Wed, Oct

Subject details


Subject details. This is one area of the law where American practice is very different from English practice and an area where considerable difficulty and complexity arise. Therefore some analysis will be offered.

What usually happens is that the parties may carry on negotiations and after offers, counter offers and "acceptances" have been made, the parties may consider that the charter is fixed in principle. They may have agreed on the use of a standard form but specify that the charter is "subject to details". Clearly, this indicates that the parties are not yet certain about what is to go into the charterparty. Indeed, the final form of the charterparty is not yet agreed which means that either side can put in any terms he may choose later. Neither side is prepared to accept this situation, which would allow the other side considerable freedom. Moreover, such an expression allows either side to withdraw if they are not convinced of the advantages for them.

In the English case of The Junior, 1988, the owner considered that there was a voyage charter and charterers contended that there was no firm mixture. The standard-form charterparty was the GENCON. After the negotiations, during which all the essential terms had been agreed, the owner's shipbroker sent a "re-cap telex" to the other side stating that the fixture was confirmed ". . . sub dets GENCON CP . . .". The judge decided that there was no binding contract. He said:

"It is plain that the parties had in mind a contract on the Gencon form but that they had not yet considered the details of it. By the expression, subject to details of the Gencon Charterparty' the owners made clear that they did not wish to commit themselves contractually until negotiations had taken place about the details of the charterparty. ... It does not follow that the owners were willing to accept all the detailed provisions of the standard form document . . . Against this background it seems to be clear that the stipulation `subject to details of the Gencon Charterparty' conveys that the fixture is conditional upon agreement being reached on the details of the Gencon form, which had not yet been discussed."

Under American law, the details are considered to be "second-level" information that is necessary only to "fill in the blanks" of the firm agreement. In one case, Pollux Marine v. Louis Dreyfus, 1978, an owner's shipbroker made a firm offer of a ship to a charterer's agent. The charterer made a counter offer which included a requirement that the vessel should have a Greek flag with "ITF in order . . . sub details pro forma...". The negotiations continued, the charterer later requiring the ship to have a `Boycott clause". This provides that if the ship is delayed because of ITF action against it, the ship would be off hire during the period of delay. The owner did not agree to the inclusion of such a clause. Three days after the negotiations commenced, it was considered that there was a fixture on all the main terms and a "fixture re-cap" was sent by the charterer's agent to the charterer. The recap telex stated ". . . We confirm having fixed the foil with you today subject details . . . and provided that the Owners warrant that on delivery vessel will be Greek Flag Vessel, crew will be of Greek Nationality and vessel's crew will be members of the Greek Collective Agreement . . .". (It was felt. that Greek flag, crew and collective agreement would avoid any ITF action against the ship.) There was still no firm agreement on the ITF clause and the Boycott clause.

The offers and counter-offers and negotiations continued for another three days, when the negotiations came to an end because of the lack of agreement on these two issues. Two days later the owner's shipbroker offered the ship again, this time with a Boycott clause. The charterer responded that the new offer was too late as they had fixed other tonnage.

It was decided by the arbitrators that when the two parties had agreed on all the essential terms there was a binding fixture. The "subject details" did not create a condition that had to be fulfilled (a "condition precedent") before the agreement became finalised and the charterer was unable to revoke the main terms because some mere formalities had to be agreed.

American law thus seems to consider that when the terms, which are central to the charter, are agreed the remainder of negotiations concerns formalities. For example, in Great Circle Lines v. Matheson, 1981, main terms were agreed and a "fixture re-cap', was sent, subject to details. The "details" wanted by the shipowner included a change of forum for arbitration from New York (under the agreed New York Produce Exchange form) to London.  The courts decided that because a binding contract already existed, the owner could not insist on changes in its terms.

Therefore it is within the court's discretion to decide the distinction between "main terms" and "details" or mere formalities. This may cause problems because, for example, one court may decide that fuel, speed, and other similar "details" are not central to the charter, whereas another court may consider these are of crucial importance. In the American system, the "details" are not crucial to the performance of the charter while the "main terms" are. There, the courts may decide the fixture is firm as soon as the main terms are agreed. Under the English system, the contract will be enforceable only if the outstanding items are of no significance whatsoever.