Maritime Contract Law
Maritime Contract Law is highly influenced by international maritime conventions. When a maritime contract is formed depends on the jurisdiction of a country. United States and England jurisdictions have different approaches.
American courts typically recognize that a Maritime Contract can be formed and enforceable as long as the parties have agreed on the essential points in other words main terms of maritime contract, even if other details were left for resolution.
On the contrary, England courts recognize that a Maritime Contract can be formed and enforceable if all terms are fully agreed without any details were left.
Maritime Contract’s (Charterparty’s) main terms are critical and includes ship specifications, time and place of delivery, duration of the charter, place of redelivery, hire rate and freight rate. During ship chartering negotiations, ship owners and charterers try to match cargo to a ship at an acceptable rate in a short time frame. Ship owners and charterers negotiate charterparty main terms and all the other details can be resolved later. if details are not resolved, it will be determined based on the standard form that provides the template for the arrangement.
Maritime Contract (Charterparty) does not have to be written single document. Oral contracts are acceptable. Maritime law enforce a maritime contract as a collection of communications between ship owners and charterers as long as maritime contracts represent a meeting of the minds and an intent to be bound to a contract. That’s why maritime practice will recognize an oral contract.
Ship owners trying to arrange charter of a ship, the shipment of goods, or the repair of a ship will commonly exchange communications, either in the form of faxes or emails, in the nature of a dialogue, to reach agreement on the key terms of the agreement. Once that agreement is reached, parties may leave matters there, and not prepare a formal written contract, either due to lack of time, or because it may appear unnecessary. If a dispute arises, the court will review the whole of the communications to determine if the parties reached an enforceable agreement, and if so, what the terms of that agreement are.
Maritime Contracts (Charterparties) also include several implied terms that are assumed to be within the intent of parties to any maritime transaction. Maritime contracts are subject to an implied obligation of good faith and fair dealing. Under that implied term, when a maritime contract provides that a party has discretion under the contract, that discretion must be exercised in good faith.
All Maritime Contracts (Charterparties) include an implied warranty of best possible performance.
Under Maritime Contracts (Charterparties), a maritime contractor implicitly agrees to perform those services in a diligent and workmanlike manner. Rules and regulations for interpreting a maritime contract are mostly the same as the rules and regulations for interpreting contracts under state law. Contracts are formed according to the mutual intent of both parties as of the time they entered into the contract.
- A Maritime Contract (Charterparty) might be void if it fails to show meeting of the minds of both parties.
- A Maritime Contract (Charterparty) might be void if one party entered into a contract by fraud or misrepresentation.
- All terms of the Maritime Contract (Charterparty) must be consistent and specific language will govern over general language addressing the same matters.
In United States, Maritime Contracts (Charterparties) can be enforced by United States district courts acting under their admiralty jurisdiction. Maritime contracts can also be enforced by state courts with jurisdiction over the parties, under the maritime jurisdiction’s “Saving to Suitors” clause. Although the law that governs the maritime contract will still be the federal maritime law in most cases.
Maritime Contracts (Charterparties) also come within the scope of the United States Federal Arbitration Act and can be enforced by an arbitration brought pursuant to that act. As mentioned in previous paragraph, maritime contracts can also be enforced by state courts with jurisdiction over the parties, under the maritime jurisdiction’s Saving to Suitors Clause.
Saving to Suitors Clause grant plaintiff the right to sue in any state court that has jurisdiction over the parties and the claims. State courts apply state procedural rules and apply federal maritime law to the substance of the maritime claims.
Alternatively, under Saving to Suitors Clause, a plaintiff could bring the case in a federal district court under the court’s diversity jurisdiction that would allow the plaintiff to use the federal forum but avoid maritime-unique rules and preserve the right to a jury trial.