How a Charterparty Is Formed: Offers, Counteroffers, Subjects and Recaps
Chapter 6 examined how charterparties are assembled from standard forms, recaps and rider clauses. This chapter picks up where Chapter 6 left off: it addresses the legal mechanics by which a charterparty comes into existence as a binding contract. The focus is on the principles of offer and acceptance as they apply in the chartering context, the role and authority of shipbrokers in the negotiation process, the taxonomy of “subjects” and their differing legal effects, and the critical question of when exactly the parties cross the line from negotiation into binding commitment. For any shipowner, charterer, operator or broker, understanding these principles is essential — because the question of whether a fixture has been concluded often determines who bears the financial consequences of market movements worth millions of dollars.
Executive summary
- As explained in Chapter 6, charterparties do not need to take any particular form and are routinely concluded in correspondence. This chapter focuses on the legal principles that determine when a binding contract comes into existence.
- Shipbrokers act as intermediaries in the negotiation process but do not ordinarily possess authority to conclude a fixture without the principal’s express approval. If a broker oversteps, the principal is not bound — but the broker may face personal liability.
- Negotiations proceed through a rapid sequence of offers and counteroffers. A counteroffer extinguishes the preceding offer and itself requires acceptance. The original proposal cannot later be revived and accepted.
- Whether a fixture has been concluded depends on two questions: first, have the parties agreed all essential terms? And secondly, have they manifested an intention to defer legal commitment by attaching “subjects”?
- Different subjects produce different legal effects. “Subject to details” does not automatically prevent formation: where the outstanding matters are truly minor or procedural, the contract will normally be treated as concluded once the essential commercial terms are in place. However, where the fixture is “sub details” of a specific standard form containing alternative provisions that require a deliberate choice, the position may be different. In that context “sub details” can operate as the equivalent of “subject to contract.” “Subject to stem” conditions the fixture on cargo availability. “Subject to shipper/receiver approval” and “subject to board approval” negative contractual intent until the relevant consent is obtained. By contrast, “subject to logical amendments” does not prevent formation.
- Once every subject has been lifted, the vessel is “fully fixed” and the parties are bound — regardless of whether a formal charter document has been drawn up or signed.
- Even where a fixture was initially “on subjects,” the parties’ subsequent conduct, for example, delivering and accepting the vessel, can dispense with the outstanding conditions, creating a binding contract by performance.
The formation question
7–001 Charterparties do not require any particular form. A binding charter can come into existence through an exchange of emails, without a signed document, and this practice is “entirely commonplace” (as the Court of Appeal put it in The Golden Ocean). This chapter is concerned with a different question: not in what form must the charter be recorded, but at what point in the negotiations does a binding contract come into existence? That question — which can be worth millions when the freight market moves between a Monday recap and a Friday signature — is determined by applying the ordinary English law principles of offer, acceptance and contractual intention to the specific communications exchanged between the parties or their brokers.
The broker’s authority and its limits
7–002 The question of broker authority is central to formation. As noted in Chapter 6, the overwhelming majority of charterparty negotiations are conducted through shipbrokers rather than directly between principals. For the purposes of contract formation, what matters is not the broker’s commercial role (discussed in Chapter 6) but the legal question: when does a communication from a broker bind the principal?
7–003 A shipbroker does not possess implied or “usual” authority to conclude a charter on the principal’s behalf. In modern practice, brokers function primarily as communication channels, relaying messages back and forth between the respective principals. Many fixtures are concluded entirely through broker-to-broker exchanges in which neither broker purports to do anything more than pass on its principal’s position. The scope of the broker’s mandate is to negotiate and transmit proposals — not to commit the principal without express authorisation to do so.
7–004 Where a broker acts without authority, the principal is not bound. The disappointed counterparty’s remedy lies against the broker personally, by way of a claim for breach of warranty of authority. In Manatee Towing v Oceanbulk (The Bay Ridge), the question was whether brokers authorised to receive and relay offers had overstepped their mandate by confirming a fixture without the principal’s express approval. The lesson is straightforward: the boundaries of authority must be established and communicated at the outset.
