Follow up on “subjects”

Follow up on subjects | BDM Blog | BDM Law

In October 2020, we commented on a decision of Foxton J in the Commercial Court (1) on the subject of … subjects! In that case a “subject” was held to be a condition precedent to the formation of a contract rather than a performance condition in the contract (i.e. something that had to be complied with once the contract had come into existence).

The issue raised its head again in a recent case (2) on appeal from an arbitral tribunal who held that charterers were liable for their failure to perform a fixture that was said to be agreed. That fixture contained a provision in the recap to the effect that it was “subject to shipper/receiver’s approval”.

The charterers (who refused to participate in the arbitration) argued that the subjects in question constituted a condition precedent and that, without lifting subjects, there was no contract to repudiate. Furthermore, they said that there was no arbitration agreement (as this was contained in the fixture) and thus the Tribunal had no jurisdiction to make any award.

The owners argued that the subject was a performance condition and that a contract did come into existence. They also argued that charterers’ approval was “not to be unreasonably withheld” as per the terms of the pro-forma charterparty.

Jacobs J followed the decision in The Leonidas in holding that the subject was a condition precedent to the formation of a contract. The subject in question needed to be expressly lifted and in the absence of any express lifting of the subject there was no contract in place. The Tribunal thus had no jurisdiction and the owners’ claims failed.

The lesson from these cases is that where a subject requires something to be done, in this case “approval”, then the party in question needs to expressly lift that subject and it cannot be satisfied by implication nor by inference.

We understand that the owners secured leave to appeal but it remains to be seen whether the case will make it to the Court of Appeal. If so, then it will be interesting to hear their views on the issue.

  1. Nautica Marine Ltd v. Trafigura Trading (The Leonidas) [2020] EWHC 1986 (Comm).
  2. DHL Project & Chartering Ltd v Gemini Ocean Shipping Co Ltd [2022] EWHC 181 (Comm).
Nick Burgess - author profile
Nick Burgess
Partner
Will Copping - author profile
Will Copping
Associate
BDM is a specialist shipping law firm offering high quality legal advice and representation at a reasonable price. Please follow us on social media by clicking below.

Other Recent Blogs

  • Anti Suit Injunctions What are they and when can you get one | BDM Blog | BDM Law
    March 6, 2024

    Anti Suit Injunctions – What are they and when can you get one?

    Recently, we have been advising clients on a possible anti-suit injunction (ASI) against proceedings commenced in breach of an exclusive jurisdiction clause. On the back of that, we felt it might be useful to release this blog to shed more light on these injunctions, in part[...]

    Read more >
  • Red Sea To go or not to go | BDM Blog | BDM Law
    February 21, 2024

    Red Sea: To go or not to go?

    The world is adjusting to the new reality of ships refusing to run the risk of being targeted by missiles launched by Houthi rebels. Over 50 ships have now been targeted with some seriously damaged. So far, no crew have been killed or injured. However, the risks remain. It[...]

    Read more >
  • BDM partners ranked once again in Who's Who Legal Transport 2024 | BDM Blog | BDM Law
    February 19, 2024

    BDM partners ranked once again in “Who’s Who Legal: Transport 2024”

    Our founding partners have once again been listed as among the world’s leading shipping law practitioners in the Who’s Who Legal: Transport 2024 report. Congratulations to David, Nick and Bob! They commented: “We are very happy to be again recognized in this public[...]

    Read more >
+44 203 968 0500
+44 7887 710 950