When a firm offer is made and accepted, it may be subject to something else happening before negotiations can become a fixture, i.e. a legally binding contract. This ‘subject’ (or proviso) is an indication that the main parts of the business have been agreed upon, but there are still some details to be finalized. Shipbrokers should avoid peppering the ‘main terms’ with too many ‘subjects’ before the final contract can be concluded as a ‘fixture’. However, some ‘subjects’ (i.e. provisos) are necessary, the important ones being:
- subject to owners’ approval of the charterers;
- subject to the charterers’ approval of the owners;
- subject to the cargo shippers’ or receivers’ approval of the owners or of the vessel;
- subject to the Board of Directors’ approval of the fixture;
- Subject To Enough Merchandise (i.e. cargo) being available – known as
STEM (or strangely but most usually as ‘subject STEM’);
- subject details, i.e. there is no fixture until all the details have been agreed: (except in US LAW);
- Subject Open. Subject to the vessel being available to be negotiated and fixed.
These ‘subjects’ are to be declared by a given time or within a specific period after fixing the main terms and the details.
Under English Law there is no fixture until all the subjects are lifted therefore, as far as an owner is concerned, it is important that there is a time limit on the subjects.