Rights and Obligations of a Shipbroker
A principal (shipowner or trader) can ruin a shipbroker’s market by over-quoting his own ship or cargo, thereby forcing the market against him by giving the impression of being desperate.
A principal who changes his mind mid-negotiation by back-trading will damage both his own reputation and also his shipbroker’s future credibility. There is a fine line between a shipbroker giving advice and being perceived as interfering with his principal’s business. This balancing act depends on experience and the trust and needs of the principal. It is wise for both shipbrokers and principals to vet each other, if possible well in advance of needing to work with each other.
Shipbrokers commission are nowadays protected by the Contracts (Rights of Third Parties) Act 1999 under English law, which governs most charterparties. There is a benefit with being associated with a professional institution such as the Baltic Exchange or the Institute of Chartered Shipshipbrokers (ICS).
Unlike in the insurance market, in which initial full disclosure of all facts is a legal duty, shipbrokers know that ethically it is vital to establish trust and to maintain a good reputation in the market place.
Disclosure of too many facts too early could be abused by a principal, in which case that principal could be shunned by the shipbroking fraternity, if necessary world-wide. Eventually news will spread to future charterers or owners.