Establishing Contractual Terms Where There Is No Signed Contract

Tryggingarfelagio Foroyar P/F v CPT Empresas Marítimas SA ('M/V Athena') [2011] EWHC 589 (Admlty)

In this case, Ince & Co acted for Chilean salvage and maritime logistics provider, CPT Empresas Marítimas SA.

Parties can sometimes agree on the main terms of their contract but intend to add to those terms later. The basic agreement may be a standard form contract, with amendments to be made or bespoke clauses to be added subsequently. Under English law, a contract may be binding between the parties even if certain terms have not been finalised where the Court concludes that the parties had intended to create legally binding relations and the essential terms had been agreed (see, for example, RTS Flexible Systems v Molenski Alois Muller [2010] UKSC 14). The test as to the parties' intention is objective not subjective. Where contractual negotiations do not culminate in a clear recap or a signed contract, disputes may arise as to whether a contract was in fact concluded and, if so, on what terms. In the present case, Mr Justice David Steel gave some useful guidance on the principles that apply in deciding such disputes.

Background to the dispute

The M/V Athena was a large factory trawler owned by Thor Fisheries ("Thor"). Thor engaged CPT Empresas Marítimas SA ("CPT") to provide fire fighting and associated services to the Athena when she suffered a fire off Chile in 2007. The contract for salvage type services was negotiated in urgent circumstances, largely by e-mail and telephone between the parties' commercial agents. However, no contract was drawn up and signed. During the course of the fire fighting operation, the fire re-ignited and spread, causing further damage to the vessel. Thor alleged that this was due to CPT's negligence and terminated their services.

Thor's Hull and Machinery underwriters, Tryggingarfelagio Foroyar P/F ("TF"), settled the insurance claim and commenced a subrogated claim against CPT in Chilean proceedings for some US$37 million. CPT contended in response that the Chilean Courts did not have jurisdiction to determine the dispute, on the grounds that the parties had contracted on BIMCO Wreckhire 99 terms that incorporate a London arbitration clause. A further very important point was that the BIMCO Wreckhire 99 terms include a "knock for knock" liabilities clause which, if applicable, would exempt CPT as the contractors from liability for "loss or damage of whatsoever nature sustained by the Vessel, whether or not the...