Korbetis v. Transgrain
The shipowner’s agents, by sending a message to the wrong facsimile number, had failed to properly communicate acceptance of the charterer’s offer to appoint one of three nominated arbitrators. By the time the shipowner’s agents had realised the clerical error, having failed to follow up the matter for eight months, it was too late to then communicate acceptance to the charterer because a reasonable time in which to accept the offer had already expired. The court would not grant relief by allowing the late commencement of arbitration proceedings because the circumstances had not been within the reasonable contemplation of the parties at the time the contract was made as the kind of circumstance which might trigger an extension of time and it would be unjust to do so when the charterer had the benefit of a contractual time bar.
Adams v Lindsell (1818) 1 B & Ald 681, distinguished.
DMC Category Rating: Confirmed and Developed
By Jim Leighton, BSc (Hons) (University of Plymouth), LLM (Maritime Law) (University of Southampton) and Claims Consultant
Clause 39 of the charterparty [an amended Centrocon arbitration clause]
Korbetis argued that the agreement to appoint the arbitrator was concluded as a matter of law when the fax of 05 April 2004 was sent to the mystery recipient. The judge indicated “the general rule is that an acceptance has no legal effect until it is communicated to the offeror” (Chitty on Contracts, 29th edn, para 2-034). Korbetis sought to rely upon the postal rule established in Adams v Lindsell (1818) 1 B & Ald 681, as confirmed in Entores v Miles  2 QB 327 (CA), “that an acceptance by post is complete as soon as the letter is put into the post-box.” The judge however indicated “those cases assume that the letter has been properly addressed.” He continued “if the letter is wrongly addressed, very different considerations apply. Common sense dictates that it is unfair to the intended recipient that he should be bound by something which he is unlikely to receive because of the fault of the sender.” The judge approved the general approach of Chitty, para 2-056, as it corresponded with principle and justice.
Communication of Acceptance: A Reasonable Time
Korbetis alternatively argued that the offer had been accepted on 24 December 2004, submitting that Transgrain’s offer had not been withdrawn and remained open for acceptance. Transgrain argued that the acceptance of the offer on 24 December 2004 was beyond an implicit ‘reasonable time’ in which the offer could have been accepted. Korbetis submitted that eight months in the context of maritime arbitrations was not a lengthy period; Transgrain submitting that the claim was now time barred in accordance with clause 39. The judge stated “clause 39 is not well drafted, but I think that it would be possible for one party to make an offer to agree to the appointment of a sole arbitrator, which would be open for acceptance within a reasonable period, which might extend beyond the date on which the claim would otherwise become barred. But in deciding what was a reasonable period for acceptance of the offer, the contractual context in which the offer was made is certainly very relevant. The reference to ‘forthwith’ in the opening part of clause 39 connotes some urgency, and the offer should not be construed as intended to give a lengthy period beyond the time at which the bar would otherwise apply. In the circumstances, I am satisfied that eight months was far in excess of a reasonable period for acceptance of the charterers’ offer. It follows that there has been no agreement for the appointment of Mr. Rayment, and that he has no jurisdiction under the charterparty.”
Arbitration Act 1996: Section 12(3)
In seeking an extension of time to commence arbitration proceedings Korbetis relied on s.12(3)(a) of the Arbitration Act 1996.1 Section 12 had been considered in Harbour and General Works Limited v Environment Agency  1 Lloyd’s Rep 65 (CA), per Waller LJ, p.81, which the judge in this case considered to limit s.12(3) to instances where the circumstances were not only beyond the reasonable contemplation of the parties but were also such that if the parties had contemplated the circumstances they would have contemplated that the time bar might not apply in such circumstances. The judge noted that in any case s.12(3) was still subject to circumstances where the court thought it just to grant relief. In terms of the stringency of the ‘reasonable contemplation’ element of the test (in s.12(a)) the judge considered that this was a reference to some “sort of extraneous things which in other contexts might be considered force majeure or frustrating events”. The present case was only concerned with an internal clerical error by failing to fax the acceptance to the right number and omitting to follow up the matter with promptitude with Transgrain or the arbitrator. The judge held that “I do not think that this combination of error and omissions was within the reasonable contemplation of the parties at the time when the contract was made as the kind of circumstance which might trigger an extension of time, or that it would be just to extend the time for commencing arbitration proceedings in circumstances where the respondents have the benefit of a contractual time bar.”
The practical lesson to be learnt is to ensure that good and timely clerical practices have been implemented so that all legally significant written communications have been properly sent and received by the intended recipient before any critical deadline has expired.
Reasonable Time & Time Bar
1. Arbitration Act 1996, s.12(3): “The court shall make an order only if satisfied (a) that the circumstances are such as were outside the reasonable contemplation of the parties when they agreed the provision in question, and that it would be just to extend the time, or (b) that the conduct of one party makes it unjust to hold the other party to the strict terms of the provision in question.”
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