7–005 The link between authority and formation is direct. The question of whether a binding contract exists cannot be separated from the question of whether the person who communicated the acceptance had authority to do so. A recap circulated by a broker “for review” is not an acceptance; a recap circulated by a broker who announces that the principal has confirmed the fixture is. The precise language used by the broker at each stage of the negotiation determines whether an offer has been made, accepted or merely passed along for consideration.
Offer and acceptance in the chartering context
7–006 Charterparty formation follows ordinary English contract law principles. There must be a definite offer, an unqualified acceptance of that offer, and consideration moving from both sides. What makes chartering distinctive is not the law itself but the speed and informality of the context in which these principles fall to be applied — rapid negotiations conducted through intermediaries, under intense time pressure, against a volatile freight market, and often using a mixture of email, WhatsApp and telephone.
7–007 An offer must be sufficiently clear and complete for it to be capable of acceptance. It should specify the terms on which the offeror proposes to contract and may stipulate how and by when acceptance must be communicated. In practice, the typical pattern involves a series of written proposals and counterproposals exchanged by email between brokers, sometimes supplemented by telephone calls or WhatsApp messages.
7–008 A counteroffer extinguishes the original offer. Acceptance, in contractual terms, means unqualified assent to every term of the offer as made. Any response that seeks to alter, add to or qualify those terms does not amount to acceptance — instead, it constitutes a counteroffer, which destroys the original offer and itself becomes a new proposal requiring acceptance. This was applied in The Aquafreedom [2024] EWHC 255 (Comm), where Jacobs J held that once Trafigura had countered the owners’ terms, those terms were no longer capable of acceptance — Trafigura could not later change its mind and purport to accept the very offer it had already rejected. For traders, the lesson is that every qualification added to an otherwise attractive offer resets the entire negotiation.
7–009 Timing matters because offers can be withdrawn at any moment before acceptance. Most charterparties come into existence through a series of communications that culminate, by application of ordinary offer-and-acceptance principles, in a binding agreement. The full terms will not usually be repeated in each successive message; the complete picture can only be assembled by reading the entire chain of communications. The Commercial Court in The Aquafreedom confirmed that WhatsApp messages carry equal contractual weight to emails — a party cannot dismiss as “informal” a message that, objectively read, communicates an intention to proceed or to withdraw.
The recap and formation: a question of timing, not of form
7–010 The recap’s significance for formation is narrower. The nature, contents and legal status of the fixture recap were discussed in Chapter 6. The present chapter is concerned with a narrower question: what is the significance of the recap for the purposes of contract formation? Specifically, does the circulation of a recap mean that a binding contract has been concluded?
7–011 Labelling a message as a “recap” does not establish that a contract exists. The recap is evidence of what the parties discussed and, if comprehensive, what they agreed — but whether those agreed terms give rise to a contract depends on whether the requirements of offer and acceptance are satisfied, and whether any outstanding subjects have been lifted.
7–012 Recaps should not be sent without principal approval. If a broker circulates a recap before obtaining that approval, this must be stated explicitly — for example, by noting that the message is sent “for review and comment” rather than for acceptance. On the receiving side, the same caution applies. Until the charterer’s or owner’s broker has secured unqualified approval from its own principal, any response should be framed as preliminary comment, not as acceptance. Careless language at this stage — an unqualified “agreed” or “confirmed” without the necessary authority — can create precisely the contractual commitment the party wished to avoid.
Subjects: the taxonomy of conditions that defer formation
7–013 Chapter 6 introduced the concept of “subjects” and the distinction between genuine conditions precedent and procedural subjects. Chapter 6 noted the distinction between subjects that operate as genuine conditions precedent to the formation of a contract and those that are merely procedural (see Chapter 6, paragraph 6-014). This chapter examines the principal categories of subject in greater detail, drawing on the case law that has refined the analysis in recent years.
7–014 A fixture “on subjects” signals that no binding contract yet exists. The agreed terms are conditional: the agreement takes legal effect only when all outstanding subjects have been lifted (that is, satisfied or removed). Until that point, either party is free to walk away without liability for doing so. Once every subject has been lifted, the vessel is said to be “fully fixed” or “clean fixed.”
