Charter party subjects: on subs and lifting subjects
Subjects as pre-conditions or performance conditions after The Leonidas, and how to draft a subject that binds without creating a contract.
A fixture agreed on subs is agreed subject to one or more outstanding conditions, most commonly subject to shippers’ or suppliers’ approval, subject to management approval, or subject to stem. Lifting the subjects is the act that converts the agreed terms into a binding charter party.
English law distinguishes a pre-condition, which turns on a party’s own judgment and prevents any contract coming into existence, from a performance condition, which depends on an external event and does not. In Nautica Marine Ltd v Trafigura Trading LLC (The Leonidas) [2020] EWHC 1986 (Comm), Foxton J held that a suppliers’ approval subject was a pre-condition, so no charter party came into existence and the charterer owed no duty to take reasonable steps to lift it.
The full article will cover the two categories and the test that separates them, the drafting that makes a subject a pre-condition, deadlines for lifting, whether a duty of good faith or reasonable endeavours attaches, and the practical consequences when subjects fail.