Misaligned charter terms lead to US$110,000 settlement against shipbroker

A mismatch in contract terms has led to a US$110,000 settlement against a shipbroker, highlighting the risks brokers face when fixtures are not clearly aligned on a back-to-back basis when fixing charter parties.

According to International Transport Intermediaries Club (ITIC), a shipbroker was instructed by their principal to source a ship under a Contract of Affreightment (COA). Following a nomination by the trader, the broker identified a suitable ship, introduced the principal to the owner, and a voyage charter was agreed shortly afterwards.

However, after the fixture was concluded, it became clear that the terms of the head COA and the voyage charter were not fully back-to-back as the charterer had expected. While the voyage charter required the charterer to nominate load and discharge ports and confirm rotation within five days of loading, the head contract placed no such limitation on the trader.

Initially, the trader complied with the five-day requirement, but later exercised their contractual right under the head agreement to amend the port rotation. When this revised rotation was passed on to the shipowner, the owner refused to proceed unless an additional payment of US$200,000 was made.

With no practical alternative available, the voyage charterer paid the additional sum and incurred a loss on the voyage. A claim was then brought against the shipbroker on the basis that they had failed to ensure the contracts were back-to-back.

ITIC supported the shipbroker, arguing that no explicit instruction had been given to make the contracts back-to-back. The principal maintained that such alignment should have been “obvious”, although their own legal team later accepted that this point could be open to challenge if the matter proceeded further.

A commercial settlement was ultimately agreed at US$110,000.

Mark Brattman, Claims Director at ITIC, commented: “This case underlines how easily gaps can arise between related contracts, even in transactions that are perceived as straightforward. Where obligations are not mirrored, parties can find themselves exposed to unexpected liabilities.”

“Parties should be mindful that assumptions about what is ‘obvious’ may not stand up under scrutiny. Clear instructions and careful review of contractual terms remain essential in managing risk and limiting exposure to legal disputes.”