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ITIC urges shipbrokers to put it in writing

01 October 2014

Specialist transport intermediary insurer, ITIC, has warned shipbrokers that they face the risk of serious financial loss if they fail to ensure that all parties to fixture agreements are in possession of full, confirmed information prior to the conclusion of negotiations.

In the latest issue of its Claims Review, ITIC cites the case of a shipboker asked by a charterer to increase the volume of cargo already booked under a contract of affreightment. The broker, working from home, contacted the owner via text to ask if there was additional space available on the ship. The owner responded ‘Max load 18k', whereupon the charterer, having initially booked 15,000 tonnes of cargo, sold an additional 2,500 tonnes to its client.

Once the sale was concluded and the ship nominated, it transpired that there was no extra space available on board. In fact, the extra space had never been available. The charterer had no option but to book the extra cargo with another ship on the spot market, at a freight rate approximately $80,000 higher than that under the original contract of affreightment.

The charterer held the owner responsible, but the owner rejected the claim on the basis that there was no formal offer/option given for the additional space. The charterer then looked to recover the additional cost from the broker, maintaining that the broker had not made it clear that it did not have a firm option to ship the additional cargo. The issue was ultimately settled with each party absorbing some of the costs, the broker's contribution being reimbursed by ITIC.

In another case, a shipbroker was asked to find a suitable ship to transport a consignment of steel pipes. Shortly after negotiations had started, the charterer informed the broker of an additional dunnage requirement between each of the layers of pipes. But the broker failed to forward this new information to the owner, and it was only when the ship was fully fixed that it transpired that the dunnage requirement meant that the vessel was too small to carry the cargo.

The owner refused to accept the unilateral cancellation of the fixture and reserved its right to deadfreight in the absence of a full cargo. Efforts to find alternative employment were unsuccessful, and the claim was passed on to the shipbroker, on the grounds that it had not relayed the message. The claim was settled by ITIC.

ITIC says, "It is important to ensure that all parties have the correct information. If the broker is not clear as to what has been agreed, it is unlikely that the other parties will be any clearer. A short message, in writing, should be passed between all relevant parties in order to avoid any misunderstandings or incorrect assumptions."