TABLE
OF AUTHORITIES
A/S
Custodia v. Lessin International, Inc.,
503 F.2d 318 (2d Cir. 1974) 4
CPC
Consolidated Pool Carriers G.m.b.H. v. CTM CIA Transmediterranea S.A.
(The
CPC GALLIA), [1994] 1 Lloyd's Rep. 68 QBD (Comm. Ct.).......... 9,10
Ginsberg
Machine Co. v. J. & H. Label Processing Corp., 341
F.2d 825
(2d
Cir. 1965) ..... 3
Grandi
Traghetti Spa v. Polish Baltic Shipping Co., Tribunal
of Genoa 23 January 1989, Dir. Mar. 1990, 1049)..... 13
Granit
S.A. v. Benship International, Inc., [1994]
1 Lloyd's Rep. 526 QBD
(Comm.
Ct.) ............. 13
Great
Circle Lines, Ltd. v. Matheson & Co., 681
F.2d 121
(2d
Cir. 1982) . 2,
3, 4, 5, 6, 9, 12, 14
Interocean
Shipping Co. v. National Shipping and Trading Corp.,
462
F.2d 673 (2d Cir. 1972) .. 3,
4
J.
Lauritzen A/S v. Korea Shipping Corp., 1986
A.M.C. 2450
(S.D.N.Y.
1986) ..... 5
Manatee
Towing Co. v. Oceanbulk Maritime S.A. (The
BAY RIDGE), [1999] 2 Lloyd's Rep. 227 QBD (Comm. Ct.) ............. 11
Messina
& Co. v. Polskie Linie Oceaniczne, [1995]
2 Lloyd's Rep. 566 QBD
(Comm.
Ct.)....... 10, 11
P.
& C. Bituminous Coal and M.B.A. Sas v. Fermar Spa, Tribunal
of Genoa 12 September 1989, Dir. Mar. 1990, 391). 12,
13
Pollex
Marine Agencies, Inc. v. Louis Dreyfus Corp.,
455 F. Supp. 211 (S.D.N.Y. 1978) aff’d 595 F.2d 1209 (2d Cir. 1979)4
Samos
Shipping Enterprises Ltd. v. Eckhardt and Co. K.G., (The
NISSOS SAMOS) [1985] 1 Lloyd's Rep. 378 QBD (Comm. Ct.)........... 7,
9
Sotiros
Shipping Inc. v. Sameiet
Solholt, (The
SOLHOLT) [1981] 2 Lloyd's Rep.
574
QBD (Comm. Ct.)........... 7,
9
Star
Steamship Society v. Beogradska Plovidba.,
(The JUNIOR K) [1988] 2
Lloyd's
Rep. 583 QBD (Comm. Ct.) ........... 8,
9
V'Soske
v. Barwick,404
F.2d 495 (2d Cir. 1968)...... 3
OTHER
AUTHORITIES
Restatement
(Second) of Conflicts of Law § 18714
BRIEF
OF AMICUS CURIAE, THE MARITIME LAW
ASSOCIATION OF THE UNITED STATES
The Maritime Law Association of the United
States (hereinafter “MLA”) respectfully submits this brief as amicus
curiae.
INTEREST OF AMICUS CURIAE
The MLA is a national bar association
founded in 1899, with a membership of about 3,300 attorneys, law professors,
judges and others interested in maritime law.Its
attorney members, most of whom are specialists in admiralty law, represent
all maritime interests, including shipowners, charterers, cargo interests,
port authorities, seamen, longshoremen, passengers, underwriters, and other
maritime claimants and defendants.
The objectives of the MLA, as stated
in its Articles of Association, are:
To advance reforms in the Maritime Law of the United
States, to facilitate justice in its administration, to promote uniformity
in its enactment and enforcement, to furnish a forum for the discussion
and consideration of problems affecting the Maritime Law and its administration,
to participate as a constituent member of the Comité Maritime International
and as an affiliated organization of the American Bar Association, and
to act with other associations in efforts to bring about a greater harmony
in the shipping laws, regulations and practices in different nations.
