Nisshin Shipping Co Ltd v Cleaves & Co Ltd [2004] 1 Lloyds Rep 38

Nisshin entered charterparties containing provisions for payment of commission to Cleaves, the brokers involved in arranging them. Cleaves was not an original party to those charterparties. When payment was disputed, the brokers sought to enforce the commission provisions and invoked the arbitration machinery through the Contracts (Rights of Third Parties) Act 1999. Nisshin challenged their entitlement, including the effect of existing trust-based methods historically used to protect brokers. The court considered the intended benefit, any contrary intention and how the statutory right interacted with the charterparties' arbitration provisions.

Could the brokers enforce the commission provisions under the Contracts (Rights of Third Parties) Act 1999 and use the associated arbitration machinery despite not being original charterparty parties?

Colman J upheld the brokers' ability to enforce the commission provisions under the Contracts (Rights of Third Parties) Act 1999. The charterparty terms identified the brokers and conferred the relevant benefit on them. The availability of a historical trust-based method of enforcement did not show an intention to exclude the additional statutory route. The arbitration provisions also mattered: section 8 applied to the third party's enforcement of the substantive benefit in the circumstances, so the dispute could proceed through arbitration. The decision did not make the brokers original parties to every charterparty obligation. It gave effect to the defined commission benefit and the statutory machinery accompanying its enforcement.

A named or otherwise identified beneficiary of a contractual term may enforce it under the 1999 Act unless proper construction shows the contrary intention required by the statute. A pre-existing trust-based remedy does not itself exclude that route; section 8 can attach arbitration to enforcement.

Nisshin is a leading practical use of the Contracts (Rights of Third Parties) Act 1999. It shows why identifying the beneficiary and benefit is only part of the analysis: construction and the agreed dispute-resolution framework remain important. The case also prevents an old common-law mechanism from being treated as an implied rejection of statutory rights. In a problem, separate the right to commission from whether enforcement belongs in court or arbitration, and identify which statutory provision answers each question.