Free Terms
Cases
Soufflet Negoce SA v Bunge SA
[2010] EWCA Civ 1102
Lord Justice Longmore:
Introduction
If, in a typical Free On Board (“FOB”) contract, the buyer presents a vessel at the loading port which is not ready to take the cargo because the holds need to be cleaned, is the seller obliged to begin loading? No doubt if the buyer agrees the holds need to be cleaned, an accommodation will usually be reached. But if the buyer asserts that the holds do not need cleaning while the seller insists that they do, there will be an impasse and there is then a risk that the cargo will not be delivered during the delivery period in the contract. If, in such a situation, the goods are never shipped, can the buyer sue the seller for damages for non-delivery? A panel of arbitrators has said “No”; the GAFTA Board of Appeal has said “Yes”. David Steel J has agreed with the Board of Appeal but has given permission to appeal to this court.
Facts
On 19th September 2006, in a written “contract confirmation”, Soufflet Negoce S.A. (“the Sellers”) agreed to sell and Bunge S.A. (“the Buyers”) agreed to buy 15,000 metric tons of Ukrainian Feed Barley, “free from alive insects and foreign smell” for a price of US$135.00 per metric ton FOB stowed/trimmed Nikotera, Ukraine. It was further agreed that weight, quality and condition were to be “final” at load port as per surveyor’s certificates “Sellers’ option and costs”. Delivery was to be:-
“Between 9th – 22nd October 2006 at Buyers’ call both dates included (No Extention).”
Under the heading “Shipping Terms” it was agreed that the Sellers were to load the cargo at the rate of 5000 metric tons per weather working day of 24 consecutive hours Saturdays, Sundays and holidays excepted even if used. There were then provisions for laytime which expressly required the valid tender of a Notice of Readiness and it was further said “All other terms and conditions as per relevant C/P”. If the Sellers took more than 3 days to load the cargo, they would have to pay demurrage to the Buyers while if the Sellers took less than 3 days to load cargo they would earn dispatch “as per Charter Party rates”. All other terms and conditions, not inconsistent with these terms were to be “as per GAFTA 49”, a standard form of contract for delivery of goods from Eastern Europe in bulk or bags on FOB terms.
The references to “relevant C/P” and “Charter Party” rates show that the Buyers would have to charter a vessel (or buy space in an already chartered vessel) from a shipowner in order to perform the contract. Under that contract the Buyers would become liable for demurrage if loading exceeded the time stipulated in the charterparty but they would be able to recover such demurrage from the Sellers under the sale contract. Laytime would, of course, only begin under the charterparty when the shipowners served a valid “Notice of Readiness” for which purpose the holds would have to be clean and ready to receive the cargo of feed barley.
GAFTA 49 has its own standard “Period of Delivery” clause (clause 6) leaving a gap for that period (here agreed to be 9th – 22nd October 2006). There is then a provision for the Buyers to give not less than [x] days notice of the “name and probable readiness date of the vessel” (but no number of days was stipulated in the contract). It was then provided as follows:-
“The Sellers shall have the goods ready to be delivered to the Buyers at any time within the contract period of delivery.
Buyers have the right to substitute the nominated vessel, but in any event the original delivery period and any extension shall not be affected thereby. Provided the vessel is presented at the loading port in readiness to load within the delivery period, Sellers shall if necessary complete loading after the delivery period, and carrying charges shall not apply.”
The reference to carrying charges is a reference to clause 8 (Extension of Delivery) under which the Buyers can require an additional period for delivery of 21 days but, if so, the Sellers are to “carry the goods for the Buyers’ account”. That is, of course, irrelevant in the present case since the contract confirmation had stipulated that there was to be “no extention” (sic).
On 10th October, the Buyers nominated the vessel “LADY HIND” with an ETA Nikotera of 18th October. They then chartered that vessel from her owners on 12th October. The shipowners gave an ETA of 18th/19th October with a laydays/cancelling date spread of 0800 hours 7th October/2400 hours 22nd October. The shipowners served a notice of readiness on the Buyers/Charterers at 0520 hours on 22nd October 2006. It would thus be necessary (if the contract was to be performed) for the Buyers to invoke that part of clause 6 of GAFTA 49 which would oblige the Sellers to complete loading after the delivery period had expired.
On the same day the Buyers’ surveyors issued a certificate of cleanliness for the ship while the Sellers’ surveyors issued a certificate which included the following
“Remarks – hoppers partly covered with coal powder (traces) at holds No. 1, 2, 3 and 4 ….
Conclusion – Based on the above mentioned inspection we find cargo holds and hatches not suitable to receive and carry the above mentioned cargo.”
On the same day the Regional State Grain inspectorate also stated that the ship and holds were found to be not suitable for loading grain in bulk.
At 10.10 hours on 23rd October the master advised that the vessel’s holds were ready for re-inspection at 11.00. By that time the Sellers had at 09.24 hours declared the Buyers in default.
“due to the fact M/V LADY HIND was not presented ready to load at Nikotera, Ukraine.”
In due course the first-tier arbitration panel held that the vessel’s holds were not ready to receive cargo on 22nd October. The Board of Appeal made no express finding about this in view of their decision as to the meaning of clause 6 of GAFTA 49. The Sellers accept that, if their appeal succeeds, the award will have to be remitted to the Board for them to deal with this issue. On the assumption that the holds were not ready to receive cargo (which is the hypothesis on which this appeal is proceeding) it is perhaps slightly surprising that Board of Appeal has decided that the Buyers can nevertheless sue the Sellers for non-delivery of the goods. Why, one asks, should the Sellers be obliged to load the barley into unclean holds? The answer given to this question by the Board of Appeal was (para 26) that it was the Buyers’ responsibility to provide a vessel for shipment within the time agreed at the place agreed for shipment.
“So long as it was physically and legally possible for Sellers to load, on the nominated ship, the agreed goods at the agreed place within the agreed time, then Buyers would have discharged that responsibility and Sellers were under a duty to load – loading which, by Sellers’ own admission, never happened.”
The Board further referred to what they called “the fundamental commercial dynamic of the sale” namely that risk of loss or damage passed from the Sellers to the Buyers on the loading of the goods onto the vessel chartered by the Buyers. If the goods were damaged by shipment into unclean holds, the shipment was the Buyers’ decision and at their risk.
The reference by the Board to it being “physically and legally possible for Sellers to load” is probably a reference to the standard position under an FOB contract at common law in the absence of any relevant express terms. As set out in the 8th edition (2010) of Benjamin’s Sale of Goods paras 20-046 to 20-047 the FOB buyer is bound to give instructions with regard to the shipment of goods and those instructions must be “effective” instructions
“in the sense that it must be possible and lawful for the seller to comply with them.”
The authority for this proposition is Agricultores Federados Argentinos v Ampro S.A. [1965] 2 Lloyds Rep 157 and has thus stood as the law for 45 years or so.
The Argument
Mr David Owen QC for the Sellers did not seek to quarrel with the common law position as set out in Benjamin but submitted that this case was different by reason of first the express term in relation to the period of delivery in GAFTA Form 49 (which was replicated in many other GAFTA Forms e.g. Form 64 for FOB grain in bulk and Form 119 for other feeding stuffs) and secondly the express terms of the typed confirmation note PT 31006.
The main purpose of the Period of Delivery clause in the GAFTA forms is, of course, to define the time within which delivery is to be made. If the parties agree a delivery period between 9th – 22nd October (as they did in the present case) that, without more, would mean that the barley would all have to be loaded by 22nd October and the Buyers would have to ensure that the vessel arrived at the port in sufficient time for that to be achieved. The printed form of GAFTA 49 provides for two ways in which this strict position can be qualified. One is set out in clause 8 and enables the Buyers to claim an extension of the delivery period of not more than 21 days in which case the
“Sellers shall carry the goods for Buyers’ account … unless the vessel presents in readiness to load within the contractual delivery period.”
In the present case, however, the parties agreed that there would be no extension to the shipping period. The second possible qualification is set out in the Period of Delivery clause itself.
“Provided the vessel is presented at the loading port in readiness to load within the delivery period, Sellers shall if necessary complete loading after the delivery period, and carrying charges shall not apply.”
The concept of the vessel presenting “in readiness to load within the delivery period” is thus common to both clauses and the question is whether that concept carries with it the requirement that the vessel must be in a position in which a Notice of Readiness can be (or perhaps has been) given.
As is well-known in a charterparty context a ship must in fact be ready to load (or discharge as the case may be) before it can be said to be at charterers’ disposal. One of the most important consequences of being in the appropriate state of readiness is that laytime begins to count and, once laytime has expired, demurrage begins to accrue. A fairly elaborate set of rules governs the question whether the ship is, in fact, ready namely (unless otherwise agreed) the vessel must have been an “arrived” ship, she must have been granted free pratique (unless the granting of free pratique is a formality), she must have been cleared by Customs and the holds must be in a state in which they can receive cargo. The third edition of Mr Julian Cooke’s book on Voyage Charters takes 17 paragraphs (15.22 – 15.38) to set out the law on the topic and the question is whether all this fairly elaborate law is intended to be incorporated into GAFTA FOB sale contracts by using the concept of the vessel presenting “in readiness to load”.
In my view much clearer words would be necessary if all this shipping law is to be transported into an FOB sale contract. The phrase “in readiness to load” does not expressly say that a Notice of Readiness must have been (or at least be capable of being) given. If that was the intention the form would have said so and not left it to implication.
It is noteworthy that in one respect the parties to this contract have expressly specified the circumstance in which a Notice of Readiness must be given and that is for the purpose of commencement of laytime under the sale contract. I have already said that, in a shipping context, the Notice of Readiness (“N.O.R.”) is relevant to the commencement of laytime and that, once laytime has expired, charterers will have to pay demurrage to the shipowners. In an FOB contract, the Buyers have to charter the ship and potentially render themselves liable for demurrage; but it is of course the Sellers who in practical terms have to put the goods on board the vessel; if therefore Buyers are liable for demurrage because the Sellers have taken too long to load the vessel, they will wish to make the Sellers responsible for indemnifying them in respect of that demurrage liability. Ideally the Buyers will wish to have terms in the sale contract which are identical (or at least similar) to the terms of the charterparty in respect of that laytime and demurrage. That is what Bunge as the Buyers have effectively achieved because the typed confirmation note expressly says that, as between them and the Sellers:-
“Laytime start counting at 8.00 a.m. the next working day if N.O.R is validly tendered during official working hours or between 8.00 a.m. and 5.00 p.m. local time from Monday to Friday whichever applicable. …. All other terms and conditions as per relevant C/P.”
The express reference here to the tender of a valid Notice of Readiness does mean that the laytime allowed by the charterparty will not, as between Buyers and Sellers, start before such a notice is given and will start at 8.00 a.m. on the following day once it is given. For this purpose the rules about the validity of a notice of readiness have been expressly incorporated into the contract so that the Sellers will not be liable to the Buyers for any demurrage incurred unless a Notice of Readiness has actually been tendered and validly tendered. But it does not to my mind follow that, merely because the technical rules relating to Notices of Readiness have been incorporated into the sale contract for the purpose of calculating laytime and demurrage, those technical rules have been incorporated for all purposes by the use of the phrase “in readiness to load” in the printed form of GAFTA 49.
Mr Owen submitted that if the printed form did not make it clear that a valid Notice of Readiness had to be served (or at least, could be served) by the shipowners on the charterers within the delivery period, it had left the matter open by the use of the phrase “in readiness to load” and that the typed confirmation note made the matter clear by its use of the concept of a formal N.O.R. in the laytime provisions of the sale contract. But, in my view, the true position is precisely the opposite. By making clear that a valid N.O.R. is required to operate the laytime and demurrage provisions of the contract, the parties are by implication saying that a valid N.O.R. is not required for other purposes (e.g. for determining whether the vessel has arrived during the period of delivery). All that has to happen within the delivery period is that the vessel must be presented in readiness to load at some time between 00.01 hours on 9th and 24.00 hours on 22nd October. The fact that the holds may have needed some cleaning on arrival does not mean that the Sellers can throw up the sale contract on the basis that no vessel has arrived during the period fixed for delivery.
For my part I am satisfied that the legal position is as I have set it out, whether one looks only at the printed form No. 49 of GAFTA or that form in conjunction with the Confirmation Note. I would be troubled if it were not the correct legal position in the light of the Board of Appeal’s assessment of what they have called “the fundamental commercial dynamic in this shipment sale”. As business men the Board is in a much better position to assess that “dynamic” than this court. But it is obviously correct that if the Buyers assumed the risk of loading the cargo into unclean holds the state of the holds was not a matter in which the Sellers had any real legitimate interest. Mr Owen sought to say that the Sellers might be exposed to claims in tort from third parties or, alternatively that their commercial reputation might be at risk but it is difficult to see that either of those situations could in practice arise, particularly when it is common form in sales of this kind to have a clause saying that Quality and Condition are to be final as per certificates issued at loading port by a GAFTA approved surveyor. If the state of cleanliness of the holds were to be a legitimate concern of the Sellers, it would probably be necessary to have some provision entitling the Sellers to inspect the holds in addition to whatever rights the Buyers might have under the charter but no such provision appears in this contract. In my view there is no need for it.
