“SUBJECT TO BOD”, can the Charterer just walk away of a Charter Party negotiation?

“SUBJECT TO BOD”, can the Charterer just walk away of a Charter Party negotiation?

We are lately receiving a large number of queries regarding the implication of a “SUBJECT TO BOD” clause, when in the midst of a Charter Party negotiation or right after Owners lift details, the Charterer simply walks away of the negotiation.

BOD stands for “Board of Directors” and it is in fact one of the many clauses which are added into the negotiation of a Charter Party to prevent a party to be bound by the negotiations until such condition is satisfied.

In this case, the Charterer is entitled to seek the approval of its Board of Directors before being bound by the contract it is intending to enter into.

Other examples are the more common “subject to lifting details”, “subject to stem”, “subject financing”, “subject to satisfactory completion of two trial voyages”, “subject to survey”, etc.

All of those phrases do prevent the creation of a contract. They express the intention not to create a contract. There is no contractual intent in them.

Therefore, terms like “SUBJECT TO BOD”, “SUBJECT TO BOARD APPROVAL” or “SUBJECT TO CHARTERERS BOD RECONFIRMATION” will allow the party making the “subject” able to walk away if such approval has not been obtained and the other party will not be able to make any claim for any alleged loss.

So the short answer is yes, if such a clause has been incorporated into the negotiations, the Charterer can walk away of the negotiation if it has not obtained the authorisation of its Board of Directors.

Of course, the above cannot be taken as a legal advice and every case should be looked at in detail. But such expressions remind us about how important is to properly draft our messages to charterers or owners as the case may be and to be very cautious about the consequences of miscalculating the effects of the particular wording used.

Dr. Miquel Roca

LMA Legal

www.lmalegal.co.uk

Twitter: Miquel_Ro

Twitter: LMALegalUK