The issue of whether a charter party
contract has been formed when there is agreement on essential terms but
continuing negotiations on other “details” is important to admiralty practitioners,
particularly those in New York, since such charter parties are typically
subject to arbitration either in New York or in London and arbitration
is typically required for the resolution of all charter party disputes
once it has been determined that a charter has been formed.
INTRODUCTION
On April 24, 2001, the Court invited
bar associations to provide amicus briefs in this case in view of
the challenge to the Court’s decision in Great Circle Lines, Ltd. v.
Matheson & Co., 681 F.2d 121 (2d Cir. 1982).That
case essentially holds that when a charter party is described as “fixed
subject to details” (frequently shortened to “fixed sub details”), there
is, in fact, a binding contract, if all essential terms have been agreed.An
important consequence of the finding of a charter party being formed is
that all disputes are then typically subject to arbitration, as arbitration
is frequently a term that is agreed at an early stage, generally by agreement
to a charter party form calling for arbitration.The
MLA does not advocate that Great Circle should be overruled but,
instead, urges that it be revisited for clarification.
POINT I
PROPERLY UNDERSTOOD, GREAT
CIRCLE
AND ITS PROGENY
APPEAR TO PROPERLY TREAT
CONTRACT formation AS A QUESTION OF FACT
Almost 30 years ago, in Interocean
Shipping Co. v. National Shipping and Trading Corp., 462 F.2d 673 (2d
Cir. 1972) this Court said:
Under the general principles of contract law, there
is no contract if the parties fail to agree on all the essential terms
or if some of the terms are too indefinite to be enforceable.See
–V’Soske v. Barwick, 404 F.2d 495, 500 (2d Cir. 1968);
Ginsberg
Machine Co. v. J. & H. Label Processing Corp., 341 F.2d 825, 828
(2d Cir. 1965).
Id.
at 676
Following a remand
in that case, this Court later affirmed the finding of the district court
that a charter party contract had been formed, despite continuing negotiations
on non-essential terms.Interocean
Shipping Co. v. National Shipping and Trading Corp., 523 F.2d 527 (2d
Cir. 1975).
That precedent for determining the formation
of a charter party contract was followed or referred to in A/S Custodia
v. Lessin International, Inc., 503 F.2d 318 (2d Cir. 1974) and Pollex
Marine Agencies, Inc. v. Louis Dreyfus Corp., 455 F. Supp. 211 (S.D.N.Y.
1978) aff’d 595 F.2d 1209 (2d Cir. 1979).This
Court’s later decision in Great Circle in 1982 seems only to have
given further recognition to the “general principles of contract law” applied
in Interocean.
If Great Circle has a weakness,
it is in suggesting that the issue of charter party formation is “cut and
dry” and that a charter party clause can readily be classified as being
a “main term” or a “detail.”The
panel in that case wrote:
Charter parties
are formed in two stages.First,
significant “main” terms are negotiated through brokers.These
terms usually include the name of the charterer, name of owner, ship and
its characteristics, time and place of delivery, duration of charter, place
of redelivery, hire rate, printed form upon which the contract is based,
and any other term that a party deems important.These
are considered the “bare-bones” of the contract.The
“main” terms when agreed upon are entitled a “fixture.”
Second, after a “fixture” has been reached, the
parties continue to negotiate “details” amending the form contract specified
in the “fixture.”
681
F.2d at 125
It is respectfully submitted that, properly
interpreted, Great Circle does nothing more than repeat the principle
that the issue of whether there has been a meeting of the minds on “essential”
terms is a question of fact.It does
not and should not establish a per se rule concerning what
is a “main” term and what is a “detail” nor should it be viewed as setting
forth how all types of charters in all trades are negotiated nor when they
become “fixed”.It would, for example,
seem open to argument under Great Circle that even what might commonly
be viewed as a “detail” can be an essential term in a particular case.This
appears to be the interpretation given to Great Circle by the district
court in J. Lauritzen A/S v. Korea Shipping Corp., 1986 A.M.C. 2450
(S.D.N.Y. 1986).Also, what may be
a “detail” in the dry cargo trade may well be an “essential” term in the
carriage of crude oil or natural gas.Additionally,
the concept of what is “essential” may be more complex and elastic in a
charter party for a vessel than in the sale of a parcel of cotton.Further,
under the authorities cited in Interocean, it also appears that
when terms are “too indefinite to be enforceable”, this might also prevent
the formation of a contract.