Lastly Mr Owen relied on a dictum of Lord Ackner in Compagnie Commerciale Sucres et Denrees v Czarnikow Ltd (The Naxos) [1990] 1 WLR 1337 to the effect that an FOB Seller has to have cargo available to load without delay “as soon as the vessel is ready to load the cargo in question” (see 1345 G). But Lord Ackner was there encapsulating the sellers’ obligation to make delivery not the buyers’ obligation in relation to the degree to which the vessel must be ready to load. His use of the phrase “ready to load” does not, to my mind, intend to import the requirement that an N.O.R. has been or can be served any more than the phrase in “readiness to load” imports such a requirement in the printed GAFTA form 49. Lord Ackner was not considering the point that has arisen in this case.
For these reasons I agree with the judgment of David Steel J and would dismiss this appeal.
Lord Justice Wilson:
I agree with both judgments.
Lord Justice Toulson:
I also agree.
David Steel J gave permission to appeal because GAFTA 49 is a form in common use and its construction is a matter of general interest for traders in the grain market.
It is well established that an FOB buyer is obliged to give instructions for the shipment of the goods with which it is possible and lawful for the seller to comply.
I agree with the GAFTA Board of Appeal and with the judge that the phrase in GAFTA 49 “Provided that the vessel is presented at the loading port in readiness to load within the delivery period” requires no more than that the vessel should be ready in the sense of it being lawful and possible for the loading to take place – which I take to mean possible in a normal fashion, ie without abnormal hindrance. The vessel might be on voyage charter, time charter or for that matter in the buyer’s ownership, but that does not affect the meaning of the words in question.
I have begun with GAFTA 49 rather than the wording of the contract confirmation because it is the standard form which is of general interest. But the question arises in the present case whether the language of the “Shipping Terms” in the contract confirmation had the effect that the seller’s obligation to load was conditional on the buyer giving a Notice of Readiness conforming with the requirements of a Notice of Readiness under the charterparty. The contract of sale did not say so, and I do not consider that it is necessary to construe it as if it did in order for it to make sense. As the Board of Appeal observed, it was not on the face of things a matter for concern on the part of the seller whether the holds were clean, when the weight, quality and condition were to be final at the load port as per certificates issued by a GAFTA approved surveyor to be chosen by the seller.
I agree with Longmore LJ (para 15) that it does not follow that, because the provisions of the charterparty with the associated technical rules relating to Notices of Readiness have been incorporated into the sale contract for the purpose of calculating laytime, demurrage or despatch, the buyer could not contractually require the seller to begin loading when the vessel was ready to load within the meaning of GAFTA 49.
As the Board of Appeal said, the dispute before the Board was not one for demurrage, but was a simple claim under the contract for failure to load by the shipment date. I agree with Longmore LJ that under the terms of the contract the seller would not be liable for demurrage unless a Notice of Readiness complying with the requirements of a Notice of Readiness under the charterparty had been validly tendered, but that is a separate matter. I have considered what would be the position if, conversely, the seller loaded at a rate which would have prima facie entitled it to claim despatch. Would it then be open to the buyer to deny the claim on the ground that there had been no valid Notice of Readiness, even though it had called on the seller to load, and is this therefore a reason for accepting the seller’s case on the construction of the sale contract? The point was not advanced in argument, but my answer to the first part of that question (as at present advised) would be no and my answer to the second part is no. I would not consider it to be open to the buyer both to assert that the vessel was ready for loading but also to deny that an effective notice had been served for the purpose of entitling the sellers to claim despatch, because that cannot have been the parties’ intention; and I do not see this point as providing a good argument for regarding the contract as limiting the buyer’s right to require the loading of the vessel when the operation was legal and possible.
For those reasons and those given by Longmore LJ, I agree that the appeal should be dismissed.
Scottish & Newcastle International Limited v Othon Ghalanos Ltd
[2008] UKHL 11 : [2008] 2 All ER 768, [2008] Bus LR 583, [2008] UKHL 11
Lord Mance
The application of the common law principle described by Lord Diplock was also contemplated by Lord Hobhouse of Woodborough in Borealis AB v. Stargas Ltd. (The Berge Sisar) [2001] UKHL 17, [2002] 2 AC 205, when he said at para. 18:
“The bill of lading acknowledges the receipt of the goods from the shipper for carriage to a destination and delivery there to the consignee. It therefore evidences a bailment with the carrier who has issued the bill of lading as the bailee and the consignee as bailor”.
Commenting on this dictum in East West Corporation v. Dampskibsselskabet AF, 1912, Aktieselskabet [2003] EWCA Civ 83, [2003] QB 1509, paras. 34-35, I said:
“34. …This was said in a context where the named consignees were FOB buyers: cf pp. 215, 216, paras. 7 and 10. In such a context, a shipper may readily, indeed normally, be regarded as acting as agent for a named consignee in making the relevant bill of lading contract: cf Albacruz v. Albazero (The Albazero) [1977] AC 774, 786A-B, per Brandon J. The goods will then have been from the outset bailed by the consignee, acting through the agency of the consignor, to the carrier. But this is only the first of three categories identified by Brandon J in a close analysis of the authorities, which later received approval in the House of Lords [1977] AC 774, 842H, per Lord Diplock, with whose speech all other members of the House agreed. The other categories were: (2) cases where the consignor in delivering the goods to the carrier was acting as principal on his own account, with property and risk remaining in him during the carriage; and (3) cases where the consignor was held entitled to sue, whether or not the property and risk in the goods was in him at any material time, on the ground that the consignor had made a ‘special contract’ with the carrier, and that, because of this, the carrier could not dispute the consignors’ title to sue. …..
35. …It is clear both from Brandon J’s definition of the three categories and from Lord Diplock’s speech [1977]
AC 774, 842C-843A that (a) whether a consignor has contracted with the carrier on behalf of an named consignee or on his own behalf (i.e. whether the case falls within the first or second category) depends upon an analysis of the terms, e.g. of any contract for sale, agreed between the consignor and consignee, which would normally be quite unknown to the carrier, while (b) the question whether the case falls within the third category (i.e. is one where, whatever the position regarding property and risk, the consignor has made a ‘special contract’ with the carrier) involves an analysis of the relationship between the consignor and carrier. Thus, in circumstances where a consignor was acting on his own behalf in shipping the goods, or at all events reserving the right vis-à-vis the consignees to deal with and redirect the goods, Lord Brandon’s analysis in The Aliakmon [1986] AC 785, 818 was that: “The only bailment of the goods was one by the sellers to the shipowners.” See also Carver on Bills of Lading, para. 7-038, footnote 47 and Benjamin’s Sale of Goods, 6th ed (2002), para 18-057.”
In the most recent (7th) edition of Benjamin at para. 18-065, Sir Guenther Treitel points to possible difficulties about Lord Hobhouse’s invocation of the common law principle on the particular facts of The Berge Sisar. These do not affect the general distinction drawn in the East West Corporation case between situations where, on the one hand, a seller ships goods on the buyer/consignee’s behalf and, on the other hand, a seller acts on his own behalf, whether because he retains property and risk or simply because he reserves rights to deal with and redirect the goods, for example against the event that the buyer defaults in taking up and paying for the goods against the documents.
None of the latter features exists in the present case. Here the bills of lading were, under the sale contract between S&N and Ghalanos to be, and were, non-negotiable. They were made out to Ghalanos as consignees. The sale contract required them to be forwarded “immediately after shipment by registered and express mail” to Ghalanos. S&N were to arrange and “prepay” on behalf of Ghalanos freight at a rate negotiated by Ghalanos. The price and freight were not payable by Ghalanos against transfer of the bills, but 90 days after each vessel’s arrival in Cyprus. S&N were to have no actual or potential right or interest in the goods or the bills of lading after shipment.
The only factor that, it may be suggested, takes the present case outside s.32 and outside the analysis of the position in bailment in the statement by Lord Diplock in The Albazero (paragraph 41 above) is that S&N accept that they incurred liability as principals to the carriers for the freight, which, as between S&N and Ghalanos, S&N were requested to “prepay” on Ghalanos’s behalf. But this factor could mean (at most) that S&N were party to a special contract with the carriers, and could have claimed damages in respect of any breach of that contract, e.g. involving loss or damage to the goods. In relation to Ghalanos, S&N may still have been acting as an agent, rather than a principal, in shipping the goods and/or in holding the bills of lading received upon shipment. An analysis, according to which S&N, when contracting personally with the carrier, were also contracting on behalf of Ghalanos was not suggested below, though there could have been much to say for it (cf also Bowstead & Reynolds on Agency (18th ed.) para. 9-006). But, assuming that S&N alone were party to the carriage contract, everything still indicates that S&N ceased as regards Ghalanos to have any interest in the goods upon shipment and held the bills of lading issued upon shipment on behalf of Ghalanos, with the corresponding obligation to forward them to Ghalanos immediately. The bills symbolise the goods, and possession of the goods was on this basis held by S&N for and on behalf of Ghalanos as from shipment.
This conclusion is consistent with general principle. “The legal relationship of bailor and bailee of a chattel can exist independently of any contract”: Morris v. Martin Ltd. [1966] 1 QB 716, 731, per Diplock LJ, and East West Corporation, para. 24. A bailee may owe duties in bailment not merely to his immediate bailor, but also to a third party owning or having an immediate proprietary interest in the goods, certainly where the bailee is on notice that such a third party exists: East West Corporation, paras. 25-27 and cf generally Palmer on Bailment (2nd ed.) chaps. 15(II) and 20. Cases of sub-bailment are only one example. In East West Corporation bills of lading were made out by the shippers to Chilean banks or order and delivered to the banks, who were acting vis-a-vis the shippers purely as agents (to collect on behalf of the shippers the price payable by buyers at destination). Under the Carriage of Goods by Sea Act 1992 the contractual rights of suit evidenced by the bills of lading were transferred to the banks. However, the shippers retained an immediate possessory interest in the goods, entitling them to hold the carriers responsible as bailees accordingly: East West Corporation, paras. 27 and 37-39.
Here, there is every reason, in view of the nature and terms of the sale contract, to regard S&N as bailing the goods to the carriers on behalf of Ghalanos, even if Ghalanos were not party to any contract which S&N made with the carriers. The carriers could not reasonably suggest that they thought that S&N were the only persons likely to own and be at risk in respect of the goods on or from shipment. The fact that the bills were non-negotiable and made out to Ghalanos as consignees were clear contrary indications. Ghalanos would be bound by the terms of the bills of lading qualifying the carriers’ liability in respect of the goods and their carriage: The Pioneer Container [1994] 2 AC 324. If the bills of lading had been taken out and held by S&N in their own interests (e.g. pending payment of the price), then delivery of the bills to Ghalanos as the named consignees could have been required before Ghalanos acquired any possessory interest. But that sheds no light on the present case, where S&N made the shipment and held the bills throughout for Ghalanos.
In these circumstances, under the principles contained in the Sale of Goods Act, Rix LJ was in my opinion correct to treat delivery of possession of the goods as well as property and risk in respect of them as having taken place upon shipment. It follows that delivery of the goods took place upon shipment in every sense that can conceivably be relevant under article 5(1)(b) of the Judgments Regulation and that the appeal should be dismissed on that basis alone.
It thus becomes unnecessary to consider what the position might have been after the passing of property and risk on shipment if S&N had not only made a special contract with the carriers but had also, for some reason (e.g. to secure payment of the price), retained symbolic possession of the goods through the bills of lading until these were forwarded to and/or received by Ghalanos. I will however say something about the position on this hypothesis. Mr Lord’s primary submission was that the “place of delivery” under article 5(1)(b) would then be (i) nowhere, (ii) the place of shipment, Liverpool, (iii) the place where the documents were transferred, (iv) the place where the goods happened to be when the documents were transferred (at least if that was within the territory or territorial waters of a Member State) or (v) the place of destination, Cyprus. It might, he suggested, be necessary to consider referring to the European Court of Justice the question what is the correct approach under a documentary sale such as the present.
