Guarantees

Photo of Robbie PeroniPhoto of Gemma AdamsBy Robbie Peroni and Gemma Adams on Posted in Guarantees

This blog post explores the different ways of drafting guarantees and how this interacts with the obligations of parties within the shipping industry.

What is a guarantee?

A contract of guarantee is an undertaking given by one party (the guarantor) to another party (the beneficiary) to pay the principal obligor’s debts or to perform their obligations set out in the underlying contract. A guarantor has a secondary obligation to the beneficiary and therefore the guarantor will typically only be obliged to act where there has been a breach of the underlying contract. Whilst the commercial reasons behind a guarantee are often straightforward, the use of the word “guarantee”  including the fact that the term “guarantee” is also frequently used to refer to other arrangements, such as contracts of indemnity (the difference between these terms is explored further below), and the differing ways in which guarantees are drafted, often leaves scope for ambiguity. Such ambiguity can be problematic for a beneficiary trying to enforce the provisions of their agreement. Continue Reading

The “Tai Prize” [2021] EWCA Civ 87: An invitation to the Master?

Photo of Nick AustinPhoto of Nick WrightBy Nick Austin and Nick Wright on Posted in Case Law

At a glance: the words “CLEAN ON BOARD” and “SHIPPED in apparent good order and condition” in a draft bill of lading presented to the Master for signature, were merely an invitation by the shippers to the Master to make those representations in accordance with his own assessment.

Our previous briefing on this case can be found here. Continue Reading

Buyer beware: Pre and post delivery issues under Shipbuilding Contracts

Photo of Laura HyneBy Laura Hyne on Posted in Contractual Issues, Shipbuilding

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

Termination of Contracts

Photo of CJ KimPhoto of Celine CollisBy CJ Kim and Celine Collis on Posted in Contractual Issues

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

The “Majesty”: Cargo claims, LoUs, and the importance of clear cross-referencing

Photo of Vassilis MavrakisBy Vassilis Mavrakis on Posted in Cargo Issues, LoU

At a glance: In a recent judgment, the Commercial Court highlighted the difficulties that can arise of out of LoU wording in terms of arbitration agreements and extensions of time.

Background

The M/V Majesty was carrying 25,000 mt of rice under a voyage charterparty on an amended Synacomex 90 form. Five Bs/L were issued. The charterparty contained (a) a BIMCO arbitration clause; and (b) a bespoke arbitration clause (“CP Arbitration Clause”), although it was common ground between the parties that the Bs/L incorporated the bespoke CP Arbitration Clause rather than the BIMCO clause. Continue Reading

No Oral Modification clauses

Photo of Elena EvoyanBy Elena Evoyan on Posted in Case Law, Contractual Issues

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

Assignment of insurances: The secured lender’s obligation to obtain proper recovery

Photo of Vassilis MavrakisBy Vassilis Mavrakis on Posted in Case Law, Finance

In a late 2020 judgment (Aegean Baltic Bank SA v Renzlor Shipping Ltd and Ors [2020] EWHC 2851 (Comm)), the High Court provided important guidance on the position of a bank under security documents relating to a loan agreement, and its obligations when exercising its rights as assignee to the insurance policies over a vessel. The case also highlights the intricacies of disputes involving multiple applicable laws, and the difficulties faced by a party in breach of its disclosure obligations and subject to an order pursuant to which they are not entitled to adduce or rely upon any factual or expert evidence. Continue Reading

Letters of indemnity

Photo of Anushka KarunaratneBy Anushka Karunaratne and Sophie Ainscough on Posted in LOI, Transportation

Welcome back to our new series of ‘back to basics’ blogs in which we will provide blogs focused on common legal issues. This blog post looks at letters of indemnity, a sometimes unreliable but commonplace feature of the shipping industry.

When might an LOI be required:

Letters of indemnity act as an unofficial form of insurance in instances where a party is requested to step out of the bounds of its contracted obligations. Continue Reading

Remote casualty investigations

Photo of Mark MylesBy Mark Myles on Posted in Technology

2020 has presented a number of challenges to the shipping industry, certainly none more so than the global pandemic which has significantly disrupted international trade and profoundly affected crew welfare.  The closure of national borders and the curtailment of commercial flights has introduced other limitations, including the ability of lawyers to travel to vessels following a marine casualty.  While this is certainly less of a concern than the plight of many seafarers, who have been stranded on board vessels without any immediate prospect of returning home to their families, it nevertheless presents another unwelcome headache for ship owners.

Evidence collection

Following any significant marine casualty, whether a collision, grounding, fire, or other significant event, it is essential that evidence is properly preserved.  This will be relied upon as the subsequent legal ramifications of the incident play out, which can often take many years.  The early preservation of evidence prevents electronic data being lost, or crew witnesses leaving the employment of the ship owners and subsequently being unavailable or unwilling to provide witness statements. Continue Reading

LexBlog