Liability Warning – Signing Purchase Orders
The International Transport Intermediaries Club (ITIC) says suppliers of goods and services in the marine industries are increasingly turning to shipmanagers for settlement of their bills when shipowners fail to pay. Accordingly, ITIC has advised its shipmanager members to state clearly when signing purchase orders that they are acting only as agent for the owner.
ITIC says, “Shipmanagers need to be cautious when signing purchase orders. In the current shipping market, we are seeing an increase in the number of claims being made by suppliers against managers when owners do not settle their bills. The supplier pursues the manager on the basis that the purchase order creates a contract directly between the supplier and the manager. It is therefore crucial that the manager ensures that the purchase order clearly states that it is acting as agent for the owner when ordering supplies.
“Managers should not state that supplies are 'for the account of XYZ Ship Management Company'. If this wording is used in purchase orders, it should be changed immediately, as it indicates that the manager is ordering supplies in its own name and, therefore, it assumes the credit risk.”
ITIC recommends that, at the top of the purchase order, managers include the notation, 'Please invoice this order to (name of owner or bareboat charterer etc) c/o XYZ Ship Management Company Limited'. It also warns managers that they should sign off the purchase order, ‘For XYZ Ship Management Company Limited as agents only for and on behalf of (name of owner/bareboat charterer)'.
ITIC Director Stuart Munro says, “The use of the word ‘agent’ alone may not be sufficient. In order to avoid liability, shipmanagers should alter the printed words to provide 'as agents only', always followed by the identity of their principal. It is important for managers to state in which capacity they are acting, not only in connection with purchase orders but in all communications with their clients and suppliers, whether that is by letter, fax or email. They should sign off automatically as agent for their principal.
“If shipmanagers make their agency status clear in this way, they should avoid problems if the shipowner does not pay its bills. Although it will not prevent suppliers trying to sue them, it will make it very difficult for those suppliers to prove that they did not know with whom they were contracting, and it will make it clear that they must look to the shipowner, and not to the manager, for payment. Any agent members who are in doubt about their position should get their purchase orders checked by ITIC.”