good faith is inherently repugnant to the adversarial position of the parties when involved in negotiations.”.

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Rajeev Philip Steamship Insurance Management Services Limited

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Rajeev philip steamship insurance management services limited l.jpg

Rajeev Philip

Steamship Insurance Management Services Limited


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“SUBJECTS” in Charterparty Negotiations - Is there a Contract???

“The concept of a duty to carry on negotiations in good faith is inherently repugnant to the adversarial position of the parties when involved in negotiations.”


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“Subjects” and Intentions

Objective Observation/External Evidence

v.

Private Intentions


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Mutual Expectations

  • Uncertainty and Enforceability

  • Filling the Gaps

    • THE DIDYMI

      “equitably … by an amount to be mutually agreed between owners and charterers”

    • MAMIDOIL-JETOIL v. OKTA

      “even in the absence of express language, the Courts are prepared to imply an obligation in terms of what is reasonable…


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“SUBJECTS”

A “Fixture” is arrived at by the exchange of “firm offers” between brokers acting on behalf of their principals, an owner and a charterer, and when concluded, that is all terms and details agreed and subjects (if any) lifted, it is an enforceable contract … It is important to note that no fixture has been concluded until all “subjects” have been lifted.” Baltic Code 2003


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“SUBJECTS”

CONDITIONS TO CONTRACT

v.

CONDITIONS TO PERFORMANCE


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“SUBJECT DETAILS”

Thoresen v Fathom Marine [2004] 1 LLR 622

“Otherwise basis Saleform 93 sub details suitably amended also to reflect the above terms. Closing to take place in Piraeus ”


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Thoresen v Fathom Marine

Mr. Kokkinis - “as per telcon this is the fixing. Pls do best to get it confirmed timely otherwise sellers may run away”

Mr. Straume - “thus we have full agreement on price/terms, will also forward recap shortly”.


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Thoresen v Fathom Marine

“I would respectfully suggest that it is in the interests of the chartering business that the Courts should recognise the efficacy of the maritime variant of the well known ‘subject to contract’. The expression ‘subject to details’ enables owners and charterers to know where they are in negotiations and to regulate their business accordingly. It is a device which tends to avoid disputes and the assumption of those in the shipping trade that it is effective to make clear that there is no binding agreement at that stage ought to be respected.”


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“SUBJECT DETAILS”.

English Law -

we haven’t reached agreement, and neither of us is bound to do anything

New York (and Norway!)

we will discuss later other terms whose significance is so slight that agreement upon them now is unnecessary for the purposes of binding a contract between us


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Losing the Thread

When a contract by telex or correspondence is alleged, the court will look at the correspondence as a whole and not merely at one or two documents picked out from connected sequence.


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Conditions to Performance

  • Subject to Oil Major Approval

  • Subject to Passing an Inspection

  • Subject to Board Approval


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UNILATERAL CONTRACTS

  • Options

    • Obligations on the party with the option

      KKK v. Johnson: “Subject stem”

  • The position of the party without the option

    • Withdrawal of the offer


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CONDITIONAL CONTRACTS?

  • “Subject Board Approval”

  • “Subject to drawing up the contract in writing”

    -Degrees of Control-


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BOUND BY CONDUCT

  • Waiver

  • Estoppel

    Oceanografia SA de CV v. DSND Subsea AS

    [2006] EWHC 1360 (Comm)


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Oceanografia SA de CV v. DSND Subsea AS

“Offer subject to the signing of mutually agreeable contract terms and conditions”

“Subject to FMA Approval vessel free for winter season, notice to be given by 01/10”

Contract terms were never signed.

No Binding Agreement


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WAIVER

  • ‘a party has acted in a manner which is consistent only with his having chosen one of the two alternative and inconsistent courses of action then open to him’

  • by words or conduct the election must be communicated in clear and unequivocal terms

  • the party making the election ‘must be aware not only of the facts giving rise to his rights but also of the rights themselves’

    THE KANCHENJUNGA[1990] 1 Lloyd’s Rep. 391


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ESTOPPEL

For estoppel:

  • party must either agree or conduct themselves in a such a manner that the other party believes that the other party will not insist on their strict legal rights.

  • In addition the other party must rely on the representation made, such that it would be unjust to allow the representor to go back on the representation.

    -ESTOPPEL-


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Oceanografia SA de CV v. DSND Subsea AS

Charterers unaware of FMA difficulty:

  • payment of the mobilisation fee

  • signing the on-hire statement

  • accepting the vessel for service

    Charterers aware of FMA difficulty

  • extending the departure date, which was signed by the Charterers

  • signing the off-hire statement

  • agreement by the Charterers to pay the demobilization fee

    -WAIVER-


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CONDITIONAL CONTRACTS

  • Entirely contingent conditions

    - “Subject to weather permitting”

  • “Subject Superficial Inspection”

    - THE MERAK [1976] 2 Lloyd’s Rep 250

  • “Subject to satisfactory completion of two trial voyages”

    - THE JOHN S DARBYSHIRE [1977] 2 Lloyd’s Rep 457


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PRATICE TIPS

  • Private Intentions Irrelevant

  • Awareness of Terms of Art

  • Effect of Genuine “Subjects” v. Conditions to Performance

  • Track progress on terms

  • Unilateral Contracts and Withdrawal

  • Conduct yourself in line with private intentions


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