Opinion ID: 772183
Heading Depth: 4
Heading Rank: 2

Heading: The Charter Party

Text: 96 Although the district court determined that the parties did not form an ad hoc arbitration agreement, the district court granted Titan's motion to compel arbitration on the ground that the parties had formed a binding charter party that included an arbitration clause. Specifically, the court concluded that the parties formed a charter party through their respective brokers no later than September 26, 1995, on which date Titan's broker (Seabrokers) confirmed the agreement by faxing both parties a recap or fixture. See id. at 339. Relying on this Court's decision in Great Circle Lines, the district observed that [a] 'recap' communication, or 'fixture,' is recognized throughout the shipping industry as an agreement to a charter party's essential terms. Titan I, 16 F. Supp.2d at 339 (citing Great Circle Lines, 681 F.2d at 125, 125 n.2). In the court's view, the recap embodied the charter party's main terms by incorporating the terms of Shell Time 4 Charter, a standard form charter, which included an arbitration clause. See id. 97 The court then rejected on two grounds Zhen Hua's argument that the charter party did not come into force due to the alleged failure of one of its subjects--the approval of the charter party by Titan's board of directors upon receipt of the inspection report. First, the court found that the weight of the evidence demonstrated that Titan's board did approve the charter party within the agreed time period. See id. Second, relying again on Great Circle Lines, the court held that a'subject detail' does not create a condition subsequent to a charter party. Id. As a result, the court ordered that the parties arbitrate in London pursuant to the charter party's arbitration clause any disputes arising under the charter party. See id. at 340. In a subsequent opinion the court clarified that the London arbitrators may determine whether the actions of either party, subsequent to the formation of the charter party, have vitiated the agreement. 8 Titan II, 182 F.R.D. at 101. 98 On appeal, Zhen Hua contends that the district court made an erroneous finding as to the existence of a charter party. Zhen Hua does not contest, however, that the district court's finding was in accordance with the standard set forth in Great Circle Lines, which holds that a recap communication, such as the one sent on September 26, 1995 in the instant case, represents an agreement as to the charter party's main terms, with the subject details being no more than an acknowledgment of an intention to continue negotiations. Instead, Zhen Hua calls for the overruling of Great Circle Lines, asserting that its holding conflicts with the laws of the United Kingdom and with the trade practices of the shipping industry at large. Unpopular though it may be, Great Circle Lines is binding precedent, and we will not overrule a prior decision of a panel of this Court absent a change in the law by higher authority or by way of an in banc proceeding of this Court. Samuels v. Mann, 13 F.3d 522, 526 (2d Cir. 1993). 99 Given that the district court (as well as this Court) is bound by Great Circle Lines, the district court correctly applied Great Circle Lines to find that the parties had formed a charter party. Under Great Circle Lines, the September 26, 1995 recap constituted proof of a binding agreement or fixture, which is a commitment that a voyage will be performed, and one which presupposes a final contract, with main terms set, and final details to be resolved subsequently. 681 F.2d at 125 n.2. As explicated in Great Circle Lines, 100 [c]harter parties are formed in two stages. First, significant main terms are negotiated through brokers. These terms usually include the name of the charterer, name of owner, ship, and its characteristics, time and place of delivery, duration of charter, place of redelivery, hire rate, printed form upon which the contract is based, and any other term that a party deems important. These are considered the bare- bones of the contract. The main terms when agreed upon are entitled a fixture. Second, after a fixture has been reached, the parties continue to negotiate details amending the form contract specified in the fixture. These minor or side issues flesh-out the original agreement or fixture. The details include a wide variety of matters, for example: fuel used, speed of vessel, condition of ship's holds, exact time of ship's delivery to charterer, brokerage, breakdown, bunkering, option to extend charter, cargo capacity, demurrage and whatever else is deemed by the parties to be of minor importance. 101 Id. at 25 (footnote omitted). In other words, Titan and Zhen Hua formed an enforceable agreement to charter the BIN HE, subject to certain conditions, including: (1) CP Details, i.e., future agreement between the parties about charter party terms other than those enumerated in the broker's recap; (2) a satisfactory inspection of the ship in drydock; (3) the ship's release from a time charter to a company called Camaro, to which it was still chartered at the time; and (4) approval by Titan's board of directors of the proposed charter within 3 days of receipt of the drydock inspection report. Consequently, even if Titan's board did fail to timely approve the charter, such failure would not prevent or undo formation of the charter party. Instead, the failure (if any occurred) would constitute a breach of the charter party for which the London arbitrator may impose a remedy consistent with the terms of the charter party and English law (which, under the charter party, controls the interpretation of the agreement). 9 102