Smit Salvage BV & Ors v Luster Maritime SA & Anor

A binding contract may arise before the parties execute a fuller written agreement, but only where their communications objectively and unambiguously show an intention to be bound by terms sufficient to constitute a contract. Agreement on remuneration or other main terms does not itself establish contractual intention where the parties contemplate further negotiation of the terms governing their relationship.

The court must assess the parties’ communications and conduct as a whole. Urgency, mobilisation, substantial performance, or the absence of words such as “subject to contract” are relevant but not conclusive. In salvage cases, mobilisation and assistance during negotiations may remain consistent with reliance on common law salvage rights if no contract is concluded.

The claimants, led by SMIT Salvage BV, sought salvage remuneration for assistance provided after the m.v. Ever Given grounded in the Suez Canal. The defendants alleged that an exchange of emails on 26 March 2021 created a binding contract under which SMIT would be paid on SCOPIC-based rates, with a refloating bonus, and that the claimants therefore had no common law salvage claim.

The trial was confined to the preliminary issue whether a binding contract for salvage services had been concluded. The court also considered, briefly, the authority of the relevant agents to contract on behalf of the shipowners.

1. No contract concluded. The exchange of emails on 26 March 2021 agreed remuneration terms for a contract that was still being negotiated. It did not create a binding contract between SMIT and either defendant.
2. Objective assessment. Contractual intention was to be determined from what the parties reasonably conveyed to each other through their words and visible conduct, considered as a whole. An intention to be bound could not be found unless that was the only reasonable interpretation of the communications.
3. Further terms. The parties had agreed only some of the commercial points in SMIT’s proposal. The scope of services and detailed Wreckhire terms remained unresolved. The references to ironing out and signing the draft agreement showed that the negotiations had not been completed.
4. Contextual factors. Urgency, the absence of an express “subject to contract” formula, the ultimatum to agree main terms, mobilisation, and the chartering of tugs did not establish contractual intention. Mobilisation and assistance in a salvage context could be consistent with an expectation of a later contract or with reliance on general salvage law.
5. Authorities. The court applied the orthodox principles in RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production) [2010] UKSC 14 and Global Asset Capital Inc v Aabar Block SARL [2017] EWCA Civ 37. The decisions in The Athena and The Kurnia Dewi were decisions on their own facts and did not establish a general salvage-industry practice.
6. Authority. Although unnecessary to the result, the court considered that SKK had authority to contract for salvage services on behalf of Luster, but not Higaki. The issue of ratification did not arise.
7. Disposition. No contract of the kind alleged by the defendants was concluded. The judgment determined the preliminary contractual issue in favour of the claimants.

First-instance decision on a preliminary issue. No prior decision in the same proceedings is stated in the judgment.