Contractual Responsibilities and Signing Off
In response to the fall in global freight rates, ITIC has noticed that some port authorities are attempting to place greater responsibility on local ship agents.
We have recently seen one communication from a port authority to an agent attempting to hold it responsible for port dues left unpaid by a ship owner. Although a ship agent's statutory liability varies from jurisdiction to jurisdiction, the general rule in most jurisdictions is that one who acts as an agent does not become personally bound on a contract that he makes for a principal. As such, if port dues are unpaid, the agent should have no financial responsibility for these charges. Any agent who receives such a communication from a port authority should make it clear in response that they cannot accept financial responsibility for the debts of the ship owner.
The same port authority asked the ship agent to ensure that any ship not fully funded prior to departure be referred to them. This guidance was helpful because the agent could simply refer in its communications with owners to the demands of the port authority. Ultimately, if the port authority requires full prefunding for the cost of the port call, prior to departure, the ship agent cannot be responsible for any delay if the port authority decides to detain the ship. Similarly, the risk of the ship agent being left with a large bill from the port authority is removed.
It is also opportune to remind you that ship agents may become involved needlessly in matters which should only concern their principals because of mistakes in the way that they represent themselves to others. If a company signs off a contract in its own name without making it clear that it is acting as agent for and on behalf of another party, there is a risk that the company will be deemed to have contracted on its own behalf.
Agents can make this mistake all too frequently, but it causes problems only when the principal is unable or unwilling to meet his obligations to his contractual partner. However, lack of care can land the agent in the middle of a dispute that has nothing to do with him. The agent may have to satisfy debts or liabilities to his principal’s contractual partners. In most jurisdictions, the agent can avoid this by always signing off every communication “ABC Company, as agent only for and on behalf of XYZ Company.