Saturday, September 23, 2023

Freight- preconditions to pay require clear wording

This is a topic of constant debate in the shipping industry. Owners and Charterers agree the mode of freight payment in the Charterparty. However, given the recent reported incidents that fraudsters are intercepting emails (See K v A [2019] EWHC 1118), Charterers usually request additional information before processing their payments.

In a previous arbitration case, the tribunal had to determine “Whether obligation to pay 5 per cent balance of freight conditional on provision of “signed/stamped freight invoice”. Owners claimed for the 5% balance of freight and Charterers said that it was a condition precedent to pay after Owners submit a “signed/stamped freight invoice”.

The tribunal considered the fundamental importance of freight payment and said that “such technical arguments were a proposition that required meticulous examination” unless included “words to the effect that the charterers’ liability to pay the balance of freight would only arise provided that the relevant invoice was given to them, or would not arise unless it was given, would be required”.

Absent clear provisions then Charterers should be cautious before insisting to add “preconditions” to their payment obligations.

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