Voyage Charters - Agreements for employment of ship Last updated 06-Oct-2014

… under [charterparty] the charterer only acquires a right to have his goods carried in the shipowner’s ship, while the latter is liable both in contract and in tort for the acts of his servants in charge of her … .

Historical Notes

When the agreement is for the employment of the whole ship on a given voyage or voyages or for given period of time the contract of affreightment is almost always contained in a document called a charterparty, the person entitled to the use of the ship is called the charterer, and the ship is said to be chartered or under charter.

Charterparties originated at a period when contractual obligations were as a general rule treated as absolute. A party’s obligation was to secure that anything that he warranted should be done, was done. If it was not, then, unless this was the result of some default of the other party, he was liable in damages, even though circumstances over which he himself had no control and could not even have foreseen made it impossible for it to be done. In the case of maritime carriage this rule was subject to the exception that performance was excused if it were prevented by act of God or of the King’s enemies or by inherent vice in the goods carried. At a very early date it became usual to incorporate in charterparties express exceptions for other maritime perils, and in modern charterparties these have been extended to strikes and other hindrances to performance which take place on land. But that the old rule still applies in the absence of an express exception in the charterparty is shown by the fact that when there is deviation from the chartered voyage the shipowner’s liability for the safe delivery of the goods is absolute, save for the limited common law exceptions mentioned above.
Per Lord Diplock in EL Oldendorff & Co GmbH v Tradax Export SA (The Johanna Oldendorff) [1973] 3 All ER 148 at p.175

Almost until the second half of the nineteenth century charterparty contracts usually were made under seal. They embodied the terms upon which the shipowner lends the use of the ship, and contained stipulations as to the rate of remuneration, the nature of the voyage, and the time and mode of employing the vessel. However for agreement to chart out a ship for a voyage trip to be valid no any particular form of document is necessary under English law. Already in Lidgett v Williams [1845] EngR 662; (1845) 4 Hare 456 it was held that signatures of parties are not required to give force to complete agreement.

There was not, properly speaking, a charter-party, but there was an agreement, the terms of which are on paper; and it is admitted that, if the agreement was completed, a charter-party, signed by the parties interested, was not necessary.
Per Sir James Wigram VC in Lidgett v Williams [1845] EngR 662; (1845) 4 Hare 456 at p. 462

Legal rules applicable to the charterparty contract are essentially the same as to any other contract under the ordinary law of contract. The courts generally inquire whether an offer made by one party has been accepted by the other and whether a firm agreement upon all essential terms has been reached.

Nowadays it is common, for parties to agree on all the essential terms necessary to bring about the conclusion of an oral contract and for the oral contract then to be followed by a written document, often described as a confirmation or recap, which will not only set out the essential terms but other terms common in the market. In such case the written document fulfils a dual function; it both confirms evidentially the making of the oral agreement but also supersedes the oral agreement in that it provides a document to which the parties thereafter look as the expression of their bargain. When no verbal communication preceded to recap a contract between the parties may be deemed to come into existence by conduct when the voyage was performed and the freight paid.

The conclusion of commercial contracts, particularly charterparties, by an exchange of emails, once telexes or faxes, in which the terms agreed early on are not repeated verbatim later in the exchanges, is entirely commonplace. It causes no difficulty whatever in the parties knowing at exactly what point they have undertaken a binding obligation and upon what terms.
Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd [2012] EWCA Civ 265 per Lord Justice Tomlinson at para 22.

Coming back to the nineteenth century case law one can find numerous illustrations of the tendency of the courts, influenced by the philosophy of laissez-faire, to give full effect to the agreement, however unreasonable and oppressive a stipulation or condition may be, because it was to be presumed that the parties meant only what was reasonable. The argument supporting such position was pronounced by Cockburn CJ:

It frequently happens in the competition which notoriously exists in the various departments of business, that persons anxious to obtain contracts submit to terms which, when they come to be enforced, appear harsh and oppressive. From the stringency of such terms escape is often sought by endeavouring to read the agreement otherwise than according to its plain meaning.

Today charterparty contracts remain to be essentially of judge made law with very limited influence of statue law, they are are not subject neither mandatory application of the Hague and the Hague-Visby Rules nor statutory obligations contained in the Carriage of Goods by Sea Act 1992 and governed by the ordinary law of contract.

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