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.”
“Subjects” and Intentions
Objective Observation/External Evidence
v.
Private Intentions
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…
“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
“SUBJECTS”
CONDITIONS TO CONTRACT
v.
CONDITIONS TO PERFORMANCE
“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 ”
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”.
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.”
“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
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.
Conditions to Performance
Subject to Oil Major Approval
 Subject to Passing an Inspection
 Subject to Board Approval

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
CONDITIONAL CONTRACTS?

“Subject Board Approval”

“Subject to drawing up the contract in
writing”
-Degrees of Control-
BOUND BY CONDUCT

Waiver

Estoppel
Oceanografia SA de CV v. DSND Subsea AS
[2006] EWHC 1360 (Comm)
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
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
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-
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-
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
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