Without Negligence

A Shipbroker is deemed to enjoy the full authority of his Principal, and should never act without that full authority. In fact, it is incumbent upon the broker to ensure that he has full authority for all offers and counter-offers made on the Principal’s behalf. If for some reason, a broker does not have authority for an offer made, he may be legally liable in an action brought by an injured party receiving and accepting an unauthorised offer. Such an action would be on the basis of ‘breach of warranty of authority’, either ‘with’ or ‘without negligence’. (The broker ‘warrants’ i.e. guarantees that he or she has the authority to make the contract). In the case of a breach ‘with negligence’ a broker mistakenly or intentionally makes an erroneous offer. Where a broker merely passes on an incorrect offer, this is a breach ‘without negligence’ but still a breach for which the broker is responsible. In either case, a broker will be legally liable but, for a breach ‘without negligence’ the broker is entitled to legal recourse against the party passing him the mistaken or erroneous offer. In practice such an action may not succeed – especially in such an international market place involving many different codes of law. Even if legally successful under one or more codes, the chances of full financial recompense may be limited. Let us assume that the SHIPOWNER offers his ship to BROKER A at US$ 25 per tonne, BROKER A passes the offer correctly to BROKER B, who mistakenly passes the offer to the CHARTERER at US$ 24 per tonne. The CHARTERER accepts. There is no contract between the SHIPOWNER and the CHARTERER, but BROKER B could be liable for an action for breach of warranty with negligence.