7–015 “Subject to details” is the most frequently encountered subject, and its treatment is more nuanced than many traders assume. Chartering negotiations typically proceed in two phases: first, the parties agree the headline commercial terms — the vessel, the period, the rate, the delivery and redelivery arrangements, the laycan — and then they turn to the “details,” meaning the remaining, less commercially critical provisions. The critical question is whether, in the particular case, “sub details” operates as a genuine condition precedent to the formation of a binding contract, or whether it is merely procedural — signalling that certain minor matters remain to be tidied up, but not preventing the main agreement from taking immediate legal effect. As explained in Chapter 6 (paragraph 6-014), a fixture described as “subject to details” will not usually be treated as requiring the parties to agree on every minor term before a binding contract can exist. Once the essential commercial terms are in place, the contract will normally be regarded as concluded, with the remaining details to be resolved as a matter of course. As one court put it, “sub details” in this sense means filling in the blanks, not reopening the entire negotiation.
7–016 The position may be different where the fixture is “sub details” of a specific standard form. For instance, “sub details Gencon CP” — particularly where the form contains alternative provisions that call for a deliberate choice between options. In that context, there are genuine matters requiring agreement rather than mere administrative completion, and “sub details” may operate as a true condition precedent to formation. The leading authority on this more restrictive interpretation is Star Steamship Society v Beogradska Plovidba (The Junior K) [1988] 2 Lloyd’s Rep 583. Steyn J held that although all of the objectively essential terms had been settled, the use of “subject to details” demonstrated that the parties did not intend to be legally committed until the details had also been resolved. His Lordship reasoned that the standard Gencon form could not simply be assumed to fill in the gaps, since parties routinely amended that form and since the form itself contained options on which the parties had not yet made a selection. Steyn J also observed that the approach taken by some United States courts — treating “sub details” as little more than a ministerial formality — did not reflect how the shipping trade actually works.
7–017 The distinction between procedural and genuine “sub details” is one of the most important questions in charterparty formation. Where the subject is found to operate as a true condition precedent (as in The Junior K), the position is equivalent to “subject to contract” in general commercial law: no binding contract exists, and either party remains free to walk away at any stage before the details are finalised, even if doing so appears commercially unfair. English law does not impose liability for withdrawing from negotiations that remain genuinely “on subs.” But where the outstanding “details” are truly minor or ministerial — for example, confirming which bank account freight should be paid to, or agreeing the precise wording of a routine laytime notice provision — the better view is that the contract is already formed and the parties are obliged to resolve the remaining points in good faith or, failing agreement, on reasonable terms.
7–018 Once details are agreed, a binding contract normally exists. In either case, once the details have been agreed (or, where the subject is merely procedural, once the main terms are settled), a binding contract will normally exist even if no formal signed charterparty document has been produced. Nor does the law require the agreed details to be compiled into a further recap or confirmed by both parties before the contract takes effect. As Mance J put it in Egon Oldendorff v Libera Corporation [1995] 2 Lloyd’s Rep 64, there is nothing inherent in the concept of “subject to details” that demands a recapitulation of the agreed details, let alone a mutual confirmation of any such recapitulation. The practical lesson for traders is therefore to pay close attention to what remains outstanding at the “sub details” stage: if the outstanding points are genuinely trivial, walking away may expose the departing party to a claim for breach of an already-formed contract; if they involve real choices (such as which printed form options to select), neither side is yet committed.
7–019 “Subject to contract” is not commonly used in chartering. This expression is not commonly used in the chartering business — “subject to details” is the preferred formulation — but where it appears, its effect is the same as in general commercial law: it signals that neither party intends to be bound until a formal written contract has been entered into. A party that wishes to ensure it is legally committed only upon signing a document incorporating all agreed terms should instruct its broker to make this explicit at every stage of the negotiation.
7–020 “Subject to stem” conditions the fixture on cargo availability. This subject is encountered predominantly in voyage chartering. “Stem” stands for “subject to enough material” — in other words, the charterer is indicating that the fixture is conditional upon it being able to secure a cargo for the vessel. An important point, and one that can surprise owners, is that in the absence of express words or particular circumstances, the charterer is under no implied obligation to use reasonable efforts to find a cargo. If no cargo materialises, the fixture simply does not proceed.
