Nisshin Shipping v Cleaves [2003]

Court: High Court (Commercial Court)

Facts: Cleaves & Co Ltd (Cleaves), a broker, negotiated nine time charters for Nisshin Shipping Co Ltd (Nisshin). The contract entitled Cleaves to a commission, which Nisshin refused to pay, alleging that Cleaves had breached the contract by collaborating with a competitor. Nisshin sought to terminate the contract and withhold the commission.

Issue: Does the contract allow a third party, Cleaves, to claim a benefit (commission) under the Contracts (Rights of Third Parties) Act 1999?

Held: The court ruled in favor of Cleaves, holding that the commission clauses were designed to benefit Cleaves, thus allowing Cleaves to enforce the commission payment under Section 1 of the Act. Nisshin's argument of contract repudiation was rejected.

Key Judicial Statement: The contracts were neutral concerning third-party enforcement, allowing Cleaves to claim the commission. The intention of the parties and contract language are crucial in determining third-party enforceability.

💡 Leveluplaw: Under the Contracts (Rights of Third Parties) Act 1999, clear contractual language is necessary to establish whether third parties can enforce contract terms.