Contract can be formed by company's actions, High Court rules
Bad news for oil company fighting over typo in written freighting contract
Posted in Management, 23rd May 2011 13:28 GMT
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The actions of two companies can lead to a binding contract being formed even if there is a mistake in the terms of the contract itself, the High Court has ruled.
The High Court determined that a contract had existed between Statoil ASA and TTMI Sari because Statoil had paid TTMI for delivering its freight – even though there was no such written agreement between the companies.
TTMI had chartered a ship to carry cargo and brokers set about constructing a sub-contract agreement with Statoil to pick up and deliver their freight on the way. A mistake was made in writing the contract when a broker wrongly named TTMI's then parent company Sempa Energy as the contractor instead of TTMI, the court ruling said.
"I have concluded that, objectively viewed, a contract was formed between them," Mr Justice Beatson said in the High Court ruling.
"I refer in particular to the combination of the fact that TTMI instructed the vessel to take on Statoil's cargo, the Notices of Readiness which were accepted on behalf of Statoil's managing agents identified TTMI as the time charterer, the full performance of the voyage, the demand that freight be paid to TTMI in terms which stated the 'total amount due TTMI' and requiring payment to TTMI's bank account, and the payment of the freight by Statoil to TTMI," the judge said.
TTMI had appealed an original decision taken by an arbitrator that rejected its claims that Statoil were bound by a contract between the companies.
Further matters will now be determined by an arbitrator. An underlying dispute exists between TTMI and Statoil over who is responsible for fees of more than $322,000. The fees were incurred as demurrage, the charges that a contractor pays to the owner of a ship for extra use of its vessel.
Copyright © 2011, OUT-LAW.com
OUT-LAW.COM is part of international law firm Pinsent Masons.
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COMMENTS
@what's the news here
You are working as a contractor. They decide not to pay you on the basis that your contract was with Megacorp and they are in fact megacorp-uk (a wholly owned subsiduary of megacorp bermuda holdings holdings ltd)
This ruling says - "come of it, you're getting paid".
A typo
Should be Sempra Energy, not Sempa...
Other than that - demurrage (penalties for vessel's idle time beyond an agreed laytime limit in ports) is a legal cesspit. Anything can happen there...
And, anyway, a constructive contract is not such a unique event...
It implies at least one side doesn't employ enough lawyers
Seriously, in-house counsel would just said "pay up", although internal politics usually play a part in this sort of thing.
The case law on this situation goes back over a century, and it's clear: if you behave as if there's a contract, there's a contract. In shipping and industry, there'll be common practices which the court will imply the parties intended to be bound by.
Trust me, I'm not a lawyer.
Yet
I don't know about cesspit...
But vessel owners have an expensive resource on their hands, and idle time costs money. If you can't return the resource (book to a library, rental car to the agency, 'escort' to the pimp) when agreed to, expect to be charged overtime.
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