BP Oil International Ltd v Target Shipping Ltd

Where a charterparty provides for a minimum cargo quantity but does not specify the overage rate for a particular voyage, the omission does not mean that no overage freight is payable. The charterer is liable for a reasonable sum, assessed as a question of fact. An option clause must generally be exercised by communicating the election to the other party. Silence or conduct will amount to acceptance only where it objectively demonstrates an intention to contract. In restitution, payment may be recovered where an authorised payment agent was mistaken and the mistake caused the payment. Mere carelessness, internal communication failures or transient uncertainty do not necessarily amount to assumption of risk.

BP chartered the tanker Target from Target Shipping under a voyage charterparty. The charterparty specified a minimum cargo quantity, Worldscale freight for transatlantic voyages, and 50 per cent overage freight for European Mediterranean discharge only. BP directed the vessel to load further cargo at Marmara before discharging in the United States.

The Owners invoiced freight calculated on the full cargo, including full overage freight. BP paid the invoice and subsequently sought recovery of the alleged overpayment. The issues included construction of the freight provisions, the scope and exercise of the backloading clause, alleged variation, rectification, estoppel and mistake.

1. Construction of freight provisions. The Euromed overage term limited the agreed 50 per cent rate to European Mediterranean discharge. It did not establish that no overage freight was payable elsewhere. Nor did the charterparty establish full transatlantic overage freight. The omission was therefore resolved by implying an obligation to pay reasonable overage freight, assessed as a question of fact.
2. Backloading clause. SAC6 was limited by its wording and heading. The vessel had to be diverted to a place within the rotation of previously nominated discharge ports, and the operation had to be a backloading operation following discharge. Marmara was outside the clause’s geographical scope, and loading there before any discharge was outside its operational scope. In any event, BP had not communicated an election to invoke SAC6, so it could not rely on the clause retrospectively.
3. Subsequent agreement and estoppel. The exchanges did not create an agreement for full transatlantic overage freight. BP’s loading of cargo and silence did not unequivocally accept such an offer. The Owners showed neither an unequivocal representation nor detrimental reliance. Rectification was also unavailable: BP had not caused or unconscionably exploited a sufficiently identified mistake.
4. Payment under mistake. The relevant activating agents were those who authorised payment. They mistakenly believed the invoice reflected BP’s liability, and their mistake caused payment. The fact that another employee had a different view would matter only if that employee had decided or accepted that payment should be made regardless of the true position. That was not the case here. BP could recover any amount exceeding reasonable overage freight.
5. Order. The claim succeeded in principle. An inquiry was directed into the proper amount, if any, recoverable by BP. Submissions were invited on the form of the order and outstanding commission issues.