IF IN DOUBT CHECK WITH ITIC
- Date: 02/08/1998
ITIC is often asked whether a shipbroker is entitled to claim his commission. It is very important to remember that each case should be considered on its own facts.
Shipbroker cut out of negotiations
There can be few greater sources of annoyance to brokers than the feeling that they have made the necessary contacts only to be deprived of the commission. This is a difficult area, but a broker does have a right where a principal cuts him out of the negotiations and completes the transaction without him. The leading case is Allan -v- Leo Lines (1957), in which the court held that the broker is entitled to commission if his efforts were the "effective cause" of the contract. It is clear that this does not mean that the broker must be the only reason the deal was struck. That would be an impossible standard. However, the broker must materially contribute to the securing of the deal. There is no single stage which negotiations must reach, such as agreement on main terms or inspection, before the broker is entitled to commission. In the case previously referred to the judge held that the important factor was the introduction.
Cancellation of charterparty
A number of charterparty forms such as GENCON and BALTIME contain specific clauses which provide for the broker to receive compensation in the event that the agreement is cancelled. In the absence of this type of clause the broker unfortunately does not have a right to commission if a principal merely chooses to cancel the agreement.
Continuation of charterparty
The NYPE charterparty provides that commission is payable not only on hire earned under the charterparty but "also on any continuation or extension". There may be a practical problem in showing that a continuation or extension has taken place, but the clause clearly does provide that the broker has a right to commission in these circumstances. In the absence of a clause it is difficult to see on what basis the broker could claim that he should be paid further commission.