Maritime Lien Upheld Despite "No Lien" Provision in Contract

Maritime Lien Upheld Despite "No Lien" Provision in Contract

By: Amanda Meadow

Edited By: Andrew Lifsey

World Fuel Services Trading, DMCC v. Hebei Prince Ship. Co., Ltd., 783 F.3d 507 (4th Cir. 2015)

            In World Fuel Servs. Trading v. Hebei Prince Shipping Co., the United States Court of Appeals for the Fourth Circuit reviewed, de novo, the district court’s decision granting summary judgment in favor of World Fuel Services (DMCC). At issue was a maritime lien on a vessel owned by Hebei Prince resulting from a contract for necessities made by Tramp Maritime Enterprises, who had chartered the vessel with DMCC. Despite a “no lien” prohibition in the charters, the district court found that, under the Federal Maritime Lien Act (FMLA), DMCC was entitled to enforce a maritime lien against the vessel as a result of Tramp’s nonpayment of its responsibilities and the contract’s clear language incorporating terms that disclaimer stamps did not waive the seller’s lien.The Fourth Circuit court, considering all of the evidence in light most favorable to the non-moving party, rejected all of Hebei’s arguments. First, it found that the district court had admiralty jurisdiction over the contract because the contract was a maritime contract and the property (the vessel) was within the lawful custody of the court. Second, it found that the question of whether Greek or United States law governed issues of contract formation was irrelevant because the outcome was the same under either country’s laws. Third, privity of contract existed because both Greek and United States law have some form of agency doctrine permitting an agent to commit his principle to business relations with third-party actors. Fourth, the court found that the contract, by clearly and unambiguously referencing other terms not found within the agreement, but providing means for obtaining those terms, validly incorporated the terms. Fifth, the choice of law provision provided for in the contract for necessities encompassed the FMLA because it referred to both “General Maritime Law of the United States” and Florida law as governing. Even if “General Maritime Law of the United States” is a term of art, Florida law, by default, includes United States law and the FMLA. Sixth, the FMLA provides a statutory presumption that Tramp had authority to contract for necessities, and that presumption can only be rebutted by clear and convincing proof of actual knowledge to the contrary on the part of DMCC. Finally, the court was unconvinced by Hebei’s argument that United States law with regard to maritime liens was so inconsistent with international conventions and treaties that the court should conclude that no lien was created. The court found this argument irrelevant because they did not have the authority to overrule precedent set out by a prior panel of the court. Ultimately, the Fourth Circuit Court of Appeals affirmed the lower court’s decision to grant summary judgment in favor of DMCC and upheld the validity of the maritime lien.