The Commercial Court has allowed a Disponent Owner’s appeal against the striking out of its demurrage claim by an arbitrator. The grounds for striking out were that there was no contract between the Disponent Owner and Voyage Charterer, and as such there was no arbitration agreement between them.
The Claimant Disponent Owners, who had time chartered the vessel in question, instructed shipbrokers to sub-charter the vessel to the Defendant. In the fixture recap, the shipbrokers mistakenly named the Claimant’s parent company, rather than the Claimant itself, as disponent owners of the vessel.
The voyage under the charterparty between the Claimant and Defendant was fully performed. All notices of readiness were correctly tendered and accepted. They referred to the terms and conditions of the charterparty and identified the Claimant as disponent owner. The freight invoices stated that an amount was due to the Claimant, and specified the Claimant’s bank account details for payment.
The Claimant commenced arbitration, and claimed demurrage from the Defendant. The arbitrator found that there was no contract between the parties, and as a result there was no arbitration agreement. On that basis, he struck out the claim on the grounds that he had no jurisdiction to decide it.
The Claimant appealed to the High Court. It argued that the Defendant had contracted with the Claimant and/or its parent company, which had instructed to shipbrokers to negotiate the sub-charter. The shipbroker’s mistake in recording the disponent owners’ name in the fixture recap did not mean that there was no contract.
The Claimant also submitted that, in any event, a contract had come into existence by conduct: the voyage had been performed by, and the freight paid to, the Claimant, and not the entity named in the fixture recap.
COURT’S FINDINGS ON APPEAL
The High Court allowed the Claimant’s appeal, set aside the arbitrator’s award and remitted the matter to the arbitrator.
In doing so, the Court noted that it is common for charterparties to be concluded by an exchange of communications, with the terms being set out again in a fixture recap. Charterparties could also be concluded orally and recapitulated in this way. In this case, however, there was no evidence of an oral contract coming into existence prior to the recap. Indeed, the charterparty had not been agreed, either fully or substantially, before the issue of the name of the disponent owners arose.
Even if a written fixture recap was preceded by an oral agreement, the terms of the fixture recap itself were still very important. In this case the fixture recap was the main, indeed possibly the only, expression of the agreement between the parties. It could, therefore, for all material purposes be regarded as the charterparty. The identity of the disponent owners was specifically set out in that document, and the Claimant’s argument was at odds with and undermined by the express terms of the fixture recap.
However, the Court ultimately found that a contract had been formed by the parties’ conduct. This contract was formed when the freight was paid, although other possible points of formation included when the first NOR identifying the Claimant as disponent owners was accepted, or when the cargo was loaded. The contract so created was on the terms set out in the correspondence, and in the circumstances it did contain an arbitration agreement.
This case exemplifies two important points. The first is that a contract can be created between two parties by their conduct, regardless of what is contained in the documentation. Parties to a commercial transaction should, therefore, always bear in mind that contractual relations may be created in this way, and that such relations bring with them certain rights and consequences.
Secondly, this case highlights the importance of accurately identifying all relevant parties in contractual documentation. Had a contract not been created by conduct, the Claimant’s appeal may well not have been successful and they would have failed in their demurrage claim.