For reasons already indicated, I see no basis for possibility (v). Possibility (i) arises, in Mr Lord’s submission, from the nature of a documentary sale, under which delivery takes place in more than one sense and may therefore take place in more than one place. It is true that article 5(1)(c) itself contemplates that article 5(1)(b) may not apply. However, the most obvious reason for article 5(1)(c) is that not all contracts are for the sale of goods or provision of services, and still less for the delivery or goods or the provisions of services in any Member State. Article 5(1)(a) thus covers for example a contract for the sale of goods for delivery in South Africa. It would seem surprising however if there was no place of delivery at all within article 5(1)(b) even though all the places identified under possibilities (ii), (iii) and (iv) lay within Member States.
In its recent decision in Color Drack GmbH v. Lexx International Vertriebs GmbH (Case C-386/05) [2007] ILPr 35, the European Court of Justice explained the aim of Regulation EC 44/2001 as being to enable a claimant “to identify easily the court in which he may sue and the defendant reasonably to foresee before which court he may be sued” (paras. 19, 20, 32 and 33) and the origin of article 5(1)(b) as an exception to the original rule reflected in article 5(1)(a):
“By that provision (article 5(1)(b)), the Community legislature intended, in respect of sales contracts, expressly to break with the earlier solution under which the place of performance was determined, for each of the obligations in question, in accordance with the private international rules of the court seised of the dispute. By designating autonomously as ‘the place of performance’ the place where the obligation which characterises the contract is to be performed, the Community legislature sought to centralise at its place of performance jurisdiction over disputes concerning all the contractual obligations and to determine sole jurisdiction for all claims arising out of the contract.” (para. 39)
Article 5(1)(b) takes a very simple contractual model. It directs attention to a place of physical delivery of goods. The physical obligation by way of delivery which characterises an essentially FOB contract such as the present is clearly shipment. That involves an easily identifiable physical delivery at an easily identifiable place. It is on and at shipment that the goods have to be of the contractual quantity and quality as well as fit for carriage to destination (ss. 2, 14, 15 and 30 of the Sale of Goods Act), and it is then that the risk of any subsequent loss, damage or problem passes to the buyer (ss.18 rule 5 and 20(1)). The transfer of documents may under some FOB sales give rise to a notional passing of possession in the goods: cf e.g. Kwei Tek Chao v. British Traders and Shippers Ltd. [1954] 2 QB 459, 486. But it would be highly undesirable that the place of delivery for the purpose of article 5(1)(b) should be understood in a way which could mean that it varied according to an analysis of which of the types of FOB contract identified in paragraph 34 above was involved. The place where possession passes, or where either the shipping documents or the goods are when it passes, is generally irrelevant under FOB contracts and under this particular contract. Further, any place with which such events might be associated could not be regarded as either easy to identify or reasonably foreseeable.
That shipment identifies the place of delivery with which FOB contracts are naturally associated is illustrated by a number of passages in Benjamin. In the chapter on FOB contracts, para. 20-014 headed “Place of delivery” reads:
“An f.o.b. contract will normally indicate the port of shipment, either by naming it or by stating which party has the right to name it. The place of delivery may also be stated more narrowly, as a particular wharf within a port. An f.o.b. contract which contains no indication at all as to the place of delivery may be void for uncertainty.”
In considering the duty to obtain and tender shipping documents at paras. 20-020 to 20-027, Benjamin also observes (in para. 20-026) that
“There is no necessary connection between delivery and passing of property, and a seller may perform his duty to deliver by shipping the goods without at the same time unconditionally appropriating them to the contract so as to pass the property.”
In relation to the governing law of an FOB contract, Benjamin also identifies (para. 25-010)
“the observable tendency in the relatively few authorities to treat the country of shipment as the place of performance by delivery on board the ship and to regard the contract as governed by the law of that place in the absence of any countervailing considerations”.
The Sale of Goods Act generally uses delivery to refer to passing of possession, and this under some FOB contracts will be associated with the transfer of the shipping documents. But there are, as the definition in s.61(1) contemplates, occasions when in the Act delivery is used in another sense. An example is s.30, dealing with the seller’s obligation to deliver the contractual quantity, which must in the context of an FOB contract refer to delivery by shipment.
Bearing in mind the general aim of article 5(1)(b) as explained in Color Drack and the general nature of FOB contracts, I would consider it clear that the place of shipment is the place of delivery which characterises an FOB contract such as the present and is relevant under article 5(1)(b). This is so whether the matter is viewed simply under domestic law (as in both parties’ primary submissions can and should be done) or is viewed as engaging autonomous conceptions of delivery (as Mr Lord submitted in an alternative).
Leigh & Sillivan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon)
[1985] UKHL 10 [1986] AC 785
LORD BRANDON OF OAKBROOK
My Lords,
This appeal arises in an action in the Commercial Court in
which the appellants, who were the c. and f. buyers of goods
carried in the respondents’ ship, the Aliakmon claim damages
against the latter for damage done to such goods at a time when
the risk, but not yet the legal property in them, had passed to the
appellants. The main question to be determined is whether, in the
circumstances just stated, the respondents owed a duty of care in
tort to the appellants in respect of the carriage of such goods;
and, if so, whether and to what extent such duty was qualified by
the terms of the bill of lading under which the goods were
carried.
The appellants’ claim was put forward originally in both
contract and tort. Staughton J. at first instance gave judgment
for the plaintiffs on their claim in contract, so making it
unnecessary for him to reach a decision on their further claim in
tort. However, on appeal by the respondents to the Court of
Appeal (Sir John Donaldson M.R. and Oliver and Goff L.JJ.), that
court set aside the judgment of Staughton J. and dismissed the
appellants’ claims in both contract and tort. Sir John Donaldson
M.R. and Oliver L.3. (as he then was) rejected the claim in tort
on the ground that the respondents did not at the material time
owe any duty of care to the appellants. Goff L.J. (as he then
was) rejected the claim in tort on the ground that, although the
respondents owed a duty of care to the appellants, they had not,
on the facts, committed any breach of that duty. The judgment
of Staughton J. is reported in [1983] 1 Lloyd’s Rep. 203 and that
of the Court of Appeal in [1985] 2 W.L.R. 289.
My Lords, the facts relating to what I have called the main
question to be determined are unusual and need to be set out with
some particularity. By a contract of sale made in July 1976 the
appellants (“the buyers”) agreed to buy from Kinsho-Mataichi
Corporation (“the sellers”) a quantity of steel coils (“the goods”) to
be shipped from Korea to Immingham on c. and f. terms, free out
Immingham. The price of the goods was to be paid by a 180 day
bill of exchange to be endorsed by the buyers’ bank in return for
a bill of lading relating to the goods. The buyers, who were
traders in steel rather than users of it, intended to finance the
transaction by making a contract for the re-sale of the goods to
sub-buyers before the bill of lading was tendered by the sellers.
The goods were loaded on board the “Aliakmon” (“the ship”)
at Inchon in South Korea and a bill of lading dated 14 September
1976 was issued, in respect of them. The bill of lading showed the
carrying ship as the “Aliakmon”; the shippers as Illsen Steel Co.
Ltd; the port of shipment as Inchon; the port of discharge as
Immingham; and the consignees as the buyers. It is to be inferred
that Illsen Steel Co. Ltd., in shipping the goods, were acting as
agents for the sellers. The bill of lading further expressly
incorporated the Hague Rules.
The buyers later found themselves unable to make the
contract for the re-sale of the goods which they had intended to
make with the result that their bank declined to back the bill of
exchange by which payment for the goods was to be made. In
this situation representatives of the buyers and the sellers met on
7 October 1976 in an effort to find a solution to the problem.
Following that meeting the sellers sent the bill of lading to the
buyers under cover of a letter dated 11 October 1976, and receipt
of these was acknowledged by the buyers by a letter dated 18
October 1976. The Court of Appeal has held, and the buyers now
accept, that the effect of the letters so exchanged was to vary
the original contract of sale in the following respects. First, the
sellers, despite delivery of the bill of lading to the buyers, were
to reserve the right of disposal of the goods represented by it.
Secondly, while the buyers were to present the bill of lading to
the ship at Immingham and take delivery of the goods there, they
were to do so, not as principals on their own account, but solely
as agents for the sellers. Thirdly, after the goods had been
discharged, they were to be stored in a covered warehouse to the
sole order of the sellers.
On arrival of the ship at Immingham the buyers duly carried
out the terms of the contract of sale as varied in the manner
described above. On discharge of the goods they proved to be in
a damaged condition. Staughton J. found, and his finding has not
been challenged, that a substantial part of this damage, but not
all, has been caused by improper stowage of the goods in two
respects: first, the stowage of steel and timber in the same
compartment, resulting in condensation from the timber causing
rusting of the steel; and, secondly, overstowage of the goods in
such a way as to cause crushing of them. He further assessed the
amount of damage at £83,006.07, a figure which is likewise not in
dispute.
The buyers subsequently paid the price of the goods to the
sellers, after certain claims for alleged defects in them had been
settled. The result of this was that the legal ownership of the
goods, which had until then remained in the sellers by reason of
their reservation of the right of disposal of them, finally passed to
the buyers.
My Lords, under the usual kind of c.i.f. or c. and f.
contract of sale, the risk in the goods passes from the seller to
the buyer on shipment, as is exemplified by the obligation of the
buyer to take up and pay for the shipping documents even though
the goods may already have suffered damage or loss during their
carriage by sea. The property in the goods, however, does not
pass until the buyer takes up and pays for the shipping documents.
Those include a bill of lading relating to the goods which has been
endorsed by the seller in favour of the buyer. By acquiring the
bill of lading so endorsed the buyer becomes a person to whom the
property in the goods has passed upon or by reason of such
endorsement, and so, by virtue of section 1 of the Bills of Lading
Act 1855, has vested in him all the rights of suit, and is subject
to the same liabilities in respect of the goods, as if the contract
contained in the bill of lading had been made with him.
In terms of the present case this means that, if the buyers
had completed the c. and f. contract in the manner intended, they
would have been entitled to sue the shipowners for the damage to
the goods in contract under the bill of lading, and no question of
any separate duty of care in tort would have arisen. In the
events which occurred, however, what had originally been a usual
kind of c. and f. contract of sale had been varied so as to
become, in effect, a contract of sale ex-warehouse at Immingham.
The contract as so varied was, however, unusual in an important
respect. Under an ordinary contract of sale ex-warehouse both the
risk and the property in the goods would pass from the seller to
the buyer at the same time, that time being determined by the
intention of the parties. Under this varied contract, however, the
risk had already passed to the buyers on shipment because of the
original c. and f. terms, and there was nothing in the new terms
which caused it to revert to the sellers. The buyers, however, did
not acquire any rights of suit under the bill of lading by virtue of
section 1 of the Bills of Lading Act 1855. This was because,
owing to the sellers’ reservation of the right of disposal of the
goods, the property in the goods did not pass to the buyers upon
or by reason of the endorsement of the bill of lading, but only
upon payment of the purchase price by the buyers to the sellers
after the goods had been discharged and warehoused at
Immingham. Hence the attempt of the buyers to establish a
separate claim against the shipowners founded in the tort of
negligence.
My Lords, there is a long line of authority for a principle
of law that, in order to enable a person to claim in negligence for
loss caused to him by reason of loss of or damage to property, he
must have had either the legal ownership of or a possessory title
to the property concerned at the time when the loss or damage
occurred, and it is not enough for him to have only had
contractual rights in relation to such property which have been
adversely affected by the loss of or damage to it. The line of
authority to which I have referred includes the following cases:
Cattle v. Stockton Waterworks Co. (1875) L.R. 10 Q.B. 453
(contractor doing work on another’s land unable to recover from a
waterworks company loss suffered by him by reason of that
company’s want of care in causing or permitting water to leak
from a water pipe laid and owned by it on the land concerned);
Simpson & Co. v. Thomson (1877) 3 App. Case 279 (insurers of two
ships A and B, both owned by C, unable to recover from C loss
caused to them by want of care in the navigation of ship A in
consequence of which she collided with and damaged ship B);
Societe Anonyme de Remorquage a Helice v. Bennetts [1911] 1
K.B. 243 (tug owners engaged to tow ship A unable to recover
from owners of ship B loss of towage remuneration caused to them
by want of care in the navigation of ship B in consequence of
which she collided with and sank ship A); Chargeurs Reunis
Compagnie Francaise de Navigation a Vapeur v. English A
American Steamship Co. (1921) 9 Ll.L. R. 464 (time charterer of
ship A unable to recover from owners of ship B loss caused to
them by want of care in the navigation of ship B in consequence
of which she collided with and damaged ship A); The World
Harmony [1967] 341 (same as preceding case). The principle of
law referred to is further supported by the observations of
Scrutton L.J. in Elliott Steam Tug Co. Ltd, v. The Shipping
Controller [1922] 1 K.B. 127, 139-140.
