Missing profit

A ship broker fixed a tanker for a two-year period to charterer ABC. It was subsequently renewed for a third year. During the course of the third year the brokers arranged a subcharter to XYZ. The subcharter needed to be on back to back terms with the original fixture.

The individual broker who arranged the sublet requested details of the original terms from his colleague who fixed the head charter. Prior to sending over the terms the colleague deleted what he deemed to be the financial details of the original deal - the hire, the period and an ice class profit share clause. This provided that in certain circumstances the ship owner received part of the market earnings from voyages. The colleague deleted the whole clause. The broker used the terms he received and the subcharter fixture was concluded on that basis.

Six months later the owner requested from ABC their earnings from the profit share. ABC in turn told the broker to contact XYZ and have them arrange payment of the profit share. Understandably the subcharterer was not willing to make any such payment as there was no profit share clause within the terms they had agreed.

ABC paid the owners as they were obliged to do and looked to the broker for reimbursement. Whilst it could have been argued that ABC had some responsibility for failing to check that the terms being agreed with the subcharterer were the same as they had agreed with owners, the brokers had clearly been negligent. The claim was for a modest amount of US$ 20,000 and was accordingly settled in full.