Since Great Circle has been argued
to stand for different propositions (see Guangzhou’s Petition for Rehearing
En Banc at pp. 9-10), it should be revisited to reemphasize that
Great Circle does not represent a per se rule that a charter
party contract always exists whenever the term “fixed sub details” is used
and that the issue, under American maritime law, is one of fact.
POINT II
THE ENGLISH VIEW
OF “FIXED
SUB DETAILS” APPEARS TO ESTABLISH
A PER SE RULE AGAINST CONTRACT FORMATION
As discussed below, the decisions in
England appear to establish to a per se rule that whenever the term
“fixed sub details” is used, the parties have clearly signaled, apparently
as a matter of law, that they do not intend to be contractually
bound until all details are concluded.The
MLA does not advocate that this approach be adopted by this Court.It
would seem, at the very least, that the ambiguous phrase “fixed sub details”
can mean different things to different people, particularly in view of
the international nature of the shipping business.(see
Point III).This is not to say that
parties cannot agree to suspend the time of contract formation until the
last detail is agreed.This is simply
to say that the ambiguous phase “fixed sub details” should not create such
an effect as a matter of American maritime law.
The first English case to consider is
Sotiros Shipping Inc. v. Sameiet Solholt (The SOLHOLT), [1981] 2
Lloyd's Rep. 574, QBD (Comm. Ct.).In
that case, the Court observed that as a result of negotiations under a
charter, the vessel had been “fixed subject to details.”According
to a statement by the Court in dicta, “[t]hat means that the main
terms were agreed, but until the subsidiary terms and the details had also
been agreed no contact existed.”Id.
at 576.The Court cited neither evidence
nor authority for this proposition.
The phrase “subject details” was considered
again in Samos Shipping Enterprise Ltd. v. Eckhardt and Co. K.G., (The
NISSOS SAMOS), [1985] 1 Lloyd's Rep. 378 QBD (Comm. Ct.), involving
a contract to sell a vessel for scrap.During
negotiations, offers were said to be “subject details.”According
to the Court, “‘subject details’ is a well-known expression in broking
practice which is intended to entitle either party to resile from the contract
if in good faith either party is not satisfied with any of the details
as discussed between them.”Id.
at 385.However, in that case the
dispute between the parties concerned one of the main terms, not the details
and hence this statement might be viewed as dicta.
The meaning and effect of “subject details”
was squarely considered in Star Steamship Society v. Beogradska Plovidba
(The JUNIOR K), [1988] 2 Lloyd's Rep. 583 QBD (Comm. Ct.), which appears
to have become the leading English case on this issue.In
that case, plaintiff shipowner contended that negotiations resulted in
a contract.Defendant charterer refused
to participate further in the negotiations the day after receiving a telex
setting forth agreed main terms, which began with the language “confirm
telcons here recap fixture sub details.”Id.
at 584.The telex closed with the
phrase “SUB DETS GENCON CP.”Id.
at 585.The Court stated that the
two expressions meant “subject to the details of the Gencon charterparty.”Id. The
Court concluded that the parties were still negotiating and had not reached
agreement on a contract.The Court
began with the proposition that “in negotiations parties are free to stipulate
that no binding contract shall come into existence, despite agreement on
all essentials, until agreement is reached on yet unmentioned and unconsidered
detailed provisions.”Id.The
Court then wrote:
Against this background it seems to me clear that
the stipulation “Subject to details of the Gencon charterparty” conveys
that the fixture is conditional upon agreement being reached on the details
of the Gencon form, which had not yet been discussed.In
other words, it was stipulated that there was to be no contract until agreement
had been reached on the details of the Gencon charter-party.
