Nautica Marine Ltd v Trafigura Trading LLC (Rev 1)

A charterparty negotiated on subjects is not binding merely because most subjects are lifted. Whether negotiations have produced a contract is judged objectively from the parties’ communications and conduct as a whole. A subject which is to be lifted by a charterer, particularly one involving its commercial judgment about cargo or suppliers, ordinarily operates as a condition precedent. It does not become a performance condition, carrying an implied duty to take reasonable steps, without clear agreement or conduct. Outstanding terms identified by the parties may prevent formation even if they are not legally essential to enforceability. Where a performance condition depends on third-party approval, ordinary causation principles apply. Damages may be assessed for loss of a chance, but only where a significant chance existed.

The claimant was the registered owner of the vessel Leonidas. Between 8 and 13 January 2016, the parties negotiated a voyage charterparty for the carriage of crude oil from the Caribbean to the Far East.

The negotiations were conducted on subjects, including suppliers’ approval, cargo availability, receivers’ approval and management approval. The claimant contended that an exchange on 13 January concluded a charterparty subject to a performance condition requiring the defendant to take reasonable steps to obtain suppliers’ approval. The defendant denied that any contract had been concluded and disputed liability, causation and the assessment of damages.

Claim dismissed. No binding charterparty was concluded.

1. The court applied the objective approach in RTS Flexible Systems v Molkerei Alois Muller [2010] 1 WLR 753 and the principles summarised in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601. The parties’ intention had to be assessed from the communications as a whole. They could agree to be bound while leaving terms outstanding, but only where that intention was objectively established.
2. In charterparty negotiations, expressions such as subject to details, subject to stem and subjects to approval ordinarily postpone contractual formation. The approach in Star Steamship Society v Beogradska Plovidba (The Junior K) [1988] 2 Lloyd’s Rep 583 and Kokusai Kisen Kabushiki Kaisha v Johnson (1921) 8 Ll L Rep 434 was applied. A subject dependent on a charterer’s personal or commercial judgment is particularly likely to be a condition precedent.
3. The Suppliers’ Approval Subject was a condition precedent. It covered the approvals which the charterer commercially wished to obtain on the supply side, including approval by the relevant supplier, and was satisfied only when lifted or waived. It was not confined to approval by the terminals at Aruba and Statia.
4. The 13 January exchange did not clearly waive or alter that condition, nor did it resolve the outstanding charterer-identity and Trafigura/NJG terms. The continuing references to the fixture being on subjects, the absence of a final recap and the short extension period all pointed against a concluded contract.
5. If the Suppliers’ Approval Subject had been a performance condition, the court would have implied an obligation to take reasonable steps to obtain timely approval. However, the special burden and standard of proof developed in import and export licence cases were not applicable to this subject.
6. On the alternative damages analysis, the court rejected treating the condition as satisfied merely to award full contractual loss. Ordinary causation principles applied, including loss of a chance where appropriate. There was no realistic prospect of Rosneft obtaining the necessary approval by the deadline. Although terminal approval from NuStar would probably have been obtained, that was not the proper construction of the subject.