Be wary of "first class charterers"

Norwegian shipbrokers were involved in negotiations for a voyage charter. When entering the market, they described the charters as “first class.” It was also alleged that during the negotiations, they made positive representations that the charterers had the money to perform the fixture. Ultimately, however, after the voyage had been fixed, the charterers did not perform the contract.

The owners obtained an arbitration award but the charterers had no assets to satisfy it. The owners subsequently sued the shipbrokers, stating that they had been induced into the charterparty because of misrepresentations made regarding the financial standing of the charterers. The claim totalled approximately USD 3 million. In its loss prevention presentations, ITIC has discouraged the use of the expression “first class charterers”. If, as is often the case, brokers do not wish to identify the charterers, it is better to use the more neutral “private clients” than anything that could imply a financial reference. In this case, although many of the representations were oral, lawyers advised that there was a real possibility that the broker could be held liable. Accordingly, a settlement was agreed at USD 650,000.

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