JUDGMENT

Wee Chong Jin CJ:

The appellants, C.F. Sharp & Company (Malaya) Private Limited (Sharp), are ship's agents and shipbrokers. They were instructed in January 1975 by the second respondents, Hai Nguan & Co. (Hai Nguan) to find vessels to carry triple phosphate sulphate, a fertiliser, from Rumania to Indonesia. Unknown to Sharp, Hai Nguan were acting on the instructions of a Mr. Hiswara of B.T. Bina Alam, an Indonesian firm. Hiswara had agreed to purchase 40,000 tons of the fertiliser from a Rumanian company but had arranged with Phillips Petroleum International Inc. (Phillips) for Phillips to be the purchaser who would re-sell the fertiliser to P.T. Bina Alam. By this arrangement Phillips would make a profit of US$80,000 although its part was that of a mere intermediary. Phillips was also asked by Hiswara to find vessels to carry the fertiliser to Indonesian ports for which they would receive a commission of 1.¼% of the charter fees.

The seeds for dispute had thus been planted by Hiswara by his instructing, unknown to each other, Phillips and Hai Nguan to find vessels for carrying the fertiliser. Phillips instructed shipbrokers Stott Nielson and Hai Nguan instructed Sharp. Sharp negotiated with shipbrokers Polfracht (Australiasia) Sydney Pty. (Polfrancht) to charter vessels in the belief that the charterers were Phillips. They conducted the negotiations with Polfracht by telex throughout. They sent two copies of all outgoing and incoming telexes to Hai Nguan as soon as the telexes were sent or received.

On 5 February 1975, through Stott Nielson and unknown to Sharp, the vessel "Montego" was chartered by P.T. Bina Alam to carry a shipment of 10,000 metric tons of the fertiliser. On that date several telexes were exchanged between Sharp and Polfracht as a result of which Polfrancht prepared for signature a charterparty using a standard form of charterparty called the "Nuvoy Voyage Charter Party 1964". Sharp and Polfracht dealt with each other in their telexes by reference to this standard form of charterparty and all their telexes were for the purpose of completing or adding to this printed form. The prepared charterparty was signed by Polfracht as agents for Grace Shipping Inc. who are named in it as T/C (Time Charter) Owners. In the prepared charterparty the charterers were named as Phillips Petroleum International Inc.

The charterparty was then sent to Sharp for signature by Phillips. A meeting was arranged to take place on 8 February at the office of Mr. de Guzman, the manager of Phillips. At that meeting Mr. Hiswara, Mr. de Guzman, Mr. Windt, the assistant office manager of the Liner Department of Sharp, Mr. Tessensohn, the assistant to the managing director of Sharp, Mr. Lim Kuy Bak (Lim) a partner of Hai Nguan, and Mr. Eng Meng Kar, the assistant manager of Hai Nguan were present. Mr. de Guzman refused to sign the charterparty when asked by Mr. Windt to sign. Windt was shocked and turned to Lim for an explanation. Lim's answer was that he thought Phillips would be signing. The meeting broke up with the charterparty unsigned.

Subsequently several telexes were exchanged between Sharp and Polfracht to arrive at a mutually satisfactory arrangement. When this failed Grace Shipping Inc. (Grace Shipping), the first respondent in this appeal sued Phillips for damages for breach of contract and Sharp for damages for breach of warranty of authority. Grace Shipping claimed that a concluded contract had been made between them and Phillips on February 1975 the terms of which were contained in telexes exchanged between Polfracht on their behalf and Sharp on behalf of Phillips under which Grace Shipping as disponent owners of vessels to be nominated agreed with Phillips as charterers to carry four shipments of urea each of 11,000 metric tons ten percent more or less in owners' option from Constanza to Surabaya, Macassar or Belawan in Indonesia.

Phillips' defence to the claim was that Sharp were not their agents and that they had n