Benefits of double-checking

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This article will look at two recent cases handled by ITIC. The claims were not large ones compared to many settled by the Club but they are good examples of the benefits of double checking.

Brokers frequently inform their principals of facts that will influence the outcome of the proposed business. If the broker gets the facts wrong then, as well as the professional embarrassment, they can face a claim from the aggrieved client.

In the first of our pair of claims the broker was acting for the owners of a vessel trading in the Mediterranean.  When considering an offer from charterers, which included the term “time from 17.00 Thursday or a day preceding a holiday until 08.00 hours next working day not to count even if used” the owners asked the brokers for the weekend working times in Algeria.

The broker answered the owner’s question “off the top of his head” and got the answer wrong. The broker advised that the weekend working times were 1700 Thursday to 0800 Saturday, when in fact, as set out in BIMCO’s holiday calendar, the answer should have been 1700 Thursday to 0800 Sunday. A difference of 24 hours.

The owner agreed to the fixture following this negligent advice and had calculated the freight rate on the basis of the shorter period the broker had given. The vessel was delayed in port. The laytime commenced later than the owner anticipated and the eventual shortfall in demurrage was claimed from the broker.

This was a modest claim compared to many settled by the Club. It was however a classic example of a claim that would have been avoided if the broker had checked before answering.

In tanker chartering many errors, especially on port costs, could be avoided by rechecking the relevant provisions of the Worldscale book.

On other occasions the required reference work is an atlas. A few years ago a charterer had fixed a vessel with a loading range of “1/2 safe ports Russian Black Sea”. The Charterer asked his broker if the vessel could load in Odessa. Unfortunately the broker overlooked the fact that Odessa is in the Ukraine and not Russia.

The above claims examples involve brokers who thought they knew the answer but failed to check they were right. The claims involved a failure to check reference works. Sometimes the broker will answer a question about a fixture from his recollection when looking at the charterparty document would have shown he was mistaken. In one case this led to a failure to declare an option to extend a fixture within the period specified in the charterparty.

A different sort of failure to check involves taking time to proof read all of a document. 

In an article in March 2008, we commented on how the address to which the message being sent is often overlooked when the message is being proof read. Great care may be taken over the contents of a message but if the address is wrong the consequences can be severe. We gave an example of how the principal’s confidential bid for a major tender had been sent to a mailing list including all of their competitors.

By way of contrast the second of our claims demonstrated the need to check that all the attachments have been included. The brokers in question arranged a sub-charter. As is often the case the main terms of the sub-charter were fixed with the details “otherwise as per as the head charterparty”.

The sub-charterer asked for a copy of the head charterparty for his review. The head charter had been sent to the broker together with a separate addendum. Unfortunately, while the broker passed the charterparty to the sub-charterers they failed to forward the addendum. The fixture was concluded but without the sub-charterer being aware of the addendum.

The addendum contained provisions in relation to the costs of hold cleaning in the event that the vessel carried cement. This cargo had originally been excluded under the head charterparty but had subsequently been permitted on the terms agreed in the addendum. The addendum provided that the sum of USD 7,500 could be paid by the charterer in lieu of hold cleaning. The carriage of cement under the sublet had been agreed in the main terms but the terms relating to the costs of hold cleaning had not been passed to the sub–charterer.

The charterer was left with an obligation to pay the head owner for hold cleaning but was unable to reclaim the money from the sub–charterer. The broker had to reimburse his principal the USD 7,500.

The claims in this article were simple mistakes. The claims happened to people who were not new to the business but working to tight deadlines. They are however reminders of the benefits of double checking what you are about to say or send.