Take care if local laws govern contract terms

Shipping accidents often happen in inconvenient locations and are probably down to failures resulting from cost-cutting in relation to supply, maintenance or crewing.

Quite often, people get away with it, and all goes smoothly, but generally, those who cut corners for economic reasons need to have a higher appetite for risk.

Operational caution tends to come with a price tag, but there is at least one operational precaution, or advantage, that costs nothing – ensuring contracts are covered by English law.

There is a reason why, in the most frequently used shipping contracts, English law is the default choice of law and jurisdiction.

These include TOWCON and TOWHIRE, BARGEHIRE and SUPPLYTIME, as well as SALEFORM 2012, to name but a few.

To take just one example, the contract terms that largely protect tug owners have a long history. The legal principles relating to towage were developed in the early 19th century as shipping transitioned to steam power.

The language and terms used found their way into early forms of contract and remain today in the contracts mentioned above.

Everyday common words such as ‘reasonable’ or ‘off-hire’ were the subject of sophisticated discussion and precise rulings a long time ago.

English law was developed ad hoc by court decisions. By a quirk of history, for better or for worse, Britain never developed a written constitution nor codified its law.

"Litigation is very expensive"

Where legislation was laid down by parliamentary enactment, the courts also interpret those acts. 

Under the English Common Law system, judges set judicial precedent in this way, binding principles for future cases.

Always capable of adapting to commercial changes and helped by an independent judiciary and a centralised court system, it led to consistency and fairness and a degree of certainty.

Litigation is very expensive, and thus these decisions, literally thousands of them, came at great cost to litigants. Why then not take full advantage of their investment?

It is therefore with some wonder, sometimes consternation, that I see such carefully sculpted contracts compromised by the insertion of other laws, other than English law, governing their terms.

This may be seen as part of the small print, and for commercial staff who are keen to get the deal over the line, a point perhaps of academic detail.

The client is insisting that his local law should deal with any issues in future and asking you to trust that nothing will go wrong.