None of these cases concerns a claim by c.i.f. or c. and f.
buyers of goods to recover from the owners of the ship in which
the goods are carried loss suffered by reason of want of care in
the carriage of the goods resulting in their being lost or damaged
at a time when the risk in the goods, but not yet the legal
property in them, has passed to such buyers. The question
whether such a claim would lie, however, came up for decision in
Margarine Union G.m.b.H_ v. Cambay Prince Steamship Co. Ltd.
(The Wear Breeze) [1969] 1 Q.B. 219. In that case c.i.f. buyers
had accepted four delivery orders in respect of as yet undivided
portions of a cargo of copra in bulk shipped under two bills of
lading. It was common ground that, by doing so, they did not
acquire either the legal property in, nor a possessory title to, the
portions of copra concerned: they only acquired the legal property
later when four portions each of 500 tons were separated from the
bulk on or shortly after discharge in Hamburg. The copra having
been damaged by want of care by the shipowners’ servants or
agents in not properly fumigating the holds of the carrying ship
before loading, the question arose whether the buyers were entitled
to recover from the shipowners in tort for negligence the loss
which they had suffered by reason of the copra having been so
damaged. Roskill J. held that they were not, founding his decision
largely on the principle of law established by the line of authority
to which I have referred. He derived further support for his
decision by reference to Brandt v. Liverpool, Brazil and River
Plate Steam Navigation Co. Ltd. [1924] 1 K.B. 575. In that case
it was held by the Court of Appeal that, although the plaintiffs
could not bring themselves within section 1 of the Bills of Lading
Act 1355 because they were neither consignees named in nor
endorsees of bills of ladings relating to goods carried in the
defendant shipowners’ ship, nevertheless a contract between the
plaintiffs and the defendants on the terms of the bills of lading
could be implied from the fact that the plaintiffs had themselves
presented the bills of lading to, and obtained delivery of the goods
to which they related from, the ship at the port of discharge; and,
secondly, that the plaintiffs were entitled to sue the defendants
under such implied contract for loss suffered by them by reason of
the want of care of the defendants in the carriage of the goods.
Roskill 3. asked himself the rhetorical question why, if the
plaintiffs had a right to sue the defendants in tort for negligence,
should there have been any reason or need for implying a contract
between them.
My Lords, counsel for the buyers, Mr. Anthony Clarke, Q.C.,
did not question any of the cases in the long line of authority to
which I have referred except The Wear Breeze. He felt obliged to
accept the continuing correctness of the rest of the cases (“the
other non-recovery cases”) because of the recent decision of the
Privy Council in Candlewood Navigation Corporation v. Mitsui
O.S.K. Lines Ltd. (The Mineral Transporter) [1986] A.C.1, in which
those cases were again approved and applied, and to which it will
be necessary for me to refer more fully later. He contended,
however, that The Wear Breeze [1969] 1 Q.B. 269 was either
wrongly decided at the time, or at any rate should be regarded as
wrongly decided today, and should accordingly be overruled.
In support of this contention Mr. Clarke relied on five main
grounds. The first ground was that the characteristics of a c.i.f.
or c. and f. contract for sale differed materially from the
characteristics of the contracts concerned in tine other non-
recovery cases. The second ground was that under a c.i.f. or c.
and f. contract the buyer acquired immediately on shipment of the
goods the equitable ownership of them. The third ground was that
the law of negligence had developed significantly since 1969 when
The Wear Breeze was decided, in particular as a result of the
decisions of your Lordships’ House in Anns v. Merton London
Borough Council [1975] A.C. 728 and Junior Books Ltd, v. Veitchi
Co. Ltd. [1983] 1 AC 520. In this connection reliance was placed
on two decisions at first instance in which The Wear, Breeze [1969]
1 G.B. 269 had either not been followed or treated as no longer
being good law. The fourth ground was that any rational system
of law would provide a remedy for persons who suffered the kind
of loss which the buyers suffered in the present case. The fifth
ground was the judgment of Goff L.J. in the present case, so far
as it related to the buyers’ right to sue the shipowners in tort for
negligence. I shall examine each of these grounds in turn.
Ground (1): difference in characteristics of a c.i.f. or c. and f.
contract
My Lords, under this head Mr. Clarke said that in the other
non-recovery cases the plaintiffs who failed were not persons who
had contracted to buy the property to which the defendants’ want
of care had caused loss or damage; they were rather persons
whose contractual rights entitled them either to have the use or
services of the property concerned and thereby made profits (e.g.
the time charter cases), or to render services to the property
concerned and thereby earn remuneration (e.g. the towage cases).
By contrast buyers under a c.i.f. or c. and f. contract of sale
were persons to whom it was intended that the legal ownership of
the goods should later pass, and who were therefore prospectively,
though not presently, the legal owners of them.
– 5 –
I recognise that this difference in the characteristics of a
c.i.f. or c. and f. contract of sale exists, but I cannot see why it
should of itself make any difference to the principle of law to be
applied. In all these cases what the plaintiffs are complaining of
is that, by reason of their contracts with others, loss of or
damage to property, to which, when it occurred, they had neither
a proprietary nor a possessory title, has caused them to suffer
loss: and the circumstance that, in the case of c.i.f. or c. and f.
buyers, they are, If the contract of sale is duly completed,
destined later to acquire legal ownership of the goods after the
loss or damage has occurred, does not seem to me to constitute a
material distinction in law.
Ground (2); equitable ownership
My Lords, under this head Mr. Clarke put forward two
propositions of law. The first proposition was that a person who
has the equitable ownership of goods is entitled to sue in tort for
negligence anyone who by want of care causes them to be lost or
damaged without joining the legal owner as a party to the action.
The second proposition was that a buyer who agrees to buy goods
in circumstances where, although ascertained goods have been
appropriated to the contract, their legal ownership remains in the
seller, acquires upon such appropriation the equitable ownership of
the goods. Applying those two propositions to the facts of the
present case, Mr. Clarke submitted that the goods the subject-
matter of the c. and f. contract had been appropriated to the
contract on or before shipment at Inchon, and that from then on,
while the legal ownership of the goods remained in the sellers, the
buyers became the equitable owners of them, and could therefore
sue the shipowners in tort for negligence for the damage done to
them without joining the sellers.
In my view, the first proposition cannot be supported.
There may be cases where a person who is the equitable owner of
certain goods has also a possessory title to them. In such a case
he is entitled, by virtue of his possessory title rather than his
equitable ownership, to sue in tort for negligence anyone whose
want of care has caused loss of or damage to the goods without
joining the legal owner as a party to the action: see for instance
Healey v. Healey [1915] 1 K.B. 938. If, however, the person is
the equitable owner of the goods and no more, then he must join
the legal owner as a party to the action, either as co-plaintiff if
he is willing or as co-defendant if he is not. This has always
been the law in the field of equitable ownership of land and I see
no reason why it should not also be so in the field of equitable
ownership of goods.
With regard to the second proposition, I do not doubt that it
is possible, in accordance with established equitable principles, for
equitable interests in goods to be created and to exist. It seems
to me, however, extremely doubtful whether equitable interests in
goods can be created or exist within the confines of an ordinary
contract of sale. The Sale of Goods Act 1893, which must be
taken to apply to the c. and f. contract of sale in the present
case, is a complete code of law In respect of contracts for the
sale of goods. The passing of the property in goods the subject-
matter of such a contract is fully dealt with in sections 16 to 19
of the Act. Those sections draw no distinction between the legal
and the equitable property in goods, but appear to nave been
framed on the basis that the expression “property”, as used in
them, is intended to comprise both the legal and the equitable
title. In this connection I consider that there is much force in
the observations of Atkin L.J. in In re Wait [1927] 1 Ch. 606, 635-
636, from which I quote only this short passage:
“It would have been futile in a code intended for
commercial men to have created an elaborate structure of
rules dealing with rights at law, if at the same time it was
intended to leave, subsisting with the legal rights, equitable
rights inconsistent with, more extensive, and coming into
existence earlier than the rights so carefully set out in the
various sections of the Code.”
These observations of Atkin L.J. were not necessary to the
decision of the case before him and represented a minority view
not shared by the other two members of the Court of Appeal.
Moreover, Atkin L.J. expressly stated that he was not deciding the
point. If my view on the first proposition of law is correct, it is
again unnecessary to decide the point in this appeal. I shall,
therefore, say no more than that my provisional view accords with
that expressed by Atkin L.J. in In re Wait [1927] 1 Ch. 616, 635-
636.
Ground (3); development of the law of negligence since 1969
My Lords, under this head Mr. Clarke relied principally on
the well known passage in the speech of Lord Wilberforce in Anns
v. Merton London Borough Council [1978] AC 728, 751-752. That
passage reads:
“Through the trilogy of cases in this House – Donoghue v.
Stevenson [1932] AC 562, Medley Byrne & Co. Ltd, v.
Heller & Partners Ltd. [1964] AC 465, and Dorset Yacht
Co. Ltd, v. Home Office [1970] AC 1004, the position has
now been reached that in order to establish that a duty of
care arises in any particular situation, it is not necessary to
bring the facts of that situation within those of previous
situations in which a duty of care has been held to exist.
Rather the question has to be approached in two stages.
First one has to ask whether, as between the alleged
wrongdoer and the person who has suffered damage there is
a sufficient relationship of proximity or neighbourhood such
that, in the reasonable contemplation of the former,
carelessness on his part may be likely to cause damage to
the latter – in which case a prima facie duty of care arises.
Secondly, if the first question is answered affirmatively, it
is necessary to consider whether there are any
considerations which ought to negative, or to reduce or limit
the scope of the duty or the class of person to whom it is
owed or the damages to which a breach of it may give rise.
Mr. Clarke submitted that the proper way for your Lordships
to approach the present case was to ask and answer the two
questions set out by Lord Wilberforce in that passage. He said
that the answer to the first question must be that there was, as
between the shipowners and the buyers, a sufficient relationship of
proximity or neighbourhood such that, in the reasonable
contemplation of the former, want of care on their part might be
likely to cause damage in the form of pecuniary loss to the latter,
so that a prima facie duty of care arises. With regard to the
second question, relating to considerations which ought to limit the
scope of the duty, he conceded that it would be unjust to the
shipowners to be liable to the buyers in tort for negligence
without reference to the terms of the bills of lading under which
the shipowner carried the goods; and he sought to find a. legal
rationale for the qualification of the duty of care by reference to
those terms on the basis that those were the terms of the
bailment of the goods by the sellers to the shipowners to which
the buyers had, by entering into a c. and f. contract with the
sellers, impliedly consented.
Before examining these submissions it will be convenient to
refer to two decisions at first instance relating to the question of
law raised by this appeal, both made alter the decision of your
Lordships’ House in Anns’ case [1978] AC 728 and on the basis of
the passage of Lord Wilberforce’s speech in that case which I have
set out above. The reasoning in those two cases, as will become
apparent, tended to go further than Mr. Clarke has sought to
persuade your Lordships to go in the present case.
The first decision is that of Lloyd 3. in Schiffahrt-und
Kohlen G.m.b.H. v. Chelsea Maritime Ltd. (The Irene’s Success)
[1982] Q.B. 481. In that case the plaintiffs were c.i.f. buyers of a
complete cargo of coaking coal carried in the defendants’ ship,
The Irene’s Success, from Norfolk, Virginia, to Hamburg. During
the voyage the cargo was damaged by sea water and the plaintiffs
alleged that the damage had been caused by want of care by the
shipowners. The plaintiffs could not sue the shipowners in
contract because they never became holders of the bill of lading,
and they therefore sued them in tort for negligence on the basis
that, although they were not the legal owners of the cargo when
the damage was done, it was nevertheless at their risk at that
time. A preliminary question of law was tried as to whether the
plaintiffs were entitled to sue the shipowners in tort for
negligence. Both counsel appear to have agreed that the question
so raised fell to be determined by reference to Lord Wilberforce’s
two questions in Anns’ case [1978] AC 728, and Lloyd J. had no
hesitation in acting on that agreement. He answered Lord
Wilberforce’s first question in the affirmative, on the basis that
the incidence of risk under a c.i.f. contract was or ought to be
well known to shipowners. With regard to the second question he
said, at p. 486:
“Another possible ground of policy for excluding the duty of
care in the case of a c.i.f. buyer might be if it enabled him
to sidestep the carrier’s contractual exceptions, including,
for instance, the rights and immunities conferred on him by
the Hague Rules. It is difficult to know how far that
argument would carry the defendants, since the point was
not canvassed at the hearing. But if I may express my own
tentative view, it would be that it would require a much
stronger argument of policy for the duty of care in the
present case, arising out of so close a relationship as that
which exists between a carrier and a c.i.f. buyer, to be
excluded.”
