Prior Course Of Dealing Between Parties To Fleet Agreement Did Not Mean They Had Agreed To Arbitrate

Lisnave Estaleiros Navais SA v. Chemikalien Seetransport GmbH [2013] EWHC 338 (Comm)

The Commercial Court here considered the circumstances in which a term may be implied into a contract as a result of a course of dealing between the parties. The particular term which the fleet agent was seeking to imply into a Fleet Agreement with a shipyard was an agreement to arbitrate. After considering the relevant case law, the Court held that it was impossible to conclude that the parties intended that this term should form a part of their contract.

The background facts

The Claimant shipyard ("Lisnave") entered into a Fleet Agreement with the Defendant fleet agent ("CST") in relation to repairs for vessels managed by CST. Lisnave subsequently entered into separate ship repair contracts with each of the ship-owners whose vessels were managed by CST. The purpose of the Fleet Agreement was to set out the terms which would apply to each individual repair contract. The repair contracts expressly incorporated Lisnave's General Conditions. In particular, Article 15.2 of the General Conditions provided for disputes to be resolved by arbitration in London.

A dispute later arose between Lisnave and CST in connection with the Fleet Agreement. CST referred the matter to arbitration on the basis that Article 15.2 of the General Conditions was implied into the Fleet Agreement by virtue of the parties' prior course of dealing under the individual ship repair agreements. The parties agreed that the Tribunal would first determine the question of whether there was an agreement to arbitrate. By a majority, the Tribunal agreed that it did have substantive jurisdiction and the Fleet Agreement did incorporate the General Conditions and therefore did provide for arbitration. Lisnave appealed against the award.

The relevant case law

There is a long line of authorities dealing with the implication of a term into a contract. The course of dealing principle was set out in McCutcheon v. David Macbrayne Ltd [1964]1 WLR 125, in which the House of Lords provided that a term could be incorporated into the last of a series of similar contracts, where such a term was used in the previous contracts and, for some reason, appears to have been omitted from the particular contract under consideration. The incorporation of terms by a prior course of dealing, however, is a question of fact and degree, which depends, amongst other things, on the number of previous contracts, how recent they...

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