How an implied contract sidestepped a time bar - Glencore v OMV
Posted on 27th April 2018 at 11:35
As we outlined on 24 March, in Lukoil v Ocean Tankers ( EWHC 163 (Comm)) charterers successfully identified a claim as demurrage, thus time-barring it under a standard clause. The 23 April decision in Glencore Energy v OMV ( EWHC 895 (Comm)) involved a similar approach, but this time the claimant prevailed under a rarely used legal structure. The dispute concerned a sale contact but could easily have arisen under a charterparty.
During the carriage of oil sold under a CFR contract there was congestion at the discharge port and the sellers agreed to the buyers’ request for the tanker to wait offshore until a berth became available. This is commonplace and happens many times daily and worldwide.
When the sellers later claimed for the time and also the bunkers used, the buyers argued that it was a demurrage claim and so time-barred, citing a provision reflecting familiar charterparty terms, that;
“Any claim for demurrage [was] to be received latest 90 days from completion of discharge otherwise it [would] be deemed to have been waived …”
As in the Lukoil case, everything depended on the nature of the claim.
Perhaps partly seeking to adopt the description and invoicing of the claim elsewhere as one for demurrage, the buyers urged that it was precisely that and had come about by either (a) straightforward application or (b) variation of the contract, and either way the 90 day deadline was intact and barred the claim.
The sellers rejected that, but they still needed to be able to point to a contract. Somehow they had to show that the buyers had agreed to pay for the time and bunkers used, and in a way that did not involve the time bar. They argued for an implied contract.
Application, or variation, of the contract?
The court rejected the buyers’ arguments because (a) the operational events while and after the vessel waited simply did not fit within the contract terms and (b) similarly, to cover what had happened, any contract variation would have needed major change to several clauses, and there was no such thing.
The sellers said the correspondence showed that, due to their agreeing that the vessel would wait, there was an implied contract that they would be paid - for what was a period of detention - at the demurrage rate, and that they would also be reimbursed for the additional bunkers.
The buyers argued that the courts only imply a contract when it is necessary, and do not when the matter is already covered, which they had said it was.
The judge said this was a straightforward case of an implied contract for what has been called "delay by agreement".
The buyers had asked the sellers to do something outside the contract terms and the sellers had agreed. It was wrong to describe the extra performance as falling under the contract (as it did not), and there was an implied contract that the vessel would wait as asked and the buyers would meet the cost of that. This included the additional bunkers, as shown by the buyers’ unusual request for related ROB figures.
An implied contract was necessary here, to give effect to a business reality which anticipated enforceable obligations, without which the sellers would not have been paid for what they had agreed to.
The claim was for detention, not demurrage, though as here it was acceptable to use the demurrage rate, and moreover it did not matter how things had been described and invoiced by owners under the charterparty.
The sellers were not time-barred and their claim succeeded.
Many fixtures contain what are often lengthy provisions on for example waiting, diversion, contra-rotation, extra steaming and additional bunkers, and commercial analysts are used to applying these and calculating the resulting costs. However, this case shows that:
Amid the heat of detailed operations, it is sometimes essential for parties to take time to think about how requested changes might affect arrangements, and how that will be paid for;
It might be necessary to set out what has been agreed, so that all is captured, in the moment, rather than having to tackle it afterwards and perhaps face ingenious and motivated argument; also
As ever, time bar should be watched carefully, and the arguable nature of each aspect of a claim should be checked against the wording of the relevant clause; and finally
Though readily found here, implied contract is by no means common and parties should not rely on it.
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