As I have already indicated, Mr. Clarke, while resisting any
suggestion that the question of policy- referred to by Lloyd 3.
should exclude a duty of care altogether, accepted that it would
be just for such duty to be qualified by the terms of the relevant
bill of lading.
The second decision is that of Sheen 3. in The “Nea Tyhi”
[1982] 1 Lloyd’s Rep. 606. In that case the plaintiffs were the
endorsees of bills of lading relating to a part cargo of plywood
carried in the defendants’ ship, the Nea Tyhi, from Port Kelang to
Newport. The plywood having been stowed on deck and damaged
during the voyage, the plaintiffs sued the defendants for the
damage both in contract on the bills of lading and in tort for
negligence. Sheen 3. found for the plaintiffs’ claim in contract
and did not therefore need to reach a decision on their alternative
claim in tort. He indicated, however, that, if it had been
necessary for him to do so, he would, in relation to the question
of title to sue, have followed The Irene’s Success [1982] Q.B. 481
rather than The Wear Breeze [1969] 1 Q.B. 219 for the reasons
given by Lloyd 3. in the former case. He went on to say that
Lloyd J.’s decision had the advantage, in a case where the legal
ownership of the goods passed while they were still afloat, and
damage was done to them progressively during the voyage, of
obviating the need for a difficult inquiry into how much of the
damage occurred before, and how much after, the time when the
ownership passed.
Having referred to these two cases I now return to consider
Mr. Clarke’s submissions based on what Lord Wilberforce said in
Anns’ case [1978] AC 728. There are two preliminary
observations which I think that it is necessary to make with regard
to the passage in Lord Wilberforce’s speech on which counsel
relies. The first observation which I would make is that that
passage does not provide, and cannot in my view have been
intended by Lord Wilberforce to provide, a universally applicable
test of the existence and scope of a duty of care in the law of
negligence. In this connection I would draw attention to a passage
in the speech of my noble and learned friend, Lord Keith of
Kinkel, in Governors of the Peabody Donation Fund v. Sir Lindsay
Parkinson & Co. Ltd. [1985] AC 210. After citing a passage
from Lord Reid’s speech in The Dorset Yacht Co. case [1970] A.C.
1004, 1027 and then the passage from Lord Wilberforce’s speech in
Anns’ case [1978] AC 728, 751-752 now under discussion, he said,
at p.240:
“There has been a tendency in some recent cases to treat
these passages as being of themselves of a definitive
character. This is a temptation which should be resisted.”
The second observation which I would make is that Lord
Wilberforce was dealing, as is clear from what he said, with the
approach to the questions of the existence and scope of a duty of
care in a novel type of factual situation which was not analagous
to any factual situation in which the existence of such a duty had
already been held to exist. He was not, as I understand the
passage, suggesting that the same approach should be adopted to
the existence of a duty of care in a factual situation in which the
existence of such a duty had repeatedly been held not to exist.
It is at this point that I think it is helpful to examine The
Mineral Transporter [1986] A.C.I, which I mentioned earlier. The
facts of that case were familiar enough. A collision took place
between ships A and B solely by reason of want of care in the
navigation of ship B. As a result of the collision ship A was
damaged and had to be repaired, and during the period of repair
the first plaintiff, who was the time charterer of ship A, suffered
loss in the form of wasted payments of hire and loss of profits.
The Supreme Court of New South Wales held that the first
plaintiff was entitled to recover his loss from the owners of ship
B. On appeal to the Privy Council that decision was reversed and
it was held that the first plaintiff had no right of suit in respect
of his loss. It was urged on the Board that the rule against
admitting claims for loss arising solely from a contractual
relationship between a plaintiff and the victim of a negligent third
party could no longer be supported, and that it was enough that
the loss was a direct result of a wrongful act and that it was
foreseeable. The judgment of the Board was given by Lord Fraser
of Tullybelton who rejected this contention. He made a full
examination of the long line of English authority to which I
referred earlier, and also of certain Scottish, Australian, Canadian
and American decisions. He expressed the conclusion of the Board
at p. 25 as follows:
“Their Lordships consider that some limit or control
mechanism has to be imposed upon the liability of a
wrongdoer towards those who have suffered economic
damage in consequence of his negligence , . . The common
law limitation which has been generally accepted is that
stated by Scrutton L.3. in Elliott Steam Tug Co. Ltd, v.
Shipping Controller [1922] 1 K.B. 127, 139-140 … Not only
has the rule been generally accepted in many countries
including the United Kingdom, Canada, the United States of
America and until now Australia, but it has the merit of
drawing a definite and ascertainable line. It should enable
legal practitioners to advise their clients as to their rights
with reasonable certainty, and their Lordships are not aware
of any widespread dissatisfaction with the rule. These
considerations operate to limit the scope of the duty owed
by a wrongdoer, and they do so at the second stage
mentioned by Lord Wilberforce in the passage cited above
from his speech in Anns v. Merton Borough Council [1978]
A.C. 728, 751-752.”
Although, as I indicated earlier, I do not think that Lord
Wilberforce, in formulating the two questions which he did
formulate in his speech in Anns’ case, was intending them to be
used as a means of re-opening issues relating to the existence of a
duty of care long settled by past decisions, it will be observed
that in The Mineral Transporter [1986] AC 1 the Privy Council
was content to test the first plaintiffs’ liability by reference to
those two questions, and to exclude a duty of care on the basis of
the answer given to the second question.
Mr. Clarke said, rightly in my view, that the policy reason
for excluding a duty of care in cases like The Mineral Transporter
and what I earlier called the other non-recovery cases was to
avoid the opening of the floodgates so as to expose a person guilty
of want of care to unlimited liability to an indefinite number of
other persons whose contractual rights have been adversely
affected by such want of care. Mr. Clarke went on to argue that
recognition by the law of a duty of care owed by shipowners to a
c.i.f. or c. and f. buyer, to whom the risk but not yet the
property in the goods carried in such shipowners’ ship has passed,
would not of itself open any floodgates of the kind described. It
would, he said, only create a strictly limited exception to the
general rule, based on the circumstance that the considerations of
policy on which that general rule was founded did not apply to
that particular case. I do not accept that argument. If an
exception to the general rule were to be made in the field of
carriage by sea, it would no doubt have to be extended to the
field of carriage by land, and I do not think that it is possible to
say that no undue increase in the scope of a person’s liability for
want of care would follow. In any event, where a general rule,
which is simple to understand and easy to apply, has been
established by a long line of authority over many years, I do not
think that the law should allow special pleading in a particular
case within the general rule to detract from its application. If
such detraction were to be permitted in one particular case, it
would lead to attempts to have it permitted in a variety of other
particular cases, and the result would be that the certainty, which
the application of the general rule presently provides, would be
seriously undermined. Yet certainty of the law is of the utmost
importance, especially but by no means only, in commercial
matters. I therefore think that the general rule, re-affirmed as it
has been so recently by the Privy Council in The Mineral
Transporter [1986] AC 1, ought to apply to a case like the
present one, and that there is nothing in what Lord Wilberforce
said in Anns’ case [1973] A.C. 728 which would compel a different
conclusion.
Mr. Clarke sought to rely also on Junior Books Ltd, v.
Veitchi Co. Ltd. [1983] 1 AC 520. That was a case in which it
was held by a majority of your Lordships’ House that, when a
nominated sub-contractor was employed by a head contractor under
the standard form of R.I.B.A. building contract, the sub-contractor
was not only under a contractual obligation to the head contractor,
under the sub-contract between them, not to lay a defective
factory floor, but also owed a duty of care in tort to the building
owner not to do so and thereby cause him economic loss. The
decision is of no direct help to the buyers in the present case, for
the plaintiffs who were held to have a good cause of action in
negligence in respect of a defective floor were the legal owners of
it. But Mr. Clarke relied on certain observations in the speech of
Lord Roskill as supporting the proposition that a duty of care in
tort might, as he submitted it should be in the present case, be
qualified by reference to the terms of a contract to which the
defendant was not a party. In this connection Lord Roskill said,
at p. 546:
“During the argument it was asked what the position would
be in a case when there was a relevant exclusion clause in
the main contract. My Lords, that question does not arise
for decision in the instant appeal, but in principle I would
venture the view that such a claim according to the manner
in which it was worded might in some circumstances limit
the duty of care just as in the Hedley Byrne case the
plaintiffs were ultimately defeated by the defendants’
disclaimer of responsibility.”
-As is apparent this observation was no more than an obiter
dictum Moreover, with great respect to Lord Roskill there is no
analogy between the disclaimer in the Hedley Byrne case [1964]
A.C. 465 which operated directly between the plaintiffs and the
defendants, and an exclusion of liability clause in a contract to
which the plaintiff is a party but the defendant is not. I do not
therefore find in the observation of Lord Roskill relied on any
convincing legal basis for qualifying a duty of care owed by A to
B by reference to a contract to which A is, but B is not, a party.
As I said earlier, Mr. Clarke submitted that your Lordships
should hold that a duty of care did exist in the present case, but
that it was subject to the terms of the bill of lading. With
regard to this suggestion Sir John Donaldson M.R. said in the
present case [1935] 2 W.L.R. 289 at p. 301:
“I “have, of course, considered whether any duty of care in
tort to the buyer could in some way be equated to the
contractual duty of care owed to the shipper, but . do not
see how this could be done. The commonest form of
carriage by sea is one on the terms of the Hague Rules.
But this is an intricate blend of responsibilities and
liabilities (Article III), right and immunities (Article IV),
limitations in the amount of damages recoverable (Article
IV, r.5), time bars (Article III, r.6), evidential provisions
(Article III, rr.4 and 6), indemnities (Article III, r.5 and
Article IV, r.6) and liberties (Article IV, rr,4 and 6). I am
quite unable to see how these can be synthesised into a
standard of care.”
I find myself suffering from the same inability to understand how
the necessary synthesis could be made as the learned Master of
the Rolls.
As I also said earlier, Mr. Clarke sought to rely on the
concept of a bailment on terms as a legal basis for qualifying the
duty of care for which he contended by reference to the terms of
the bill of lading. He argued that the buyers, by entering into a
c. and f. contract with the sellers, had impliedly consented to the
sellers bailing the goods to the shipowners on the terms of a usual
bill of lading which would include a paramount clause incorporating
the Hague Rules. I do not consider that this theory is sound.
The only bailment of the goods was one by the sellers to the
shipowners. That bailment was certainly on the terms of a usual
bill of lading incorporating the Hague Rules. But, so long as the
sellers remained the bailors, those terms only had effect as
between the sellers and the shipowners. If the shipowners as
bailors had ever attorned to the buyers, so that they became the
bailors in place of the sellers, the terms of the bailment would
then have taken effect as between the shipowners and the buyers.
Because of what happened, however, the bill of lading never was
negotiated by the sellers to the buyers and no attornment by the
shipowners ever took place. I would add that, if the argument for
the buyers on terms of bailment were correct, there would never
have been any need for the Bills of Lading Act 1855 or for the
decision of the Court of Appeal in Brandt v. Liverpool, Brazil and
River Plate Steam Navigation Co. Ltd. [1924] 1 K.B. 575 to which
I referred earlier.
Ground (4); the requirements of a rational system of law
My Lords, under this head Mr. Clarke submitted that any
rational system of law ought to provide a remedy for persons who
suffered the kind of loss which the buyers suffered in the present
case, with the clear implication that, if your Lordships’ House
were to hold that the remedy for which he contended was not
available, it would be lending its authority to an irrational feature
of English law. I do not agree with this submission for, as I shall
endeavour to show, English law does, in all normal cases, provide a
fair and adequate remedy for loss of or damage to goods the
subject-matter of a c.i.f. or c. and f. contract, and the buyers in
this case could easily, if properly advised at the time when they
agreed to the variation of the original c. and f. contract, have
secured to themselves the benefit of such a remedy.
As I indicated earlier, under the usual c.i.f. or c. and f.
contract the bill of lading issued in respect of the goods is
endorsed and delivered by the seller to the buyer against payment
by the buyer of the price. When that happens, the property in the
goods passes from the sellers to the buyers upon or by reason of
such endorsement, and the buyer is entitled, by virtue of section 1
of the Bills of Lading Act 1855, to sue the shipowners for loss of
or damage to the goods on the contract contained in the bill of
lading. The remedy so available to the buyer is adequate and fair
to both parties, and there is no need for any parallel or .
alternative remedy in tort for negligence. In the present case, as
I also indicated earlier, the variation of the original c. and f.
contract agreed between the sellers and the buyers produced a
hybrid contract of an extremely unusual character. It was
extremely unusual in that what had originally been an ordinary c.
and f. contract became, in effect, a sale ex-warehouse at
Immingham, but the risk in the goods during their carriage by sea
remained with the buyers as if the sale had still been or. a c. and
f. basis. In this situation the persons who had a right to sue the
shipowners for loss of or damage to the goods on the contract
contained in the bill of lading were the sellers, and the buyers, if
properly advised, should have made it a further term of the
variation that the sellers should either exercise this right for their
account (see The Albazero [1977] A.C. 774) or assign such right to
them to exercise for themselves. If either of these two
precautions had been taken, the law would have provided the
buyers with a fair and adequate remedy for their loss.
