Navig8 Inc v South Vigour Shipping Inc  EWHC 32 (Comm)
The claimant had chartered four vessels, the charterparties for which had been signed by the vessels’ commercial manager. Each charterparty contained the phrase “the disponent owners signatory in contract”, followed by the manager’s name. During the negotiations, the manager had made it apparent that it was acting on behalf of Owners, and had said that Owners were being kept informed of the progress of negotiations.
When the vessels were withdrawn from service, Charterers brought a claim against the manager and the registered owners of the vessels, arguing that in fixing the charterparties the manager had been acting as the Owners’ agent, that Owners were bound by the charterparties, and that they were in breach by withdrawing the vessels. Charterers said that the phrase “disponent owners” in the charterparties was used in the sense of the manager having the power to fix charterparties on behalf of Owners. Owners denied that they were party to the charterparties and, if they were, that the manager had authority to act on their behalf.
The Court held first that the manager had signed the charterparties as disponent owner, in the sense of being the manager of the vessels. The phrase “disponent owner” could be used to refer to a party who was the agent of the registered owner, if he was a manager with very wide powers (although the court acknowledged that the use of the phrase in this context is both rare and unusual).
The Court also held that Owners had not expressly authorised the manager to conclude the charterparties. Charterers’ claim against Owners, therefore, was dismissed. The manager, however, was liable to Charterers for breach of an implied warranty of authority. The measure of damages was the sum which would otherwise have been payable by Owners, plus a balance of account.
Third parties, such as brokers and managers, often play key roles in negotiating charterparties. This case indicates the importance of ensuring that, when one party is acting on another’s behalf, both are absolutely clear as to the extent and limits of the former’s authority. An agent which breaches a warranty of authority can find itself liable for damages under a contract purportedly agreed on behalf of its principal. The principal, even if not liable for damages, may find itself incurring the time and cost of litigation which could have been avoided.