Lloyd's Maritime and Commercial Law Quarterly
NORWEGIAN SALEFORM GUARANTEE AND INDEMNITY CLAUSE
The Barenbels
On 11th November 1980, by a memorandum of agreement on the Norwegian Saleform, sellers agreed to sell to the buyers the m.s. Barenfels. The contract of sale contained the standard form guarantee and indemnity clause (cl. 9):
“The sellers guarantee that the vessel, at the time of delivery, is free from all encumbrances and maritime liens or any other debts whatsoever. Should any claims which have been incurred prior to the time of delivery be made against the vessel, the sellers hereby undertake to indemnify the buyers against all consequences of such claims”.
On 10th December 1980 the vessel was delivered to the buyers. After the sale the ship was renamed the Barenbels and traded as before the sale. In February 1982 the vessel called at Umm Said in Qatar. The buyers’ agent in Qatar was the Qatar National Shipping and Transport Company of Doha (Qatar National). The company had also acted as agent for the sellers and was owed money by the sellers in respect of debts incurred prior to the delivery of the Barenbels to the buyers. The debts were incurred (so it was assumed) in relation to the operation of ships owned by the sellers other than the Barenbels.
Early in 1982, Qatar National began proceedings in the Court of Qatar in respect of the moneys owing and, on 6th February 1982, the Doha Court ordered the arrest of the Barenbels pending provision of security for the claim. The security was provided by a guarantee furnished by the buyers’ P. & I. Club and, on 20th February 1982, the ship was released. In 1984 the hearing of the case was still pending and the security still at risk.
In arbitration proceedings, the buyers claimed that the sellers were in breach of the guarantee provisions and were liable on the indemnity undertaking of cl. 9 of the Saleform. The arbitrators concluded:
“that the language of clause 9 is insufficiently clear to entitle the buyers to an indemnity against the consequences of the arrest to which the vessel was subject at Umm Said”.
With the consent of both parties, an appeal was brought to the High Court.1 From the judgment of Sheen, J., it appears that in reaching their conclusion the arbitrators held that:
- (i) the Barenbels was validly arrested in accordance with the law of Qatar but that the scope of the process of arrest under the law was irrelevant to the issue between the sellers and the buyers;
- (ii) “encumbrances” and “maritime liens” in cl. 9 referred to encumbrances and maritime liens in respect of the vessel sold (the Barenfels);
- (iii) the undertaking of indemnity had “a life of its own” but that, as no claim had been made “against the vessel”, there was nothing on which the undertaking operated. In so holding, the arbitrators said:
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