These considerations show, in my opinion, not that there is
some lacuna in English law relating to these matters, but only that
the buyers, when they agreed to the variation of the original
contract of sale, did not take the steps to protect themselves
which, if properly advised, they should have done. To put the
matter quite simply the buyers, by the variation to which they
agreed, were depriving themselves of the right of suit under
section 1 of the Bills of Lading Act 1855 which they would
otherwise have had, and commercial good sense required that they
should obtain the benefit of an equivalent right in one or other of
the two different ways which I have suggested.
Ground (5): the judgment of Goff L.J.
My Lords, after a full examination of numerous authorities
relating to the law of negligence Goff L.J. (now Lord Goff of
Chieveley) said [1985] 2 W.L.R. 289, 330:
“In my judgment, there is no good reason in principle or in
policy, why the c. and f. buyer should not have … a
direct cause of action. The factors which I have already
listed point strongly towards liability. I am particularly
influenced by the fact that the loss in question is of a
character which will ordinarily fall on the goods owner who
will have a good claim against the shipowner, but in a case
such as the present the loss may, in practical terms, fall on
the buyer. If seems to me that the policy reasons pointing
towards a direct right of action by the buyer against the
shipowner in a case of this kind outweigh the policy reasons
which generally preclude recovery for purely economic loss.
There is here no question of any wide or indeterminate
liability being imposed on wrongdoers; on the contrary, the
shipowner is simply held liable to the buyer in damages for
loss for which he would ordinarily be liable to the goods
owner. There is a recognised principle underlying the
imposition of liability, which can be called the principle of
transferred loss. Furthermore, that principle can be
formulated. For the purposes of the present case, I would
formulate it in the following deliberately narrow terms,
while recognising that it may require modification in the
light of experience. Where A owes a duty of care in tort
not to cause physical damage to B’s property, and commits
a breach of that duty in circumstances in which the loss of
or physical damage to the property will ordinarily fall on B
but (as is reasonably foreseable by A) such loss or damage,
by reason of a contractual relationship between B and C,
falls upon C, then C will be entitled, subject to the terms
of any contract restricting A’s liability to B, to bring an
action in tort against A in respect of such loss or damage
to the extent that it falls on him, C. To that proposition
there must be exceptions. In particular, there must, for the
reasons I have given, be an exception in the case of
contracts of insurance. I have also attempted so to draw
the principle as to exclude the case of the time charterer
who remains liable for hire for the chartered ship while
under repair following collision damage, though this could if
necessary be treated as another exception having regard to
the present state of the authorities.”
With the greatest possible respect to Lord Goff the principle
of transferred loss which he there enunciated, however useful in
dealing with special factual situations it may be in theory, is not
only not supported by authority, but is on the contrary inconsistent
with it. Even if it were necessary to introduce such a principle in
order to fill a genuine lacuna in the law, I should myself, perhaps
because am more faint-hearted than Lord Goff, be reluctant to
do so. As I have tried to show earlier, however, there is in truth
no such lacuna in the law which requires to be filled. Neither Sir
John Donaldson M.R. nor Oliver L.J. (now Lord Oliver of
Aylmerton) was prepared to accept the introduction of such a
principle and I find myself entirely in agreement with their
unwillingness to do so.
My Lords, I have now examined and rejected all the five
grounds on which Mr. Clarke relied in support of his contention
that The Wear Breeze [1969] 1 Q.B. 219 was either wrongly decided
at the time, or at any rate should be regarded as wrongly decided
today, and should accordingly be overruled. The conclusion which I
have reached is that The Wear Breeze was good law at the time
when it was decided and remains good law today. It follows that
I consider that the decision of Lloyd J. in The Irene’s Success
[1982] Q.B. 481, which even Mr. Clarke did not seek to support in
its entirety, was wrong and should be overruled, and the
observations of Sheen J. with regard to it in the The Nea Tyhi
[1982] 1 Lloyd’s Rep. 606 should be disapproved.
My Lords, if I had reached a different conclusion on the
main question of the existence of a duty of care, and held that
such a duty of care, qualified by the terms of the bill of lading,
did exist, it would have been necessary to consider the further
question whether, on the rather special facts of this case, the
shipowners committed any breach of such duty. As it is, however,
an answer to that further question is not required.
For the reasons which I have given, I would affirm the
decision of the Court of Appeal and dismiss the appeal with costs.
LORD BRIGHTMAN
My Lords,
For the reasons contained in the speech of my noble and
learned friend, Lord Brandon of Oakbrook, I also would dismiss this
appeal.
LORD GRIFFITHS
My Lords,
For the reasons contained in the speech of my noble and
learned friend, Lord Brandon of Oakbrook, I also would dismiss this
appeal.
LORD ACKNER
My Lords,
I have had the advantage of reading in draft the speech of
my noble and learned friend, Lord Brandon of Oakbrook, and for
the reasons which he gives I too would dismiss this appeal.
For the reasons given in paragraphs 24 to 48 above, I would hold that the place of delivery under the present sale contract was Liverpool and would accordingly dismiss this appeal.
LORD NEUBERGER OF ABBOTSBURY
My Lords,
I have had the advantage of reading in draft the opinion of my noble and learned friend Lord Mance and for the reasons he gives, with which I agree, I too would dismiss this appeal.
Aston FFI (Suisse) SA v Louis Dreyfus Commodities Suisse SA
[2015] EWHC 80 (Comm)
Mr Justice Eder:
Introduction
This is an appeal under s.69 of the Arbitration Act 1996 by Aston FFI (Suisse) SA (“Buyers”) against a GAFTA Appeal Award No. 4342 dated 23rd April 2014 (the “Award”) made in favour of Louis Dreyfus Commodities Suisse SA (“Sellers”) pursuant to leave granted by Cooke J. on 23rd July 2014 in respect of two questions of law arising out of the Award:
i) As a matter of law, can an FOB Buyer only reject goods in reliance on a certificate which complies with the documentary requirements set down in the payment terms of the contract?
ii) Was the Board of Appeal wrong in law to ignore the totality of the evidence bearing on the question of whether the cargo was contractually compliant and not to find for [Buyers] on liability?
The Contract
As appears from the Award, the underlying dispute arises out of a contract between Buyers and Sellers dated 7 October 2011 (the “Contract”) whereby Buyers purchased 30,000 MT (+/- 10% in their option) of “RUSSIAN MILLING WHEAT in bulk, Crop 2011 AS PER GASC TENDER TERMS”. The Contract itself provided in material part as follows:
“Quality AS PER GASC TENDER TERMS
Inspection
WEIGHT, QUALITY AND CONDITION FINAL AT TIME AND PLACE OF LOADING AS PER RELEVANT GASC TENDER. Buyer’s right to appoint a 1st class GAFTA approved surveyor. Should there be a major discrepancy between the two analysis results carried out by the 2 surveying companies, then a first class GAFTA approved 3rd surveyor (to be mutually agreed upon) should act as arbitrator.”
….
Loadport Agent AS PER GASC TENDER TERMS
Documents furnished by the seller
AS PER GASC TENDER TERMS
Please issue draft copy documents for buyer’s approval
Payment 100% C.A.D. Geneva within 48 hours
Special Conditions
All GASC expenses like fees for GASC Delegation, LOI to be for buyer’s account. Seller is simply selling F.O.B. Terms; including expenses for the surveyor are for seller’s account
Governing Contract
All conditions not in conflict with the above as per GAFTA 49. Arbitration, if any, in London as per GAFTA 125.”
The Contract also contained terms relating to notice, loadguarantee, laytime and demurrage/despatch all stated to be “AS PER GASC TENDER TERMS” as well as other terms relating to price and shipment period.
“GASC TENDER TERMS” (“GTT”) is a reference to a separate document of some 15 pages issued by the General Authority for Supply Commodities (i.e. GASC, which is the Egyptian State wheat procurement body) inviting tenders for the purchase of wheat by GASC and containing the terms applicable to any such purchase made by GASC pursuant to such tendering regime.
The goods under this Contract were purchased by Buyers specifically in order to fulfil their obligations under an on-sale contract (the “Sub-Sale”) which it had concluded with GASC. On behalf of Buyers, Mr Rainey QC submitted that to that extent (at least) the two contracts were intended to be “back-to-back”. However, whatever the intention may have been, the Board expressly held in paragraph 8.3 of the Award that this was not in fact the case because of differences between the two contracts.
In any event, there is no dispute that by virtue of the various references to “AS PER GASC TENDER TERMS”, relevant provisions of the GTT were, in effect, duly incorporated into the Contract. At this stage, without deciding what specific terms were duly incorporated, it is convenient to identify the terms of the GTT which are at least potentially relevant:
“Supplied Wheat should matches & compiles to the following terms & conditions:
1) TEST WEIGHT : ( min 77 KG/HL acceptable down to 76KG/HL, with deduction of a ratio 1:1 from the price and prorate less then 77KG/HL to on 77 KG/HL to 76 KG/HL.
2) MOISTURE : ( max 13 pct up to 14 pct acceptable with deduction of a ratio 3:1 from the price and prorate over than 13% PCT to 14%.
… For American origin not to exceed 13% acceptable up to 13.5% with deduction of a ratio 3:1 from the price and prorate over than 13% PCT to 13.5%.
… For Australian origin not to exceed 12% max.
3) PROTEINS : 11% protein minimum (determined by azot procedure on dry matter basis nx 5.7)
For Russian origin 11.5% protein minimum (determinated by azot procedure on dry matter basis nx 5.7)
4) Total shrunken broken grains, damaged Kernels grains, other cereals grains, extraneous matter, harmful &/ or toxic seeds, Bunted grains & ergot must not exceed 5% max, division as follows:
…
NOR
…
CASE VESSEL HOLDS FAILED INSPECTIONS BY THE INSPECTION COMPANIES APPOINTED BY “GASC” AS WELL AS THE EGYPTIAN GOVERNMENTAL COMMITTEE – IF ANY – AS WELL AS OFFICIAL SURVEYING AUTHORITY AT LOAD PORT WHEN OCCURRED COMPLETELY OR PARTIALLY TIME FROM REJECTION UNTIL PASSING RE-INSPECTION NOT TO COUNT.
…
Payment:
Payment will be cash upon confirmed, irrevocable, non-transferable and divisible L/C against presentation of the following documents:
1) commercial invoices …
2) certificate of origin …
3) certificate in one original and 2 copies stating that the shipped wheat is from latest crop harvest (2010) …
4) Full set clean on board bills of lading in three originals …
5) Superintending Certificate with (Sublots composite analysis) In One Original And 5 Copies To Be Issued By the Inspection company nominated by the buyer indicating Quantity, Weight, Specifications, Packing, Quality, goods kind At loading Time And Indicting Also That Holds And Hatches Of Carrying Vessel Are Clean And Free From Alive And Dead Insects And Fit For Shipping Wheat.
Said Certificate Should Also Show:
The loaded quantity conformed to the contract conditions and specifications.
Determination of the sampling methodology.
Sample is represented completely and it had been divided into three portions, stamped by the supplier and the inspection company, one sample is kept by the supplier, the second kept with the inspection company and the third sent with the master of the carrying vessel.
Determine the way of inspection and indicating the apparatus that had been used in inspection.
6) Weight Certificate …
7) Phytosanitary Certificate …
12) One original Certificate & two copies issued by the appointed Superintending Company by GASC, Evidencing That the vessel is capable to load and transport the cargo also it is clean, pure and free from any insects or pests or traces of other materials which might cause damage to the shipped wheat or change in its specification and that it is free from rust and iron filings.
…
14) two copies Of certificate of quality issued by the ministry of agriculture of Russian federation federal service on veterinary and phytosanitary supervision and declaration from the beneficiary evidencing that they have already dispatch the original certificate to the applicant (GASC) to be presented directly upon vessel’s sailing.
…
Notes:
…
3) The buyer has the right to nominate who represents him in inspection operation at loading or discharging port
4) GASC reserves the right to appoint a superintendent company of its choice with deduction of 1$Mt from the price.
…
7) Immediately after award supplier must submit request to have delegation from the Government and will handle all the costs and procedures and offer all Facilities needed for the travel of this delegation at loading port and in case the delegation did not travel for reason due to the supplier the payment of the Cargo will be after the approval of the government Egyptian authority at the discharging port to discharge the vessel.
