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“SUBJECTS” IN CONTRACTUAL NEGOTIATIONS

Lloyd's Maritime and Commercial Law Quarterly

“SUBJECTS” IN CONTRACTUAL NEGOTIATIONS

Socrates Papadopoulos*

The Leonidas

The facts

In Nautica Marine Ltd v Trafigura Trading LLC (The Leonidas),1 the owners and charterers agreed a recap on subjects in respect of a voyage charter for the carriage of crude oil from Caribbean to Singapore–Japan range. The subjects were the charterers’ subjects of “Stem / Suppliers / Receivers / Management approval”. It was common ground that the effect was to incorporate the following subjects on the charterers’ side: (a) The availability of sufficient cargo; (b) the approval of the suppliers of the cargo; (c) the approval of the receivers of the cargo; and (d) the approval of the charterers’ management. Notably, at the time of the recap, there were further matters that the parties had identified as requiring agreement to conclude a contract, namely the identity of the Charterer (Trafigura or nominee) and certain additional terms that were incorporated “subject to review/agreement”.2 Charterers subsequently offered to lift all the subjects with the exception of suppliers’ approval in return for a reduction of the demurrage rate. The owners accepted this offer.
The charterers’ interest in the fixture then cooled. They indicated that they would be willing to lift the remaining subject if the owners agreed to a discount on freight. The owners refused, asserting that the other subjects having been lifted, the charterers could back out only if they were unable to obtain the supplier’s approval despite reasonable efforts. The charterers made no further efforts to obtain the suppliers’ approval and withdrew. The owners contended that a binding contract had been concluded and that the charterers’ conduct was repudiatory, and claimed compensation.
Case and comment

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