Contractual Issues

Subscribe to Contractual Issues

In light of the unprecedented challenges faced by the shipping industry in recent years, BIMCO has recently released its long-awaited model force majeure clause for inclusion in charterparties and other shipping contracts.

Reed Smith first reported on the clause in January 2021 in our article ‘All eyes on BIMCO’s new clauses’ .  

Now that the clause is finally here, what does it say and how can it support the industry?

The context

BIMCO’s new clause aims to provide a comprehensive regime for parties to follow if certain circumstances arise, beyond their reasonable control, that prevent performance of a charterparty or other shipping contract. Force majeure clauses in carriage contracts are traditionally quite rare, with English law preferring to treat the issue as one of risk allocation.

A clearly drafted force majeure clause offers a party the flexibility to suspend performance, and potentially terminate a contract, without, in theory, facing a claim from the unaffected party for breach of contract.…

Continue Reading Expecting the unexpected – BIMCO releases force majeure clause

Exemption clauses, including those purporting to exclude or limit liability for deliberate and repudiatory breaches, are to be construed by reference to the normal principles of contractual construction. There is no presumption in English law that exemption clauses do not apply to fundamental breaches. Nor is there a requirement for any particular form of words or level of language to exclude liability.…

Continue Reading Exemption clauses subject to contractual interpretation

Knock-for-knock clauses are designed for use in commercial contracts when the parties intend that they shall each be responsible for loss or damage to their own property, and any liability to third parties, irrespective of fault as between the contracting parties.
Continue Reading TOWCON 2008 – Knock-for-Knock – Is the Tugowner’s liability exemption absolute?

The global order book for new vessels has been hit by the economic fall out of the pandemic, associated supply chain issues, over-supply and reduced demand in sectors such as offshore. However, with a globally ageing fleet and an increasing demand for greener and more efficient vessels, the shipbuilding market is expected to recover and grow at a rate of 5.7% between 2021-2026.[1] This blog looks at some of the risks posed to a buyer under a shipbuilding contract (“SBC”) both prior to and after delivery of the vessel. …
Continue Reading Buyer beware: Pre and post delivery issues under Shipbuilding Contracts

Welcome back to our new series of ‘back to basics’ blog in which we will provide posts focused on common legal issues. This blog post looks at termination of contract, and the various ways in which contractual obligations could be brought to an end.

Why terminate a contract?

Parties enter into contracts in order to ensure mutually agreed obligations are enforceable by law. However, circumstances may change overtime: the contract may no longer be commercially beneficial, the other party may not be performing their obligations, or external circumstances – such as the COVID-19 pandemic – may render the contract unfeasible or detrimental to a contracting party. As a result, a party may wish to find means by which to bring the contract to end.
Continue Reading Termination of Contracts

We have previously dedicated blog posts to so-called “No Oral Modification” or “NOM” clauses. You can find our previous post focusing on the Supreme Court judgment in MWB Business Exchange Centres v. Rock Advertising [2018] UKSC 24 here.

The validity of contractual modifications is a recurring theme in commercial disputes. A recent English Court of Appeal judgment in Kabab‑Ji S.A.L (Lebanon) v. Kout Food Group (Kuwait) [2020] EWCA Civ 6 considered this issue.

The NOM clause in Kabab‑Ji was not unlike clauses often seen in commercial contracts. It read as follows: “The Agreement may only be amended or modified by a written document executed by duly authorised representatives of both Parties”. The contract also imposed good faith and fair dealing obligations on the parties.

In the underlying arbitration proceedings, Kabab‑Ji claimed against KFG, a company which was not (originally) party to the agreement out of which the dispute arose. Kabab‑Ji argued that KFG had become party to the agreement even though the parties failed to follow the NOM procedure for amending the contractual terms.
Continue Reading No Oral Modification clauses

In Rock Advertising Limited v MWB Business Exchange Centres Limited  [2018] UKSC 24, the Supreme Court has handed down a decision which has provided further certainty in the area of no oral variation /modification clauses, albeit in doing so it has overturned the decision of the Court of Appeal referred to previously in our blog of 7 July 2016.

The wording considered was “All variations to this Licence must be agreed, set out in writing and signed on behalf of both parties before they take effect”. The question was whether the schedule of payments had been revised orally.…

Continue Reading Future proofing your contracts – ‘anti-oral variation’ clauses require even more thought

In the recent case of MSC Mediterranean Shipping Company S.A. v. Cottonex Anstalt [2016] EWCA Civ 789 the Court of Appeal ruled that the commercial purpose of the contract had been frustrated and that demurrage on detained containers which could not be redelivered to the carrier did not accrue indefinitely.
Continue Reading Definitely indefinite? Container Demurrage in the Court of Appeal

The Reed Smith Shipping Group recently published a client alert that looks at the effectiveness of what are commonly termed “no variation” or “anti-oral variation” clauses (i.e. clauses which purport to prevent the contract in question from being amended absent compliance with specified requirements). They are commonly found in commercial contracts in numerous guises. Normally…