Id. at
586.The Court mentioned that its
view of the language at issue was reinforced by the observations (admittedly
not holdings) of the judges in The SOLHOLT, supra, and The
NISSOS SAMOS,
supra.
In The JUNIOR K, Plaintiff suggested
that the Court might wish to reconsider “the English approach” in light
of this Court's decisions in Great Circle Line and earlier cases.However,
the English Court rejected the invitation.
CPC Consolidated Pool Carriers G.m.b.H.
v. CTM CIA Transmediterranea S.A. (The CPC GALLIA),[1994]
1 Lloyd's Rep. 68 QBD (Comm. Ct.), involved a dispute over whether a contract
had been agreed for transportation of a heavy lift cargo from Japan to
Las Palmas.On July 20, 1991, the
plaintiff shipowner's broker transmitted a telex that began “we have fixed
today as [follows].”Id. at
70.The telex then recited the main
terms agreed between the parties, concluding with the designation of a
printed form -- i.e., “Conline booking note -- subject to details/logical
amendments.”Id.Although
the parties had agreed in main terms that there would be no transshipment
of the cargo, they could not agree on amendments to the transshipment clause
in the Conline booking note.Plaintiff
contended that a contract nevertheless existed because the defendant charterer
was allegedly resisting a “logical amendment” to the form required by the
main terms.Contending that no final
agreement had been reached, the defendant broke off the negotiations.The
Court agreed with defendant that no contract had been created, accepting
the argument that “agreement was never reached on the ‘details’ of [the
Conline] form according to the construction of that word adopted in The
JUNIOR K.”Id. at 73.
In Granit S.A. v. Benship International,
Inc., [1994] 1 Lloyd’s Rep. 526 QBD (Comm. Ct.), plaintiff contended
that verbal negotiations between brokers had resulted in a voyage charter
of a vessel.The defendant shipowner
argued that negotiations had not been concluded and that the parties were
not of one mind on certain terms.Defendant
further contended that the oral negotiations were specifically made “subject
to details” by its broker so that no binding contract ever came about.The
Court observed, “[i]t is common ground that if the negotiations were expressly
‘subject to details’ that that would mean there was no binding contract.”Id.
at 526.As a finding of fact, however,
the Court concluded that negotiations between the brokers had not been
“subject to details” although there were certain minor matters left to
be agreed.
In Messina & Co. v. Polskie Linie
Oceaniczne, [1995] 2 Lloyd's Rep. 566 QBD (Comm. Ct.), a case involving
the alleged sale and purchase of four vessels, the Court held that the
parties had not achieved a binding contract because their negotiations
remained subject to appropriate amendments to a printed sales form (known
as the Norwegian Saleform or “NSF”) and subject to agreement on minor details.This
holding was based on the substance of the negotiations between the parties
and on prior cases, including The JUNIOR K, which “support the conclusion
that where the deal is said to be ‘subject to details’ or, as here, ‘subject
to appropriate amendments’ to the NSF ‘to be mutually agreed’, it is not
intended that there should be a binding contract until the details have
been agreed or, in the instant case, until appropriate amendments to the
NSF have been agreed.”Id.
at 581.
Most recently, Manatee Towing Co.
v. Oceanbulk Maritime S.A. (The BAY RIDGE), [1999] 2 Lloyd’s Rep. 227
QBD (Comm. Ct.), involved a claim by the prospective purchaser of a tanker
who contended that negotiations and correspondence between brokers resulted
in a binding sale and purchase contract for the ship.The
purchaser based its claim largely on a “recap” telex the seller's broker
sent to the prospective buyer's broker at the end of the first day of negotiations.The
telex began with the following language:“We
are pleased to confirm the sale of the above vessel as follows.”Id.
at 232.It continued with a recitation
of agreed main terms and, as to additional terms, said “[o]therwise per
NSF-87 mutually agreed, including” certain specific items enumerated in
the telex.Id. at 233.The
Court held the negotiations did not result in a contract.
