UK insurer International Transport Intermediaries Club (ITIC) has reimbursed a shipbroker accused of a breach of authority in a CoA row.
It was representing an unnamed brokerage accused by an owner in a dispute arising from a non-performing contract.
ITIC said the broker had negotiated the terms of a CoA between a charterer and the owner, receiving all their instructions from an agent purporting to act for the charterers.
The deal provided for a minimum of 18 shipments to take place over a 12-month period but, when the charterer failed to nominate any cargoes during the period of the CoA, the owner began proceedings against them, claiming damages of $3.1m.
The charterer claimed to not be a party to the CoA and alleged that neither the shipbroker nor the agent had authority to negotiate or enter into the CoA on its behalf.
The owner then alleged the broker had breached its warranty of authority by representing that it was authorised by the charterer to conclude the deal.
ITIC said: "Liability for breach of warranty of authority does not, under English law, depend on any negligence on the part of the shipbroker.
"It is, however, specifically covered under ITIC’s rules. The shipbrokers maintained that they had not purported to represent the charterers and said that the owners had known that the brokers were acting on the agent’s instructions. The agents, meanwhile, claimed that they had been authorised to conclude the CoA."
After filing its defence, the charterer did not take an active part in the proceedings, with the matter going to mediation without a settlement on the day.
The owner then said it would be willing to accept a substantial reduction to its claim.
The broker and agent then negotiated a split of the settlement, with the agent paying the largest proportion. ITIC reimbursed the shipbrokers’ contribution of $260,000.