7–021 “Subject to shipper/receiver approval” makes the fixture conditional on third-party consent. Its legal effect has been analysed in two important recent decisions. In Nautica Marine Ltd v Trafigura Trading LLC (The Leonidas) [2020] EWHC 1986 (Comm), Foxton J considered a tanker voyage charter negotiated on subjects including “stem/suppliers/receivers/management approval.” The judge drew a critical distinction between subjects that operate as pre-conditions to the formation of a contract, and those that function as performance conditions within a contract that already exists. A subject involving the exercise of a personal or commercial judgement by one of the putative contracting parties — such as deciding whether the deal makes commercial sense — is qualitatively different from a condition relating to an external event (for example, the grant of an import licence). Foxton J held that the subjects in The Leonidas fell on the formation side of the line: no binding charterparty ever came into existence.
7–022 The Court of Appeal reinforced this analysis in The Newcastle Express. In DHL Project & Chartering Ltd v Gemini Ocean Shipping Co Ltd (The Newcastle Express) [2022] EWCA Civ 1555, a fixture recap was expressed to be “subject shipper/receivers approval.” Males LJ held that the subject negatived any intention to enter into a binding contract, and that this applied equally to the arbitration clause contained in the recap. The separability principle under section 7 of the Arbitration Act 1996 could not assist: if the parties never agreed to be bound at all, there was nothing from which the arbitration clause could be separated.
7–023 “Subject to board approval” and similar expressions will ordinarily negative contractual intent. Phrases such as “subject to board approval,” “subject to management approval” or “subject to review” will ordinarily negative contractual intent until the relevant approval has been obtained. In The Aquafreedom [2024] EWHC 255 (Comm), Jacobs J confirmed that a fixture recap containing terms “sub review both sides” and subject to “charterers’ management approval latest 2 working days after all terms agreed” did not give rise to a binding contract. The two provisions worked in tandem: first, the parties had to review and agree all terms; only then would the two-day period for management approval begin to run. Since the parties had never agreed all terms, the approval subject could not be validly lifted.
7–024 A nuance emerges from the Leonidas framework regarding third-party conditions. Where the agreement is conditional on obtaining permission from a third party — for example, a government licence or a terminal operator’s consent — it is possible for the court to find that a binding contract already exists, containing an implied obligation on one or both parties not to prevent the fulfilment of the condition, or even to use reasonable diligence to satisfy it. The distinction drawn by Foxton J in The Leonidas between subjects involving the exercise of a party’s own commercial judgement (pre-conditions to formation) and subjects relating to external events beyond either party’s control (potentially performance conditions within an existing contract) provides the analytical framework.
7–025 “Subject to logical amendments” does not prevent a binding contract. This expression stands in sharp contrast to “subject to details.” The phrase “with logical alterations” (or “with logical amendments”) does not permit either side to reopen negotiations on any matter it pleases. The only permissible amendments are those that flow logically and inevitably from the terms already agreed — changes that can be determined objectively without further negotiation. Because nothing of substance remains to be bargained over, this expression is consistent with the immediate formation of a binding contract.
7–026 Subsequent conduct can dispense with outstanding subjects. Even where an agreement is “on subjects” and therefore lacks contractual force at the time it is made, the parties’ subsequent conduct can change the picture. If both sides begin to perform as though the agreement were binding — for example, by delivering and accepting the vessel — a court may conclude that the parties have effectively dispensed with the outstanding subjects and treated themselves as contractually committed. In Howard Marine v Ogden [1978] 1 Lloyd’s Rep 334, barges were offered “subject to availability and charterparty.” No signed charter was ever produced. The court nonetheless held that a contract had come into existence on the agreed terms when the barges were physically delivered to and employed by the charterers.
7–027 The Botnica provides a more recent illustration of waiver by election. In The Botnica [2007] 1 Lloyd’s Rep 37, a charter was agreed “subject to the signing of mutually agreeable contract terms and conditions.” Aikens J held that this subject initially prevented any binding contract from arising. But the vessel was subsequently delivered and put to use. Analysing the position through the lens of waiver by election, the judge concluded that by taking delivery and operating the vessel, the charterers had elected to treat the charter as binding and had waived the requirement for a formal signature.
