London Arbitration - Misdescription and "Subject to Details"

February 2007

In London Arbitration 18/06 (2006) 702 LMLN 3, the Tribunal considered the admitted misdescription by Owners of the vessels cubic capacity and the date on which the fixture had become binding.

Owners initially described the vessel to Charterers during negotiations as having a grain capacity of 59,421 cbm. Negotiations headed to a close on 23 December with Charterers brokers sending a message setting out the agreed terms and providing sub chrs reconfirmation latest 1500 hours London time 24 Dec provided questionnaire and desc page completed today. Charterers provided a blank questionnaire and description page. The latter expressly said on its face that it was to be fully incorporated into any resulting Charterparty.

Upon return by Owners, that latter document stated the vessels grain capacity as 57,208.40 cbm, which Charterers failed to note. On 24 December, Charterers reconfirmed and subjects were lifted.

Owners noted the error in the original description first and brought this to Charterers attention. In due course Charterers claimed loss of freight and made a deduction from hire. Owners brought a claim for the hire deducted on the basis that no fixture had been concluded until Charterers lifted subjects on 24 December and by that time Charterers had the correct grain capacity in the description page which formed part of the Charterparty. Charterers contended that as the main terms had been agreed by 23 December it was not open to Owners to thereafter change any of those.

The question for Tribunal to decide was whether there was a binding fixture on 23 December as regards grain capacity or whether the completed description page superseded that which had gone before. 

The Tribunal held that the reconfirmation subject imposed by Charterers allowed them to reject the vessel due to its description and there can have been no binding fixture on 23 December. The reconfirmation subject was itself subject to the provision of the questionnaire and description page and in effect the Charterers were saying provided you give us the requested information and it is satisfactory to us, we will reconfirm and then have a binding fixture with you.

A fixture that was subject details was not a binding one in English law and Charterers argument must be rejected.  

This follows a long line of English authority, the most familiar of which is the Junior K [1988] 2LLR 583. Even if essential terms are agreed, the expression subject details means the parties do not intend to be legally bound until all the full details are agreed. This is so even if a standard form is also referred to and said to be subject to logical amendments. Most standard forms are amended by the parties and often contain options within the form itself. However the usual effect of the words subject details can be negated by subsequent conduct showing a clear intention to dispense with them and is in any event displaced by actual agreement on those details, even if not recorded in a formal contract.

As a point of interest, the US courts take a diametrically opposed line on the subject details issue.   American precedent holds that a charter comes into existence when the parties agree its essential terms Great Circle Lines Ltd v Matheson & Co 681 F.2d 121, 1982 AMC 2321. It is not necessary for agreement on each and every term to be reached before a binding contract is created. What constitutes essential terms is a matter of fact in each individual case and there is enough precedent to fill several more pages!