Shipowners-Ensure Third-Party Guarantees Are Watertight

The club says one of the most common reasons for guarantees being avoided is that they have not been signed by the guarantor or someone lawfully authorized by the guarantor.

There must also be consideration for a guarantee to be legally binding. Usually this is a promise by the owner to enter into the charterparty, but if the guarantee is given after concluding the charterparty the consideration is past and no longer valid.

Guarantors may also avoid their obligations if they have not seen the full and final terms of the charterparty before signing the guarantee, or if they have not consented in writing to any subsequent amendments.

Finally, in situations where the owner and charterer agree that the charterer will procure the guarantee, the club warns owners they will have no claim on the proposed guarantor if the charterer fails to get a proper guarantee in place.

Owners should ensure the relevant charterparty clause sets out clearly the charterer’s obligations and the consequences of failing to comply.