Download Star Steamship Society v. Beogradska Plovidba

Conference Practice of Maritime
Business & NOVO2010
Broker’s Role in negotiating and
fixing charterparties
Alberto Batini
BB & Partners
"My son, when you can persuade a
shipowner to fix a cargo he hates,
from a port he doesn't like, to a
discharge port he doesn't know, at a
rate which is below last done, then,
my son, you can call yourself a
broker".
(John R. Hall*)
*Managing Director,
Hall Shipbroking Pty Ltd,
Melbourne, Australia
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The major broker’s effort is to find continued
and suitable employment for the ships to
maximise revenue earnings.
Primary concern is finding suitable cargoes
for ships irrespective of whether the ships
are owned or are hired.
Evaluating intended voyages to maximise
earning so as to pay for the cost of ship, cost
of its operations and to make some profit.
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The broker, if required, should be
aware of the economical function of the
charter which the Parties (Owner and
Charterer) wish to pursue.
A synoptic table of the 3 main
charterparties will follow focusing on
the economic and financial profile of
each one.
Type of Charter parties
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There
are
many
mutually
agreed
arrangements between the owners of cargo
or shippers and the ship owners or ship
operators for transportation of cargoes.
The terms and conditions for carriage of
cargo can either be on liner terms or under
different charter party terms that primarily
depend upon the types of ships and cargo.
 MAIN
TERMS
The main terms speak for themselves, in that
the parties agree to the details of the vessel,
quantity and description of cargoes, loading
and discharging ports and loading and
discharging terms, laydays and cancelling,
freight rate, freight payment, demurrage and
despatch and charter party form.

“SUBJECT TO DETAILS” (SUB DETAILS)
Whenever this term is used, the parties have
clearly signaled, apparently as a matter of
law, that they do not intend to be
contractually bound until all details are
concluded.
Leading case: Star Steamship Society v.
Beogradska Plovidba (The JUNIOR K), [1988]
2 Lloyd's Rep. 583 QBD (Comm. Ct.)
Samos Shipping Enterprise Ltd. v. Eckhardt
and Co. K.G., (The NISSOS SAMOS), [1985] 1
Lloyd's Rep. 378 QBD (Comm. Ct.), involving
a contract to sell a vessel for scrap.
During negotiations, offers were said to be
“subject details.” According to the Court,
“‘subject details’ is a well-known expression
in broking practice which is intended to
entitle either party to resile from the contract
if in good faith either party is not satisfied
with any of the details as discussed between
them.”
By contrast, in America, such a fixture will be
regarded as binding, and arbitration often
will be ordered in a 'subject details' case. It is
one of the great schisms in the maritime laws
applied on opposite sides of the Atlantic.
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“SUBJECT STEM” i.e., cargo availability.
In England, charterers who develop
misgivings about whether a fixture 'subject
stem' is advantageous can get out of it
simply by failing to seek stem.
By contrast, under American maritime law,
charterers must exercise due diligence to
obtain timely stem.

‘Subject management approval.'
It is fashionable among charterers to treat
this 'subject as creating an option in their
favour i.e., owners are committed, but
charterers are free to back away. This is
very dangerous thinking. A fixture 'subject
management approval' is not the same as
a fixture 'subject reconfirmation.' The latter
clearly creates an option, and nothing less
than a notice by charterers lifting the
subject will satisfy the condition.
By contrast, under a fixture 'subject management
approval,' a chartering manager must probably
exercise due diligence to receive instructions from
his supervisor. More to the point, he frequently will
already have full authority to fix, especially a voyage
charter. Absent supporting evidence that such a
chartering
manager
actually
contacted
his
supervisor, a court might well find as a fact that the
'subject' was a sham and and therefore the fixture
was fully binding when made, without the need for a
later notice lifting subjects.
Three important elements of the charter
party are:
 (a) Description of the ship
 (b) Description of the trade
 (c ) Description of time period
Broker needs to ensure that the above
elements
are clearly described in the fixture recap.
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Description of the Ship
The type of ship to be hired/chartered very much
depends on the nature and whereabouts of the
intended trade.
Its normal for owners to provide all the details of
the ship with a guarantee about its accuracy
An example such as “Shelltime” and “Intertank”
having appropriate format which is required to
contain several pages of ship details
Many Charterers require the following plans to
be
supplied by the Owners (in tanker industry):
 (1) General Arrangement Plan ,including
loading scale
 (2) Detailed Cargo manifold arrangement
Drawing
 (3) Pumping Arrangement Plan
 (4) Plan of Cargo Tank Ventilating System
 (5) Manufacturers Characteristics Curves of
Pumps if centrifugal pumps are installed.
Other details:
Cubic Capacity
 Speed and Consumption
 Constant Weights
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Year of built, flag, dead weight, maximum
dimensions, maximum draught, fresh water
allowance, speed, fuel consumption, cargo
space in bail and grain capacities, number of
hatches and holds, type and safe working
load of cargo gear, compliance with
international regulations for carriage of
specialised cargo and such other important
details relevant for the intended cargo and
trade.
Some bulk cargoes may require that the
holds be equipped with carbon-di-oxide fire
protection system, or special requirement of
cargo securing in the holds.
Description of the Trade
 Charterer is interested to know the
details of the ship as much as the
Owner is interested to know about the
type of trade the ship will be engaged
in.
 Owners will demand that berths and
ports to which the vessel will trade are
safe and ship will remain afloat.
The Charter Party will guarantee that
the vessel will trade within the Institute
Warranty Limits(I.W.L)- a trading area
defined by Underwriters to prevent the
more serious risk of ship causality
loss.
 The dangerous areas such as war
zones and ice bound areas may be
excluded from the charter party.

The Charter Party shall also include
certain exclusions for the cargo to be
loaded such as asphalt in bulk, pitch in
bulk, livestock, explosives, fish meal,
scrap, sulphur, and logs.
 In addition, it is increasingly frequent to
add in the cargo exclusion clause
nuclear products.
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Description of the Period
The period of charter commences with
vessel’s delivery to the Charterers and
ends with redelivery.
It is suspended by off-hire periods.