…
9) If inspection of consignment at load port states that it is not identical to GASC’s conditions and specifications (in this tender document) it will be rejected immediately on site, the performance bond will be confiscated and the contract will be cancelled.”
In passing, it is noteworthy that payment under the Contract was C.A.D i.e. cash against documents, whereas under the GTT, payment was under a letter of credit. However, in my view, this difference is not significant for present purposes because (contrary to the submissions of Mr Collett QC on behalf of Sellers) it seems relatively plain that, since the Contract identified the documents to be furnished as “AS PER GASC TENDER TERMS”, the documents that were required to be presented to obtain “cash” under the Contract were, in my view, the same documents as would have to be presented under the GTT to obtain payment under the letter of credit contemplated by the GTT.
By virtue of the words “All conditions not in conflict with the above as per GAFTA 49” included in the body of the Contract as quoted above, the terms of the standard wording contained in GAFTA 49 were also incorporated to the extent that such terms were not in conflict with “the above” by which I understand not in conflict with the terms of the body of the Contract or the GTT, as incorporated in the Contract.
Clause 19 of GAFTA 49 provides as follows:
“19. SAMPLING, ANALYSIS AND CERTIFICATES OF ANALYSIS
The terms and conditions of GAFTA Sampling Rules No. 124 are deemed to be incorporated into this contract. Samples shall be taken at time and place of loading. The parties shall appoint superintendents, for the purposes of supervision and sampling of the goods, from the GAFTA Register of Superintendents. Unless otherwise agreed, analysts shall be appointed from the GAFTA Register of Analysts.”
Thus, the Contract incorporated the terms and conditions of GAFTA Sampling Rules No. 124 (“GAFTA 124”) at least to the extent that there was no relevant conflict. GAFTA 124 contains detailed provisions with regard to sampling and analysis. For present purposes, it is only Rules 1.2 and 10 which are directly relevant viz.
“GENERAL
1.2 Pursuant to the contract terms and for the purposes of these Rules, superintendents shall be appointed from the GAFTA Register of Approved Superintendents.
…….
10. NON-COMPLIANCE WITH THE RULES
In the event of non-compliance with the preceding provisions of these Rules being raised at arbitration as a defence, any quality and/or condition and/or rye terms arbitration claim shall be deemed to be waived and barred, unless the arbitrators or board of appeal as the case may be, shall in their absolute discretion determine otherwise.”
It is noteworthy that unlike the main body of the Contract, the GTT do not expressly provide for any particular inspection regime of the cargo (as opposed to inspection of the carrying vessel) at the loadport. Rather, so far as the cargo is concerned, the reference to “inspection” appears in two places in the GTT viz (i) under the “payment” section, in particular sub-clause 5) thereunder; and (ii) in the Notes as quoted above in particular Notes 3), 4) and 9) as quoted above. The former is obviously important: the GTT required that in order to obtain payment under the letter of credit, it would be necessary to present 5 copies of the “Superintendent Certificate” issued by the “… inspection company nominated by the buyer …” indicating the matters there specified. An important issue in the present case is whether this inspection company was required to be one which was approved by GAFTA. I deal with this further below.
The Facts
As to the facts, one of the difficulties is that the findings made by the Board are set out, in part, under sub-clause 5 headed “THE FACTS”; and, in part, under paragraph 8 headed “FINDINGS”. Drawing these two sections together, I would summarise the most relevant facts by reference to specific paragraphs of the Award (as indicated in square brackets) as follows:
i) On 11 October, Buyers nominated the carrying vessel i.e. the mv “Mega Hope”. [5.2]
ii) On 17 October, the Buyers advised Sellers of their agents at Novorossisk and also their documentary requirements. In particular, the superintending company was identified as Comibassal [5.1]. Buyers indicated that the superintendent’s certificate had to be issued by Comibassal. [8.4]
iii) Comibassal had been appointed by GASC under the terms of the Sub-Sale. [5.1]
iv) On 22 October, the vessel arrived at Novorossiysk; and on 1 November, the vessel commenced loading. [5.2]
v) On 2 November, the GASC delegation requested Buyers’ local office to suspend loading as Botrans (Buyers’ surveyors) and Comibassal (surveyors appointed by GASC) stated that they had detected high levels of Lolium seeds and other defects. [5.3]
vi) On 3 November, loading was halted and an unknown quantity of cargo was discharged and replaced by Sellers [5.4]. Loading was completed at 10.10 hours on 4 November. [5.5]
vii) On 4 November at a time unknown, a report was issued by The Tripartite Egyptian Committee for State of Russia. That report contained certain analysis results on samples taken during “shipping” and the following conclusion: “The final result for only 30,000 tonnes of Wheat Which examined at origin state (Russia) is NOT acceptable according to ES 1601-1/2010 General principles for wheat … and Egyptian AGRO Quantitive Legislation of as well as the terms of the contract between G.A.S.C. and supplier”. There was however no indication in the report as to when and how any samples had been taken nor the analysis methods used to obtain the results on which they were refusing the goods. [8.11]
viii) On 5 November, Buyers sent the following message: “GASC have confirmed that the cargo will not be accepted by them; our right to reject the cargo is reserved.” [5.6]
ix) Thereafter, following numerous discussions/messages between the parties on 10 November, Buyers and Sellers entered into Addendum No 1. For present purposes, the details of that agreement do not matter. It is sufficient to note that the parties, in effect, agreed that the cargo on board the vessel would be discharged at Kerch; that the vessel would then return to Novorossiysk to load another cargo of wheat; that the costs of this operation would, in the first instance be split 50/50; and that the disputes between the parties would be referred to arbitration. [5.7]
x) Pursuant to Addendum No 1, the vessel departed Novorossisk on 15 November; and, after discharging the cargo on board in Kerch on 20/21 November, the vessel then returned to Novorossisk to load a new cargo. [5.10]
The Award
In essence, it was and is Buyers’ case that they were entitled to reject the cargo and to recover damages against Sellers. (It appears that there was originally some dispute as to whether Buyers ever did in fact reject the cargo; but the Award would seem to proceed on the basis that Buyers did in fact reject the cargo and the appeal before this Court also proceeded on that basis.) That claim was upheld by the First-Tier Tribunal. However, the Board reversed that decision in the Award and held in favour of Sellers. The Board’s reasoning appears in paragraph 8 of the Award. In summary, the Board concluded as follows:
i) In line with the GTT, the Contract and the documentary instructions given by Buyers “… the contractual quality certificates had to be issued by Comibassal.” [8.7]
ii) Both the Egyptian Standards (ES:1601-1/2010) and the GTT contain explicit rules as to what should be contained in the superintendent’s certificate(s). These requirements were confirmed and formed part of Buyers’ documentary instructions sent on 17 October. [18.16]
iii) The Comibassal certificate was deficient and non-contractual due to the following circumstances:
No mention of GASC terms
No mention of sampling methodology
No mention that sample had been divided into three portions and distributed as specified
No mention of the method of inspection
No indication of the apparatus used in the inspection
Not in conformity with Buyers’ documentary instructions
No mention that a quantity of wheat had been discharged and replaced and that the samples analysed did not contain the wheat that had been discharged. [8.18]
The critical part of the Award and the main ratio of the Board’s decision are set out in paragraph 8.19 of the Award:
“[The Comibassal] nomination as between GASC and Buyers was contractually compliant. However, as between Buyers and Sellers their nomination was not contractually compliant as they were not GAFTA approved surveyors. Even if they had been GAFTA approved their certificate was not contractually compliant due to the differences mentioned [in paragraph 8.18 of the Award]. As a consequence of this there was no contractually compliant quality certificate for the goods loaded. Buyers, who had nominated Comibassal to Sellers, therefore had no official analysis on which to base their rejection. By rejecting the goods, with no official analysis to back up that decision, the Buyers were in repudiatory breach of the Contract and consequently WE FIND that Buyers were in default”. [8.19]
Thus, in summary, the Board appears to have held that Buyers were not entitled to reject the cargo for two main independent reasons viz (i) contrary to the requirement under the Contract, Comibassal was not a GAFTA approved surveyor (the “surveyor point”); alternatively (ii) the Comibassal certificate was not contractually compliant (the “certificate point”). There was some forensically interesting debate before me as to which of these two alternatives was to be regarded as the true ratio of the Board’s decision; but in the event, such debate is, in my view, academic.
It is not entirely easy to fit these two points into the questions of law which are the subject of this appeal. In these circumstances, I therefore propose first to deal with each of these points in turn; and, in the light of my conclusions, then to consider the appropriate answers to the questions of law.
The surveyor point
As to the surveyor point, it is common ground that Comibassal was not GAFTA approved. However, Mr Rainey submitted that the Board was wrong to conclude in paragraph 8.19 of the Award that this was contrary to any requirement under the Contract.
Mr Collett submitted that this is a short, one-off point of construction; and that the Board’s view that Comibassal, as the first surveyor, was required to be GAFTA-approved, should be accorded substantial weight and accepted as correct. In general, I would agree that there is much force in that submission. However, the difficulty here is that the Board does not give any reasons or explanation for its conclusion.
Notwithstanding, Mr Collett submitted that the Board’s conclusion that the Buyers were not entitled to reject the goods because Comibassal was not GAFTA-approved is to be understood as being based on the preclusive effect of Rule 10 of GAFTA 124 which I have already quoted above. Thus, Mr Collett submitted that (i) the fact that Comibassal was not GAFTA-approved constituted a non-compliance with Rule 1.2; and (ii) by virtue of Rule 10, the effect of such non-compliance was that any quality and/or condition claims by Buyers “… shall be deemed waived and barred unless the arbitrators or board of appeal as the case may be, shall in their absolute discretion determine otherwise”. On this basis, Mr Collett submitted that the Award must be upheld.
Further, Mr Collett submitted that the Board was in any event correct in its conclusion that the nomination of Comibassal was not contractually compliant for the following reasons:
i) The superintending company appointed by GASC under the GTT will be deemed to have been appointed as the “first” surveyor under the inspection clause.
ii) The Board’s correct conclusion on this point must be based on the words “AS PER RELEVANT GASC TENDER” because there is no express reference to a first surveyor in the inspection clause at all. It follows that:
a) Note 9) of the GASC Terms cannot be incorporated into the Contract, because it would be inconsistent with the term of the Contract that the first surveyor’s inspection was to be final as to quality and condition. As Buyers themselves appear to accept, Note 9) permits rejection under the GTT by reference to inspection by an entity other than the first surveyor (e.g. the Egyptian government delegation).
b) If the incorporation of the role of the first surveyor into the Contract does not derive from Note 9) of the GTT, then it must derive from the payment provisions of the GTT (which is where the first surveyor’s role is spelled out). The Board was therefore correct to conclude that, in the Contract, the first surveyor’s inspection would only be final insofar as it complied with the requirements for the quality certificate in the payment provisions of the GTT.
iii) Buyers had the right (but not the obligation) to appoint their own “1st class GAFTA approved surveyor”. It will be noted that, because the Sellers had no role in the appointment of the first surveyor and could not compel the appointment of the second surveyor, they would be unable to prevent the quality and condition of the goods from being determined by the first surveyor (appointed by GASC). This is relevant to the Board’s conclusion that it was a term of the Contract that the first surveyor must be GAFTA-approved: this provided some commercial protection for the Sellers in circumstances where they might otherwise have no say in the identity of the relevant surveyor.
iv) If there was no “major discrepancy” between the surveyors nominated by GASC and Buyers, then the first surveyor’s analysis results would be final for the purposes of the Contract (subject to the question of contractual compliance, as further discussed below).
v) If there was a “major discrepancy” between the surveyors nominated by GASC and Buyers, then a third “1st class GAFTA approved surveyor” would be appointed by Sellers and Buyers jointly and the analysis results of the third surveyor would be final (if it were otherwise, the third surveyor’s inspection would have no contractual effect).
As to these submissions, it was common ground that the inspection clause in the Contract contemplated the possible involvement of three surveyors. I agree. Although not expressly stated, it seems to me inherent in the first sentence that an initial survey (i.e. the first survey) would be carried out in respect of weight, quality and condition. Although the first sentence of the inspection clause states that “weight, quality and condition final at the time and place of loading as per relevant GASC tender” (emphasis added), it was also common ground (and I agree) that pursuant to the second and third sentences of the inspection clause, Buyers had a “right” to appoint a “… 1st class GAFTA surveyor …” and that, should there be a major discrepancy between these two analyses, then a third surveyor would be appointed to act as “arbitrator”.
