Nisshin Shipping v Cleaves [2003]

Nisshin Shipping Co Ltd v Cleaves & Co Ltd & Ors [2003] EWHC 2602 involves issues related to a contract, arbitration, repudiation, and commission. It also delves into the application of the Contracts (Rights of Third Parties) Act 1999.

Cleaves & Co Ltd (Cleaves) negotiated nine time charters on behalf of Nisshin Shipping Co Ltd (Nisshin). The contract between Cleaves and Nisshin outlined that Cleaves was entitled to receive a commission as a broker. Additionally, the contract contained an arbitration clause, broad enough to allow a claim by the charterers (Cleaves) against the owners (Nisshin) for failure to pay the agreed commission. Dispute arose when Nisshin refused to pay the commission, alleging that Cleaves had repudiated the contract by having an interest with one of Nisshin’s competitors. Nisshin considered this a termination of the contract and cancellation of any entitled commission, leading to arbitration.

Nisshin's application was dismissed. The court held that the commission clauses were designed to confer a benefit on Cleaves, specifically entitling them to a commission as a broker. It was emphasised that Section 1(2) of the Act did not provide that Section 1(b) did not apply if Section 1(2) applied to the wording of the contract. The court clarified that for Section 1(b) to apply, it must be clear under the construction of the contract that the parties intended the benefit of a commission to be enforceable by a third party. This determination should be made by considering all the relevant circumstances at the time.

The court found that the charter parties were neutral, meaning they did not express any intention to disallow the brokers (Cleaves) from claiming a commission. Consequently, Cleaves was deemed entitled to claim a commission in its own right under Section 1 of the Act. The court rejected Nisshin's argument that Cleaves had repudiated the contract, allowing Cleaves to pursue its claim for the unpaid commission through arbitration.

The decision underscores the importance of contractual language and the intention of the parties in determining the enforceability of contractual terms by third parties under the Contract (Rights of Third Parties) Act 1999. In this case, the court found that the contracts were neutral on the question of third-party enforcement, leading to the application of the presumption under Section 1(1)(b) in favour of the chartering broker.
Back to blog
UOLLB SQE Turbocharge

UOLLB SQE Turbocharge

Get ready for the SQE1 with high-performance SQE Study Guides developed by UOLLB and published by UOL Press to revolutionise your study method and exam strategy.

Turbocharge SQE Performance Here

UOL Case Bank

Upon joining, you become a valuable UOL student and gain instant access to over 2,100 essential case summaries. UOL Case Bank is constantly expanding.
Speed up your revision with us now👇

Subscribe Now

Where are our students from?

Council of Europe
Crown Prosecution Service
Baker Mckenzie 
Yale University
University of Chicago
Columbia University
New York University
University of Michigan 
INSEAD
University of London
University College London (UCL)
London School of Economics (LSE)
King’s College London (KCL)
Royal Holloway, University of London 
Birkbeck, University of London
SOAS, University of London
University of Manchester
University of Zurich
University of York
Brandeis University
University of Exeter
University of Sheffield
Boston University
University of Washington
University of Leeds
University of Law
University of Kent
University of Hull
Queen’s University Belfast
Toronto Metropolitan University
Hong Kong University of Science and Technology
University of Buckingham
ESSEC Business School

  • Criminal Practice

    Diagrams and Charts

    Our carefully designed diagrams and charts will guide you through complex legal issues.

  • Criminal Law

    Clear and Succinct Definitions

    Key concepts are concisely defined to help you understand legal topics quickly.

  • Property Law

    Statutory Provisions

    Statutory provisions are provided side by side with legal concepts to help you swiftly locate the relevant legislation.

  • Public Law

    Case Summaries

    We have summarised important cases for you so that you don't need to read long and boring cases.

  • Evidence

    Rules and Exceptions

    Rules and exceptions are clearly listed so that you know when a rule applies and when it doesn't.

  • Company Law

    Terminology

    Legal terms and key concepts are explained at the beginning of each chapter to help you learn efficiently.

  • Case Law

    Case law is provided side by side with legal concepts so that you know how legal principles and precedents were established.

  • Law Exam Guide

    Law Essay Guide

    You will learn essential law exam skills and essay writing techniques that are not taught in class.

  • Law Exam Guide

    Problem Question Guide

    We will show you how to answer problem questions step by step to achieve first-class results.

  • Conflict of Laws

    Structured Explanations

    Complex legal concepts are broken down into concise and digestible bullet point explanations.

  • Legal System and Method

    Legal Research

    You will learn legal research techniques with our study guide and become a proficient legal researcher.

  • Jurisprudence and Legal Theory

    Exam-focused

    All essential concepts, principles, and case law are included so that you can answer exam questions quickly.