Thursday, May 23, 2024

Jurisdictional challenge- was there a binding contract?

The Merchant did not provide cargo to be loaded at Houston in repudiatory breach of the booking note, and the Carrier claimed dead freight of US $100,275.00. As provided by Clause 11. (h) of the booking note, the amount invoiced represented the gross freight of US $140,275.00 less estimated port and stevedore costs saved of US $15,000.00 and US$25,000.00, respectively. As the invoice remained unpaid, the Carrier proceeded to arbitration.

The Carrier appointed [X] as an arbitrator, advised the Merchant in writing of his appointment, and called upon the Merchant to appoint an arbitrator within 14 days. However, the Merchant did not appoint an arbitrator and having regard to Sections 16(5(a), 17(1), 17(2) of the Arbitration Act 1996, [X] agreed to act as a sole arbitrator in this reference.

The Carrier served his claim submissions on 9 February, claiming dead freight US$ 100,275.00, interest, and costs. On 13 February, the tribunal sent a message to the Merchant containing an order to serve his Defence submissions within 28 days as per LMAA Terms. On the same day, the Merchant’s legal representative responded to this message that there was no contract between the Carrier and the Merchant because the Merchant had not signed the booking note. Therefore, the tribunal had no jurisdiction in this matter.

The tribunal replied, ‘ While I cannot comment on the merits of either party’s case in this arbitration reference, I should point out that there is no requirement under English law that a contract must be signed in order to be valid and binding. My order for your clients to serve their Defence submissions in the arbitration stands. Should they not do so, they run the risk of a default Award being made against them’.

Again, the Merchant’s legal representatives repeated their position to which the tribunal responded, ‘ I shall be making no further comment on the points that you raise and await service of your clients’ Defence.’

The Merchants did not serve any Defence, and the tribunal made a final and peremptory order that Defence submissions be served by 5:30 pm London time on 23 March.

Was there a binding contract between the parties?

The tribunal was aware that the Merchant had maintained that there was no binding contract between it and the Carrier. While this was not pleaded as no Defence was served, the existence or not of a contract was in any event a matter on which the tribunal would have to satisfy itself, as, notwithstanding there having been no defence submissions, the claimant Carrier was nonetheless required to prove its case.

The tribunal considered the events leading to this arbitration and the email exchanges between the Merchant and the Carrier concerning the carriage of this cargo. First, the Merchant requested a freight quotation that the Carrier provided. Further exchanges ensued with details about the Vessel that would carry this cargo and arrival dates at the port, including an itinerary and a booking confirmation. Later, the Carrier sent an itinerary to the Merchant, who replied, informing the Carrier that it could not provide the cargo for shipment on the agreed dates.

The message of 26 December read as follows:

We will not make this cut off. Can you confirm when your next Vessel will be loading? We will not be able to get this cargo In houston until approx.. January 09th-12th. ALSO I may have to increase the booking to 1533 cubic meters


On the evidence, there was a binding booking note contract. The Merchant’s message was a clear and unequivocal acceptance of the Carrier’s unqualified proposal of the Vessel. The governing law of that contract was English law, under which a contract does not have to be signed in order to be valid and binding; it is sufficient that the acceptance is communicated to the party making the offer, which is what occurred in the present case. There was no evidence presented that the Merchant had in any way sought to contradict the confirmation; had the Merchant considered that no contract had been formed, the tribunal would have expected to see a copy of a message sent by return disputing his confirmation.

The Merchant’s message of 26 December evinced an intention not to be bound by the booking note and was thus in repudiatory breach of the contract, which repudiation the Carrier had accepted.

Consequently, the Carrier was entitled to dead freight as claimed. Based on the tribunal’s experience, the amounts deducted for port and stevedore costs were realistic and therefore concluded that the Carrier was entitled to be awarded the amount claimed.  

Award accordingly.

Final Award, 26 March 2015

Note: For more information, please check on Jus Mundi awards mostly come into the public domain through enforcement under the NYC 1958.

Related Articles

Latest Articles