Voyage Charters

Page 820

Chapter 24


14. Brokerage 141
  A brokerage commission at the rate stated in Box 20 on the freight 142
  earned is due to the party mentioned in Box 20. 143
  In case of non-execution at least ⅓ of the brokerage on the estimated 144
  amount of freight and dead-freight to be paid by the Owners to the 145
  Brokers as indemnity for the latter’s expenses and work. In case of 146
  more voyages the amount of indemnity to be mutually agreed. 147
24.1 The name of the broker and the rate of commission to which he is entitled are to be inserted in Box 20 and his entitlement is generally founded upon his procuring of the charter,1 even if it is referable to subsequent events or considerations. Unlike many forms of charter, the Gencon form does not expressly state by whom the payment of commission is to be made. Since the freight is payable “without discount” under clause 4 and since it is the owner who is responsible for payment of the broker’s indemnity in case of non-execution under the second paragraph of clause 14, the intention appears to be that the charterer is to pay freight without deduction of commission, and that it is the owner who is responsible for payment to the broker. 24.2 The mere fact that the broker is named in the charter does not render him a party to the contract contained in the charterparty. The common law principles of privity of contract would prevent him from suing in his own name for brokerage due to him and he would have to rely on his claim to be enforced by a trust on the basis that the brokerage clause created a trust.2 However, the impact of those principles has been greatly reduced by the Contracts (Rights of Third Parties) Act 1999,3 which in certain circumstances enables persons who are not party to a contract directly to enforce a term of the contract which purports to confer a benefit on them.

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The Contracts (Rights of Third Parties) Act 1999

24.3 The Act came into force on 11 November 1999 and applies to contracts entered into on or after 11 May 2000, unless, or in the case of an earlier contract, it expressly provides for the application of the Act, in which case it will apply as if the contract was entered into on or after the day when the Act came into force.4 Most modern charters will, therefore, be within the ambit of the Act, although each charter will still need to be construed to ensure that the Act applies to it. 24.4 Section 1(1) of the Act provides that a third party may enforce a term of the contract if:
  • (a) the contract expressly5 provides that he may, or
  • (b) subject to subsection (2), the term purports to confer a benefit on him.

It is not customary for brokerage clauses expressly to provide that they may be enforced by the broker, but they will, prima facie, fall within the category (b), since the usual form of brokerage clause purports to confer a benefit on the broker. It is not necessary that the broker be named in the clause, so long as he can reasonably be identified,6 and a clause which merely provides “brokerage X per cent” probably satisfies the requirement of section 1(1) of the Act whether or not there is to be division between brokers. Such clauses are to be construed with a view to achieving their plain commercial purpose.

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