The Supreme Court today (11 May 2016) handed down its decision in NYK Bulkship (Atlantic) NV v Cargill International SA (The Global Santosh) [2016] UKSC 20.
Simon Rainey QC, visiting fellow of the IISTL, was brought in to argue the SC appeal and represented the successful appellants, Cargill.
The decision of the Supreme Court is a landmark one in relation to a contracting party’s responsibility for the vicarious or delegated performance by a third party of its contractual obligations, both in the common charterparty and international sale of goods contexts.
Overview
The Global Santosh was time chartered on terms that the vessel should be off-hire during any period of detention or arrest by any authority or legal process, unless the detention or arrest was “occasioned by any personal act or omission or default of the Charterers or their agents.” She was arrested as a result of a dispute between the receiver of the cargo and a party who appears to have been a sub-sub-charterer, and which had nothing to do with the owners or the ship. The question which arises on this appeal is whether the arrest can be regarded as having been occasioned by the time charterer’s “agents” in the sense in which that word is used in the proviso.
The meaning of the common term “or their agents” in this charter context raised far-reaching issues as to the extent of a party’s responsibility under a contract for the acts of a third party who vicariously performs some aspect of the party’s contractual obligations or to whom performance of the obligation has been delegated by the creation and operation of a series of sub-contracts.
These issues, previously only canvassed at first instance and open to debate, have now been addressed in full by the Supreme Court.
Summary of the Supreme Court’s Decision
- In general terms, in deciding whether a contracting party is liable or responsible for some act or omission done by a third party in performing that party’s obligation under a contract, the correct approach is to define what obligation has been delegated to the third party and to what extent that party is vicariously acting as the contracting party in acting or omitting to act.
- In the specific context of a time charterparty off hire clause, the question as to who bears responsibility for delay occasioned by an arrest by or involving such a third party is one of construction of the clause.
- But the use of the concept of charterer’s “agents” in such a provision (and others) is to be approached in just the same general way.
- In particular, there is no over-arching concept of ‘spheres of responsibility’ which would treat any party who becomes involved in the chain of contracts around the charterparty which result from the charterer’s trading of the vessel and its commercial or trading arrangements (such as a sub- or sub-sub- charterer or a buyer or seller of cargoes) as its “agent” by being on the charterer’s ‘side of the line’.