Shipbrokers Commission

The agent has negotiated the contract on behalf of his principal, he is not an actual part of that contract; under English law the doctrine of “privity* of contract” which states that one cannot sue under a contract unless one is party to it. Until recent times this caused brokers in the chartering world considerable problems if the principal (the shipowner) was reluctant to pay the commission despite the fact that the commission had probably been spelled out in the charter party.  The only route was a clumsy procedure of persuading the charterer to sue the owner on the broker’s behalf. Fortunately this was eventually overcome by the passing of the Contracts (Rights of Third Parties) Act, 1999 which expressly permits a third party (e.g. a shipbroker) to enforce rights granted to him under a contract to which he is not a party. The third party can enforce the term of the contract where the contract expressly provides that he may, the actual wording of the act states “ a person who is not a party to the contract (a third party) may in his own right enforce a term of the contract if . . . .the term purports to confer a benefit on him”.  The Act goes on to insist that the third party(ies) should be   clearly identified. The Act makes it clear that the purpose of exercising his right to enforce a term of the contract there shall be available to the third party any remedy that would have been available to him in an action for breach of contract if he had been party to the contract. Such an Act to rectify a problem in English law has not been necessary under most other systems of law. Under the laws of France, Denmark, Norway, Germany, Spain, America, The Netherlands and South Africa there is no problem with privity of contract, and the broker has a direct action on the contract.