Owners are often faced with charterers who insist that the contracting party to a charterparty is one of their associated companies. That may leave the shipowner without redress if the charterer defaults and the associated company has no assets against which to enforce any judgment.

To guard against this, owners may insist on a parent company guarantee to ensure that, if the charterparty is not performed, they have some financial redress against the charterer. However, where such "guarantees" are never formalised, that may cause difficulties with enforcement.

Golden Ocean Group Ltd v (1) Salgaocar Mining Industries PVT Ltd (2) Anil V Salgaocar [2012] concerned an analogous situation. The Owners had entered into a charterparty which provided that the Charterers' obligations were " fully guaranteed by" the Receivers. No separate document of guarantee was ever drawn up, and the Receivers denied that they were liable to pay the Owners because of the requirement of English law that a guarantee be in writing and signed by the guarantor.

The court was unimpressed by this argument, commenting that "the present case is not concerned with prescribing best or prudent practice. It is concerned with ensuring, so far as is possible, that the adoption of usual and accepted practice cannot be used as a vehicle for injustice by permitting parties to break promises". The court held that the e-mail communications between the parties created a valid and binding contract of guarantee.

While the Golden Ocean decision is encouraging, it was made on its own facts and so it should not be assumed that all e-mail exchanges of this type will create binding guarantees. English law authority also may not assist where enforcement is to take place abroad, as the guarantor may resist enforcement and/or re-litigate the question of whether there is a binding guarantee under the local law.

While it may be possible to resolve these difficulties, they add to cost, delay and uncertainty. The Golden Ocean decision is a timely reminder, in difficult market conditions, that it is better to have a formal guarantee drawn up and signed at the outset, than to have to rely on the court for assistance later.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.