To this extent, I accept Mr Collett’s submissions. However, it seems to me that Mr Rainey is right in his submission that there is no requirement in the Contract that the first surveyor must be GAFTA-approved for the following reasons:
i) The first sentence of the inspection clause in the Contract makes no reference to the first surveyor being GAFTA-approved. This is in sharp contrast to the subsequent references to the Buyer’s surveyor and the third surveyor. In the absence of express words and given this difference of wording, it is, in my view, difficult if not impossible to imply a requirement that the first surveyor must be GAFTA-approved.
ii) I readily accept that there is at least some force in Mr Collett’s submission that a requirement that the first surveyor should be GAFTA-approved would provide Sellers with some commercial protection in circumstances where it is the Buyers who have the right to nominate the surveyor under the GTT; and that this might support an argument that such surveyor should be GAFTA-approved. However, I am unpersuaded that this argument is sufficient to override what seems to me the ordinary meaning of the words used in the context of the overall structure of the inspection clause in the Contract.
iii) I also readily accept that the position might be otherwise if the first surveyor was required to be GAFTA-approved under the GTT. However, that is plainly not the case. There is nothing in the GTT which requires the surveyor to be GAFTA-approved whether under Clause 5, Note 9) or otherwise; and, in my view, the Board was plainly right to conclude that the nomination of Comibassal was in effect contractually compliant under the GTT.
iv) The foregoing highlights the mismatch between the Contract and the Sub-Sale. Contrary to Mr Collett’s submission, it is my view that Note 9) of the GTT was, in effect, incorporated into the Contract; and as it seems to me, the effect of Note 9) of the Sub-Sale was that GASC would be entitled to reject the cargo under the Sub-Sale if the “inspection” stated that the consignment was not “identical to GASC’s conditions and specifications”. My tentative view is that the inspection referred to in Note 9) is the inspection performed by the company nominated by GASC under sub-clause 5) of the payment clause. But whether that is correct or not, there is nothing in the GTT which is comparable to the scheme of the inspection clause in the Contract.
In light of the above, I do not accept Mr Collett’s submission that the Award should be upheld on the basis of the preclusive effect of GAFTA 124 Rule 10. As already stated above, GAFTA 49 was in my view only incorporated in the Contract to the extent that such terms were not in conflict with the terms of the body of the Contract or the GTT as incorporated in the Contract. In my judgment, GAFTA 124 was similarly only incorporated to that extent. Thus, if I am right in my conclusion that the first surveyor i.e. Comibassal was not required to be GAFTA-approved, such conclusion would “conflict” with the contrary argument based upon GAFTA 124 Rule 1.2 and, to that extent, the latter would not, in my view, be incorporated or otherwise apply. It follows in my view that:
i) The requirement in GAFTA Rule 124 that “superintendents shall be appointed from the GAFTA Register of Approved Superintendents” had no application to the nomination of the first surveyor i.e. Comibassal under the Contract;
ii) The fact that Comibassal was not GAFTA-approved was not a relevant non-compliance for the purposes of GAFTA 124 Rule 10; and
iii) If, as Mr Collett submitted, the Board’s decision in this context is to be understood as being based on the preclusive effect of GAFTA 124 Rule 10, I would respectfully disagree. In the event, it is, in my view, unnecessary to consider the further argument as to whether the Board should have exercised its discretion under the last part of GAFTA 124 Rule 10 still less whether the Award should be remitted to the Board to enable it to consider the exercise of such discretion.
For these reasons, it is my conclusion that the Board was wrong to conclude that the nomination of Comibassal was not contractually compliant under the Contract.
The certificate point
As stated above, the Board concluded in paragraph 8.18 of the Award that the Comibassal certificate was “deficient and non-contractual” for the reasons there stated. There is no dispute about this conclusion. Rather, the question arises as to the consequences that flow from such conclusion. In effect, the Board considered that Buyers were only entitled to reject the cargo on the basis of a certificate which complied with the documentary requirements set out in the payment terms of the GTT; and that absent such a certificate, Buyers were, in effect, precluded from rejecting the cargo.
As to this conclusion, it seems to me relatively plain that a compliant certificate was one of the documents which had to be presented by Sellers under the Contract to obtain “cash”; and, in their turn, by Buyers under the letter of credit under the Sub-Sale. In my view, it necessarily follows that the absence of such a compliant certificate in effect prevented Sellers from obtaining “cash” under the Contract and also prevented Buyers, in their turn, obtaining payment under the letter of credit under the Sub-Sale (although the latter is not directly relevant to the present case). However, it remains to consider whether Buyers were entitled to reject the cargo under the Contract absent a contractually compliant certificate.
In considering this aspect of the case, it seems to me important to recognise at the outset that, as Mr Collett accepted, an FOB buyer will (or at least may) ordinarily have two separate rights of rejection i.e. a right to reject the documents and a right to reject the goods: see, for example, Benjamin’s Sale of Goods, 9th Ed paras 20-113. The result is that (subject, of course, to the terms of any particular contract), an FOB buyer may be able to reject the goods even if the documents are contractually compliant. As a general proposition, I did not understand Mr Collett to suggest otherwise.
However, the main thrust of his argument was that (i) as a general proposition, where a contract prescribes a mandatory procedure for (say) inspection of the goods and also provides, in effect, that the results of such inspection as contained in a certificate are “final” as to the quality of the goods, then the buyer can only reject the goods by relying on a contractually compliant certificate demonstrating a relevant (and sufficient) disconformity of the goods; and (ii) the inspection clause of the present Contract (read with such parts of GAFTA 124 as were incorporated into the Contract) provided in effect for such mandatory procedure i.e. it contained an exclusive code for determining the quality and condition of the goods with regard to the matters specified in sub-clauses 5) and 7) of the payment provisions of the GTT.
In support of that submission, Mr Collett relied, in particular, on three main authorities viz: Agro-Export v NV Goorden [1956] 1 Lloyd’s Rep 319; W N Lindsay & Co Ltd v European Grain & Shipping Agency Ltd [1963] 1 Lloyd’s Rep 437; Charles E Ford Ltd v AFEC Inc [1986] 2 Lloyd’s Rep 307. In the event, I do not consider that it is necessary to consider in detail these authorities. Without deciding the point, I am prepared to assume in Mr Collett’s favour that they support the general proposition as stated above.
However, as submitted by Mr Rainey, the exclusion of ordinary rights at common law should not be lightly inferred and require clear and unambiguous expression: see Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 per Lord Diplock at 717H; and specifically in the present context, clear words would be necessary to exclude the independent right to reject the cargo for non-conformity: see, for example, W N Lindsay & Co Ltd v European Grain & Shipping Agency Ltd per Diplock LJ at 445 and Charles E Ford Ltd v AFEC Inc per Bingham J at 314-5.
Further, I am unpersuaded that the particular terms of the Contract in the present case have the effect stated by Mr Collett. At the risk of repetition, I accept, of course, that the opening part of the inspection clause in the Contract uses the term “final”; that, as I have already stated, this must relate to what has been referred to as the “first survey”; and that the presentation of a contractually compliant inspection certificate (i.e. an inspection certificate complying with the terms of sub-clause 5) of the payment section of the GTT) is one of the documents which is required by Sellers to obtain “cash” under the Contract (and also by Buyers under the Sub-Sale). However, there is nothing in the Contract nor the GTT nor GAFTA 124 which provides either expressly or impliedly that the issuance of an inspection certificate compliant with sub-clause 5) of the payment section of the GTT is determinative of the quality of the goods such that the absence of such contractually compliant certificate would, in effect, preclude Buyers from rejecting the goods for relevant disconformity. On the contrary, it seems to me that the effect of the inspection clause in the Contract when read together with Note 9) of the GTT is that even if the inspection certificate produced by the first surveyor did not contractually comply with the terms of sub-clause 5) of the payment section of the GTT (so as to prevent Sellers from obtaining “cash” under the Contract), Buyers would be entitled to reject the cargo for relevant disconformity having regard to the totality of the evidence in relation thereto.
In summary, while I accept in principle that the independent right of an FOB buyer to reject the goods may be modified or even excluded by agreement, I do not consider that the words of the Contract in the present case have such effect.
Conclusion
For these reasons, and subject to any further submissions on the precise form of wording, I would answer the questions of law as follows:
i) “Question 1: As a matter of law, can an FOB Buyer only reject goods in reliance on a certificate which complies with the documentary requirements set down in the payment terms of the contract? Answer: No, unless the Contract stipulates in clear terms that that is the case; and the Contract in this case does not do so.”
ii) “Question 2: Was the Board of Appeal wrong in law to ignore the totality of the evidence bearing on the question of whether the cargo was contractually compliant and not to find for [Buyers] on liability Answer: The Board of Appeal was wrong in law to ignore the totality of the evidence bearing on the question of whether the cargo was contractually compliant.”
It also follows that I would set aside the Award. In that event, Mr Rainey submitted that I should in effect vary the Award so as to declare that Buyers were entitled to reject and uphold Buyers’ claim against Sellers. I accept that that course has much attraction – if only because it will bring this dispute to a close and avoid further legal costs. However, it seems to me that it must be for the Board rather than this Court to decide whether Buyers were entitled to reject the cargo having regard to the totality of the evidence. Mr Rainey submitted that, in truth, the answer to that question is obvious and inevitable having regard to the findings already made by the Board. However, in my view, the proper course is to remit the matter to the Board to enable it to reach the appropriate conclusion in the light of this Judgment unless, of course, the parties can resolve any outstanding dispute by agreement. Accordingly, I would invite Counsel to seek to agree the wording of an order including any consequential matters. Failing agreement, I will deal with any outstanding matters.
Glencore Grain Rotterdam BV v Lebanese Organisation For International Commerce (“Lorico”) (Buyers)
[1997] 2 Lloyd’s Rep 386, [1997] EWCA Civ 1958, [1997] 4 All ER 514, [1997] CLC 1274 Evans LJ
This appeal is from a judgment of Longmore J. in the Commercial Court, by which he upheld an Award of the Board of Appeal of GAFTA dated 17 October 1995, though on different grounds. It raises two issues of law. The first issue, put shortly, is whether the buyers under a sale contract on fob terms incorporating GAFTA form 64 were entitled to open a letter of credit in favour of the sellers which was restricted to payment against freight pre-paid bills of lading. The second is whether, if the buyers were not so entitled and were thereby in breach of contract, the sellers can rely on that breach to justify their own refusal and failure to ship the contract goods.
The judge has certified two questions of law of general public importance, pursuant to s.1(7)(b) of the Arbitration Act 1979, in the Schedule to his Order dated 19 April 1966. I should set them out here :-
“SCHEDULE
(1) What approach should the Court adopt on seeking to ascertain, by a process of implication, what terms of a letter of credit are contractual under an FOB sale which provides for payment to be made by an irrevocable and confirmed letter of credit but does not otherwise specify the terms which that letter of credit should contain?
(2) Whether the principle that a party, giving a wrong or inadequate reason for refusal to perform a contract, may justify his refusal by relying on some other reason not relied on at the time, is qualified by a further principle
(a) that such other reason is one which, if relied on at the time of refusal to perform, could not have been put right; and/or
(b) that a party who gives one ground for his refusal to perform may by his conduct be precluded from setting up a different ground if it would be unjust or unfair to allow him to do so”.
ICC Website
Link
https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-rules-2010/
ICC Notes
The Incoterms® rules have become an essential part of the daily language of trade. They have been incorporated in contracts for the sale of goods worldwide and provide rules and guidance to importers, exporters, lawyers, transporters, insurers and students of international trade.
Below are short descriptions of the 11 rules from the Incoterms® 2010 edition. These should be read in the context of the full official text of the rules which can be obtained from the ICC Store.
These extracts can be reproduced provided that the source is cited and a link to the ICC Store is mentioned. More information available on the dedicated page.
RULES FOR ANY MODE OR MODES OF TRANSPORT
- EXW Ex Works
“Ex Works” means that the seller delivers when it places the goods at the disposal of the buyer at the seller’s premises or at another named place (i.e.,works, factory, warehouse, etc.). The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable.
- FCA Free Carrier
“Free Carrier” means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place. The parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.
- CPT Carriage Paid To
“Carriage Paid To” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
- CIP Carriage And Insurance Paid To
“Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
‘The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.”
- DAT Delivered At Terminal
“Delivered at Terminal” means that the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. “Terminal” includes a place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal. The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.
- DAP Delivered At Place
“Delivered at Place” means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place.
- DDP Delivered Duty Paid
“Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.
RULES FOR SEA AND INLAND WATERWAY TRANSPORT
- FAS Free Alongside Ship
“Free Alongside Ship” means that the seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.
- FOB Free On Board
“Free On Board” means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.
- CFR Cost and Freight
“Cost and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
- CIF Cost, Insurance and Freight
“Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
‘The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.”