| Archives: April 2020

Award 1250 – Second degree – Bare boat charter with put option – Price clause – Interpretation or misinterpretation ? – Strict interpretation.


Further to a judicial liquidation, company A had purchased two ferry-type ships, a purchase ratified by the Commercial Court of Paris, which imposed non-transferability of the ships for five years. As it was unable to operate them directly due to an administrative decision, A had chartered them on a bare boat basis to company B. After 5 years, A had the option of selling to B, which undertook to purchase them, each single-ship company, at an agreed price less the lease payments made since chartering. In the end, for tax reasons B requested that the purchase should concern the ships themselves rather than the companies. A memorandum of understanding was drawn up with a clause that included the price terms of the previous plan apart from the deduction of prior lease payments, which

became “…less any amount due by each company in respect of bare boat charter agreements…“
At the end of the 5-year period, A exercised its option, B paid the agreed price but demanded reimbursement of the lease payments, contending in substance that the expression “due by” was erroneous and should read “due to” in reference to the common intention of the parties, whereas A interpreted the agreement literally.

The Arbitral Tribunal found that the disputed clause was clear and its wording objectively comprehensible. Besides the fact that an entire

agreement ruled out any previous statements and negotiations, the contract documents prepared by A’s counsel had been in the possession of B and its counsel for three days, and even though it had discussed numerous points, it did not challenge the new version of the price clause. B thus failed to reverse the presumption of the parties’ common intention and all its claims and submissions were dismissed.