Lifting subjects: when commitment crystallises
7–028 Most binding agreements arise before any formal charter is drawn up. In the vast majority of chartering transactions, a binding agreement comes into existence before any formal charterparty document is drawn up, let alone signed. The point of commitment is typically signalled by the parties (or their brokers) confirming that the vessel is “fully fixed,” “clean fixed” or that “all subs are lifted.” A recap email is then circulated to record the concluded fixture (see Chapter 6 on the function and contents of the recap).
7–029 The “recap” label does not by itself confirm a concluded contract. As noted at paragraph 7–011 above, labelling a message as a “recap” does not by itself mean that a contract has been concluded. The analysis always involves two questions. First, have the parties reached agreement on all necessary terms in accordance with the ordinary principles of offer and acceptance? And secondly, even if they have, have they nonetheless manifested an intention to defer the moment at which a legally binding contract comes into being — for example, by attaching subjects that remain outstanding?
7–030 What counts as an “essential term” depends on the parties and the trade. The distinction between “main terms” and “details” was introduced in Chapter 6 (paragraph 6-015). For the purposes of formation, the question is whether the parties have agreed on all the terms they regard as essential. The case law has identified these as typically including: the identities of the owner and charterer; the vessel and her characteristics; the time and place of delivery; the duration of the charter (for a time charter) or the voyage description (for a voyage charter); the place of redelivery; the hire or freight rate; and the printed form upon which the contract is to be based. Ultimately, what is “essential” depends both on the type of charter and on what the particular parties have treated as important in their own negotiations. A term that is routine in one trade may be the deal-breaker in another.
The relationship between the recap and the formal charter
7–031 Chapter 6 addressed this topic from a documentary perspective. This topic was addressed from a documentary perspective in Chapter 6 (paragraphs 6-013 and 6-019 onwards). From a formation perspective, the key points can be stated briefly.
7–032 A signed formal charter supersedes the earlier agreement in the recap. Where the parties do proceed to execute a formal charterparty, the signed document supersedes the earlier agreement reflected in the recap. As Rix LJ put it in HIH v New Hampshire [2001] 2 Lloyd’s Rep 161: where one contract has been intended to supersede an earlier contract, the parties’ rights and obligations must be found exclusively in the later document. The earlier exchanges remain relevant only insofar as they may assist in construing any ambiguity in the formal document.
7–033 If no formal charter is signed, the recap governs. Conversely, if no formal charter is ever signed, the recap — and the correspondence of which it forms part — remains the definitive record of the contract. Courts and tribunals regularly determine the terms of a charterparty by reference to a fixture recap, particularly where one party has refused or neglected to sign a formal document.
Practical points for traders
7–034 Know when you are bound. For any trader, operator or shipowner, the single most important practical question is: at what point did a binding fixture come into existence? When the freight or hire market moves sharply between the recap and the signing of a formal charter — as it frequently does — the answer to that question can determine which party bears losses running into millions of dollars. The analysis always starts with the same enquiries: (i) was there an offer capable of acceptance; (ii) was there an unqualified acceptance of the offer, or instead a counteroffer rejecting the original offer; (iii) was the offer / acceptance conditional or “on subs”; (iv) could the specific conditions prevent formation of a contract, or were they mere administrative details to be filled in; (v) were the “subs” lifted; (vi) did the person communicating offer / acceptance have authority to do so; (vii) where is the contract actually recorded – is it contained in a chain of emails or WhatsApps or is there a formal document superseding the prior exchanges?
7–035 Use subjects deliberately, not by accident. A party that does not wish to be committed until a formal charter has been signed should instruct its broker to make this clear — typically by marking the negotiation as “subject to contract” or “subject to details.” Equally, a party that wants to lock in a fixture as quickly as possible should take care to ensure that unnecessary subjects do not creep into the correspondence. The wording of each email, each WhatsApp message and each broker’s note matters, because English law will construe those words objectively. There is no room for “I didn’t really mean it” after the event.
7–036 Understand the separability trap. Following The Newcastle Express, parties should be aware that an arbitration clause contained in a fixture recap that is “on subjects” may not be binding. If the objective is to ensure that disputes about whether a fixture was concluded are resolved by arbitration rather than by the court, the parties (or their brokers) should agree a freestanding arbitration agreement — separate from the recap — that does not depend on the lifting of subjects for its contractual force.
