The ‘Ever Given’ salvage claim. Contract, or Salvage under 1989 Convention and/or common law?

Two years ago the ‘Ever Given’ threatened to become the ‘Ever Stuck’ in the Suez Canal. By the time ‘Ever Given’ refloated, SMIT had a team on board (with onshore support from Holland), and two chartered tugs, ALP Guard and Carlo Magno, contributing to the salvage effort. Whether SMIT concluded a contract with the owners for their services was the preliminary issue that came before Andrew Baker J in Smit Salvage B.V v Luster Maritime S.A.. [2023] EWHC 697 (Admlty). If the answer was ‘yes’, no salvage claim would lie, only a claim under the contract. If the answer was ‘no’ Smit would be able to claim salvage under the terms of the International Convention on Salvage 1989 and/or at common law.

The owners’ case was that the following exchange of emails on 26 March 2021 resulted in the conclusion of a contract in that consensus ad idem as to all essential terms was created, with a mutual intention, notwithstanding a mutual intention to agree (and sign) more detailed terms, by the following exchange of emails that morning (UTC):

Email (i)

At 11:35 UTC, from Captain Saumitr Sen on behalf of WK Webster & Co Ltd (‘WKW’), a claims manager acting as agent appointed by owners, to Mr Richard Janssen (Managing Director of SMIT) and Mr Jody Sheilds (also of SMIT), copied to various others, stating:

“We refer to our telephone conversation subsequent to my previous email and my further conversation with Japan. As agreed over phone, I am please to confirm as below on behalf of Owners of Ever Given.

Owners agree to the following :

The tugs, dredgers, equipment engaged by SCA and their subsequent salvage claim are separate to the Smit’s offer of assistance.

a) SMIT personnel and equipment to be paid on Scopic 2020 rates

b) Any hired personnel and equipment, out of pocket expenses of SMIT to be paid on scopic 2020 rate + 15% uplift

c) Refloatation Bonus of 35% of Gross invoice value irrespective of the type of assistance rendered.

ci) Refloatation bonus not to be calculated on amounts chargeable for quarantine or isolation waiting period.

cii) Refloatation bonus to SMIT will be applicable if refloatation attempt by SCA on 26 March 2021 is unsuccessful.

We look forward to your confirmation. We can then start ironing out the wreck hire draft agreement so that the same can be signed at the earliest.”

Email (ii)

At 11:40 UTC, from Mr Janssen to Capt Sen, cc. Mr Sheilds and the others, in

reply, stating:

“Thank you Captain and confirmed which is very much appreciated. I shall inform our teams accordingly and we shall follow up with the drafting of the contract upon receipt of your/your client’s feedback to our draft as sent last night.”

Andrew Baker J found that there would be a contract between the parties if and only if they so communicated with each other as to make it appear, judged objectively, that they had reached agreement upon terms sufficient in law to constitute a contract and that they intended to be bound by those terms whether or not they agreed any more detailed set of contract terms. So long as the parties have agreed enough to be capable of constituting a contract, there was no rule of law that if terms of economic or other significance have not been finalised, the parties cannot have intended to be bound

The contract formation issue was whether there was an intention to be bound. The parties did not state in terms whether the intention was to be bound there and then, or only upon agreeing (if they did) a detailed set of contract terms, or only upon signing a written contract having first agreed such terms. Therefore, contractual intent fell to be determined by considering what was reasonably conveyed by the parties to each other about that, by the way they expressed themselves and by their conduct visible to the other, considered as a whole, at least up to and including the moment at which it is alleged that a contract was concluded. An intention to be bound cannot be found where it is not the only reasonable connotation of the parties’ exchanges and conduct, taken as a whole. Exchanges and conduct not consistent only with an intention to be bound are ambiguous, and a contract can only be found in and constructed from unambiguous communication

Andrew Baker J rejected the argument put forward by Mr Jacobs KC, based on previous salvage decisions in The Athena [2023] EWHC 697 (Admlty) and The Kurnia Dewi  [2023] EWHC 697 (Admlty) “that it is common practice in the salvage industry for main terms (remuneration/type of contract) to be agreed and then for a broader contract on WRECKHIRE or other terms to be agreed. The latter contract supersedes the previous contract, which is entered into at a time of urgency and when there is no time for a full agreement to be reached.” They were simply decisions on their own facts, applying to those facts the basic principle stated as to whether there had been an intention to be bound.

The email exchange on 26 March 2021 read objectively and in context, showed that Capt Sen and Mr Janssen did not purport to conclude a contract between SMIT, or any of the other claimants, and the defendants or either of them. The exchange showed an agreement reached on the remuneration terms for a contract that was being negotiated. But the parties made it clear to each other that they were still negotiating, indeed the detailed work of negotiating the contract terms by which they would be bound. They did not communicate to each other an intention to be bound in the absence of completing that work of negotiating and agreeing a detailed set of contract terms. That further work was not completed, as a counter-proposal on detailed terms later sent by Capt Sen put the parties some considerable distance apart, and that gap was never closed.

Therefore, no contract was concluded between SMIT and the owners.

Published by

Professor Simon Baughen

Professor Simon Baughen was appointed as Professor of Shipping Law in September 2013 (previously Reader at the University of Bristol Law School). Simon Baughen studied law at Oxford and practised in maritime law for several years before joining academia. His research interests lie mainly in the field of shipping law, but also include the law of trusts and the environmental law implications of the activities of multinational corporations in the developing world. Simon's book on Shipping Law, has run to seven editions (soon to be eight) and is already well-known to academics and students alike as by far the most learned and approachable work on the subject. Furthermore, he is now the author of the very well-established practitioner's work Summerskill on Laytime. He has an extensive list of publications to his name, including International Trade and the Protection of the Environment, and Human Rights and Corporate Wrongs - Closing the Governance Gap. He has also written and taught extensively on commercial law, trusts and environmental law. Simon is a member of the Institute of International Shipping and Trade Law, a University Research Centre within the School of Law, and he currently teaches at Swansea on the LLM in:Carriage of Goods by Sea, Land and Air; Charterparties Law and Practice; International Corporate Governance.

Leave a Reply