Subagent Agreement

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    The facts were as follows: E.S. Binnings (“Binnings”), an agent at the golf ports, sued the shipping company on an unpaid commission of about $500,000. The shipping company had previously hired a New York steamboat agent, F.W. Hartmann – Co. Inc. (“Hartmann”) as a general agent for regular operations in North America. Hartmann`s contract with the shipping company allowed Hartmann to appoint sub-agents to ports where Hartmann did not have an office. Hartmann appointed Binnings as Hartmann`s sub-agent for the Gulf of The United States and the ports of New Orleans and Houston. This contract between Hartmann and Binnings required both to pay a 3% commission on all cargoes shipped through New Orleans and Houston. Between 1981 and 1984, Hartmann`s financial situation deteriorated and during 1983 and 1984 Binnings accepted Hartmann`s notes for approximately $300,000 for unpaid commissions. However, compensation does not apply to matters arising from the premeditation or negligence of the sub-agent. Although the FONASBA Standard Liner Agency agreement contains a similar clause requiring the line manager to compensate the agent, most agreements developed by the line companies or their lawyers do not contain such a provision.

    It is therefore important that officers try to negotiate the inclusion of such a clause when they are appointed first by a new line leader. The practice of a ship agent employing a sub-agent in a port where the agent himself does not have an office will be known to many readers of The Intermediary. The custom seems to be improving, and this seems to be due to the client`s desire to deal with a small number of agents around the world, so that the officers themselves must make their own arrangements for local representation. FONASBA (Federation of National Associations of Shipbrokers and Agents) recognized the requirement for a standard document and recently published the first edition of a sub-agency agreement. This was adopted at the last annual meeting of FONASBA in October 1998 in Slovenia. The document has also been approved by the Baltic and International Maritime Council (BIMCO). In summary, representatives authorized by their line principles to appoint sub-agents would be well advised to use the FONASBA sub-agency agreement, as it defines the responsibilities and obligations of the parties in a clear and simple document. Copies are available at the Club. In practice, it can, of course, be difficult to convince a line leader to agree that the sub-agents appointed by the General Plenipotentiary actually act as agents of the client.

    A similar case was tried in Canada in 1986 concerning the bankruptcy of a general agent. Once again, the sub-agents failed to convince the court that there was a “contractual practice” between the client and the sub-agent (the contractual relationship between the two parties to the agreement). The Canadian Court was referred to an English case, Calico Printers` Association v. Barclays Bank, and in particular to the judgment of Wright J., which stated: In subagency the broker who brings the buyer actually works for the seller as a sub-agent of the listing broker. This is important because the broker working with the buyer owes fiduciary duties to the seller, not to the buyer.