Thoresen & Co (Bangkok) Ltd v Fathom Marine Company Ltd & Ors

In negotiations for the sale of ships, the expression “subject details” has a recognised commercial meaning. It ordinarily indicates that no binding agreement exists until the details of the proposed formal agreement have been agreed. The court must nevertheless construe the precise words in their commercial context, considering the parties’ words and conduct objectively. Agreed essential terms do not displace an express condition that further details remain to be settled. Additional wording may qualify the expression only if it clearly does so. Where “subject details” and other conditional wording form part of the recap, the court should give those words effect rather than treat them as surplusage.

Thoresen claimed that exchanges between its broker and the sellers’ broker concluded a binding agreement on 27 November 2003 for the purchase of three vessels at an en bloc price of US$42 million less commission.

The sellers denied contractual formation. They relied on clause 10 of the recap, which stated: “Otherwise basis Saleform 93 sub details suitably amended to reflect also the above terms. Closing to take place in Piraeus.” The central issue was whether those words made the transaction subject to contract, or merely required amendments to the standard form to reflect the terms already agreed.

1. Claim dismissed. No binding contract for the sale of the vessels was concluded.
2. The question was one of objective construction. The court had to consider the words used and the surrounding exchanges, asking what a reasonable person in the relevant commercial setting would understand them to mean. Subjective thoughts or reasons of the brokers were irrelevant.
3. The expression “sub details” was a recognised term in the shipping context. Consistently with The Solholt [1981] 2 Lloyd’s Rep 574, The “Junior K” [1998] 2 Lloyd’s Rep 583, and Ignazio Messina & Co v Polskie Linie Oceaniczne [1995] 2 Lloyd’s Rep 566, it ordinarily meant that the main terms might have been agreed but no contract existed until the subsidiary terms and details had also been agreed.
4. The parties were free to stipulate that no contract would arise until further terms were settled. Conversely, words and conduct could show an intention to be bound despite outstanding terms. The relevant wording and context were therefore decisive, in accordance with Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601.
5. Clause 10 could not be read merely as requiring the standard form to be amended to reflect the recap. That construction would make “sub details” and “also” superfluous. “Also” indicated an additional condition: the details had to be agreed, as well as being suitably amended to reflect the agreed terms. The exchanges before and after the recap supported that construction. The later negotiations went beyond mechanical tidying-up and were consistent with the parties not considering themselves already bound.