It appears as though the foregoing English
cases (which are all lower court cases) adopt the view that the phrase
“sub details” signifies that the parties do not intend to be bound by a
contract until the details have been agreed.This
seems to adopt a per se rule against contract formation whenever
the phrase “sub details” is used and it eschews any factual inquiry as
to what the parties may actually have intended by using the phrase.As
set forth in the next point, the English view does not appear to have been
universally adopted.
POINT III
foreign law does
not appear to be uniform
on the issue of whether an agreement
on a fixture “sub details” means all details
must be agreed before a contract is formed
There does not appear to be a uniform
view among the laws of various nations randomly polled concerning whether
use of the phrase “fixed sub details” creates a binding contract or not.As
correspondence in the addenda to this brief shows, the law of Germany appears
to be consistent with the law in England.However,
the law in Norway, and apparently all of Scandinavia, is more closely aligned
with this Court’s decision in Great Circle.“The
law in Italy is that the clause “subject to details” prevents the formation
of a binding contract where the details still to be agreed are of essential
contractual importance (Tribunal of Genoa 12 September 1989, P. &
C. Bituminous Coal and M.B.A. Sas v. Fermar Spa, Dir. Mar. 1990, 391);
on the other hand, the agreement on the essential terms of the charterparty
may create a binding contract only where there is evidence that the parties
deemed the details to be of minor importance or where the details can be
determined by reference to the law, the customs of the trade or other circumstances
(Tribunal of Genoa 23 January 1989, Grandi Traghetti Spa. v. Polish
Baltic Shipping Co., Dir. Mar. 1990, 1049).”(see
letter dated June 8, 2001 from Studio Legale Mordiglia in the addenda to
this brief).
Based on this unscientific polling, it
appears as though it can be said that there is no uniformity among the
laws of the countries above mentioned on whether a “fixture sub details”
gives rise to a contract or not.
POINT IV
THE CASES TO DATE
HAVE NOT
ADEQUATELY ADDRESSED
THE CONFLICT OF LAW ISSUE
One problem not yet addressed in the
American cases to date is the issue of what law should be applied, under
conflict of law principles, to contract formation.It
would seem at least arguable that where parties have specifically agreed
to English law and London arbitration, this factor may be an important
one in the conflict of law analysis applicable to contract formation.See
Restatement (Second) of Conflicts of Law § 187.This
is not merely an academic point.In
Great Circle, this Court ordered an arbitration to proceed in
London.It is ironic that an
American court would do this whereas an English court would seemingly have
found that no contract existed.
It would therefore appear that some consideration
needs to be given to a conflict of law analysis on the issue of charter
party contract formation where the parties have agreed, in the essential
terms of a “fixture sub details”, to English law and London arbitration.
CONCLUSION
The MLA takes no position with respect
to application of the Great Circle to this case.The
MLA also does not advocate either the overruling of Great Circle
or the adoption of the English view of a fixture “sub details.”At
this or some other time, this Court should make clear, however, that whether
a charter party contract has been formed, under American law, if applicable,
is a question of fact.Furthermore,
it appears that consideration needs to be given to the conflicts of law
issue on contract formation if the parties have agreed on foreign law and
arbitration, particularly English law and London arbitration.
Dated:New York,
New York
June
11, 2001
Respectfully
submitted,
NOURSE
& BOWLES, LLP
Attorneys
for The Maritime Law
Association
of the United States,
Amicus
Curiae
BY:
________________________________
Armand
M. Paré, Jr. (AP-8575)
One
Exchange Plaza at 55 Broadway
New
York, New York 10006
(212)
952-6200
Of Counsel:
William R. Dorsey, III
President, The Maritime Law Association
Of the United
States
Donald J. Kennedy
Keith W. Heard
Vincent M. De Orchis