7–037 Brokers must not exceed their authority. Principals should ensure that their brokers understand the limits of their mandate and do not confirm or conclude a fixture without express permission. Where a broker oversteps, the principal may not be bound, but the broker risks a personal claim for breach of warranty of authority from the disappointed counterparty.
7–038 Read the whole chain of communications. Where no single document records the full contract, the terms must be pieced together from the entire correspondence — including emails, WhatsApp messages and broker notes. Good record-keeping is not merely good practice; it is essential. A missing email or a deleted WhatsApp thread can turn a straightforward case into a costly dispute.
7–039 The formal charter is worth having. Even though a binding fixture may exist without it, the formal charterparty document serves important functions. It reduces scope for disagreement about what was agreed. It provides a clean, self-contained record that can be shared with banks, insurers, sub-charterers and other third parties. And it resolves any ambiguity between the recap and the printed form, because the signed document will prevail. Parties who allow the formal charter to remain unsigned for weeks or months expose themselves to avoidable uncertainty — precisely the kind of uncertainty that generates expensive arbitrations.
Publicly available case links
Howard Marine v Ogden [1978] 1 Lloyd’s Rep 334 – Used in paragraph 7–026 for the principle that conduct (delivering and employing the vessel) can give rise to a binding contract on agreed terms even where the fixture was initially “subject to availability and charterparty.”
Not freely available online
Star Steamship Society v Beogradska Plovidba (The Junior K) [1988] 2 Lloyd’s Rep 583 – Used in paragraphs 7–016 and 7–017 for the holding that “subject to details” of a specific standard form containing alternative provisions is a genuine condition precedent to formation, not a mere formality.
Not freely available online
Egon Oldendorff v Libera Corporation [1995] 2 Lloyd’s Rep 64 – Used in paragraph 7–018 for the point that English law does not require agreed details to be recapitulated or mutually confirmed before a binding contract takes effect.
Not freely available online
Welex AG v Rosa Maritime [1998] 2 Lloyd’s Rep 636 – Used in paragraph 7–001 (by reference to Chapter 6) for the point that a recap can constitute the charterparty where no formal document is produced.
Not freely available online
HIH v New Hampshire [2001] 2 Lloyd’s Rep 161 – Used in paragraph 7–032 for the principle that a signed formal charter supersedes an earlier agreement, so that the parties’ rights must be found exclusively in the later document.
Not freely available online
The Botnica [2007] 1 Lloyd’s Rep 37 – Used in paragraph 7–027 for the principle that parties can waive subjects by election through subsequent conduct (delivering and operating the vessel).
Not freely available online
Golden Ocean Group Ltd v Salgaocar Mining Industries Pvt Ltd [2012] EWCA Civ 265 – Used in paragraph 7–001 for the Court of Appeal’s description of concluding charterparties by email as “entirely commonplace.”
Manatee Towing v Oceanbulk (The Bay Ridge) [2019] EWHC 996 (Comm) – Used in paragraph 7–004 for the question whether brokers authorised to relay communications overstepped by confirming a fixture without express principal approval.
Not freely available online
Nautica Marine Ltd v Trafigura Trading LLC (The Leonidas) [2020] EWHC 1986 (Comm) – Used in paragraphs 7–021 and 7–024 for the critical distinction between subjects that are pre-conditions to formation (involving the exercise of a party’s commercial judgement) and those that are performance conditions in an existing contract (relating to external events).
DHL Project & Chartering Ltd v Gemini Ocean Shipping Co Ltd (The Newcastle Express) [2022] EWCA Civ 1555 – Used in paragraphs 7–022 and 7–036 for the holding that an arbitration clause in a fixture recap that is “on subjects” is not binding; the separability principle does not apply where the subject negatives any intention to conclude a contract.
Southeaster Maritime Ltd v Trafigura Maritime Logistics Pte Ltd (The Aquafreedom) [2024] EWHC 255 (Comm) – Used in paragraphs 7–008, 7–009 and 7–023 for the principles that a counteroffer extinguishes the original offer, that WhatsApp messages carry equal contractual weight to emails, and that “sub review both sides” combined with a management approval subject prevents formation until all terms are agreed and the approval period has run.
