Thai Maparn Trading v Louis Dreyfus Commodities
Thai Maparn Trading Co Ltd v Louis Dreyfus Commodities Asia Pte Ltd (The “Med Salvador” and “Goa”): English Commercial Court: Beatson J:  EWHC 2494 (Comm): 4 October 2011
INTERNATIONAL SALE OF GOODS: FOB CONTRACT: WHETHER BUYERS IN BREACH OF CONDITION PRECEDENT IN CONTRACT BY FAILING TO ISSUE 7 DAY ETA OF VESSEL: WHETHER SELLERS IN REPUDIATORY/RENUNCIATORY BREACH BY REJECTING BUYERS’ NOTICE AND STATING THAT CARGO WOULD NOT BE READY IN TIME
Available on BAILII @ http://www.bailii.org/ew/cases/EWHC/Comm/2011/2494.html
Timothy Young QC (instructed by Elborne Mitchell LLP) for Sellers, Claimant, Thai Maparn
Philip Edey QC (instructed by Hill Dickinson LLP) for Buyers, Defendant, Louis Dreyfus
In dismissing the Sellers' appeal under section 69 of the Arbitration Act 1996 against two GAFTA arbitration awards, the Commercial Court held that:
(1) Where an FOB sale contract expressly required Buyers to give a vessel nomination notice seven working days before the vessel's estimated time of arrival (or readiness to load), Sellers were not entitled to reject the notice given by Buyers even though it was less than seven days and therefore uncontractually short, because under the contracts laytime, and Sellers' obligation to have cargo ready, would not commence until expiry of the seven working day period following service of notice of readiness by the vessel;
(2) In such circumstances, the Arbitration Board had been entitled to find that Sellers were in repudiation or renunciation of the contract by stating that “due to unavailability of goods and printed bags, we cannot accept [your nomination] of [vessel]”
Case note by Jim Leighton, BSc (Hons), LLB (Hons), LLM (Maritime Law), Solicitor of England & Wales, Foreign Qualified Lawyer (Practising Foreign Law) in Singapore, Associate at Hill Dickinson LLP and International Contributor to DMC’s CaseNotes [
This was a section 69 Arbitration Act 1996 appeal against two awards made by the GAFTA Board of Appeal ("Board"). Both awards concerned FOB Bangkok/Kohsichang rice sale contracts based on GAFTA Form 120 (fn.1). Both awards upheld the first tier awards that Sellers (Claimant) repudiated the contracts by making clear to Buyers (Defendant) that they would not have cargo ready to meet the vessels nominated by Buyers. Such repudiation was said to be a "default" for the purpose of clause 23 of GAFTA 120, which entitled Buyers to damages assessed as at the date of default under that clause. At the material times the market prices of rice had risen above the contract prices.
The grounds of appeal identified two questions of law on liability, as follows:
(1) Where an FOB contract expressly requires a buyer to give a vessel nomination notice a specified period of time before the vessel's estimated time of arrival (or readiness to load), is the seller entitled to reject (or not accept) a notice as given by that buyer which contains a shorter period of notice?
(2) Is the seller in repudiation or renunciation of contract where, in receipt of a short period of notice, he rejects that notice and says that he does not have cargo to meet the vessel as thus nominated to load on an uncontractual date?
Both awards had found that Buyers had given notices that substantially satisfied the terms of the contracts (to the extent that they did not strictly meet the exact requirements, this was not such as to invalidate them) and that Sellers' responses to the notices were comprehensive and unambiguous in indicating that cargo would not be ready in time for shipment during the contractual shipment periods, following which Buyers gave notices accepting Sellers' responses as bringing the contracts to an end.
On appeal to the Commercial Court, Sellers submitted that:
(1) Strict compliance with the notice of readiness provisions by Buyers was a condition precedent to Sellers being obliged to have cargo ready to load during the shipment periods [citing Bunge v Tradax (fn.2) and Cargill v Continental (fn.3)] and, because Buyers had failed to serve contractual notices, the Board was not entitled to conclude that Sellers were in default; and
(2) In light of (1), the Board had reached an unreasonable conclusion that they would not have been reached had they been properly directed as to the law, as Sellers' responses were not "absolute" in the sense that they did not say that Sellers would not have cargo available at any time within the respective shipment periods [citing The "Hermosa" (fn.4) and The "Pro Victor" (fn.5)].
As for the Buyers, their submissions that short notices of ETA were not breaches of the contracts did not have to be considered, because the Board had rightly held that even if short notices were breaches, Sellers' responses to the notices and their subsequent conduct were still capable, as a matter of law, of constituting a renunciation of the contracts.
Despite the noted force of the submissions made for Sellers, the judge concluded that the appeals on liability should be dismissed.
Sellers’ First Submission
This assumed that the obligation in the contracts to provide cargo after the tender of a valid NOR depended on seven working days' notice of the vessels' ETA having been given. But the notice of ETA was only an estimate. It was conceivable that the vessel would in fact arrive before the expiry of the period stated in that notice. Time would start to run when NOR was given. There was nothing in the contracts which suggested that the obligation to provide cargo after tender of a valid NOR (triggering the running of laytime) was dependent on Buyers first serving a 7 working days' notice of ETA. Clauses 6 and 10 of GAFTA 120 indicated that laytime started to run from the NOR provided it was given within the delivery period, and subject only to the specified exceptions. Seven working days' notice of ETA was not one of them. The effect of clauses 6 and 10 was that Sellers would be protected if the vessel was presented without the requisite notice and Sellers did not have cargo because, as the Board found, laytime would not run after NOR was tendered until the expiry of seven working days after the notice.
The cases relied on by Sellers did not assist their case. In Bunge v Tradax the breach consisted not of giving less than the requisite number of days' notice but of giving notice after the last date on which it could legitimately have been given because the required 15 days’ notice would have ended after the last possible date for shipment. In Cargill v Continental the notice in respect of the substitute vessel was too late - given the end of the shipment period - and not merely too short. Moreover, in Cargill v Continental, it was a term of the contract that if the requisite notice was not given, NOR could not be tendered. In addition, to regard the giving of full notice as a condition precedent to Sellers' obligation to provide and load cargo is not consistent with the approach in the commentaries on charterparties (fn.6). The judge accepted Buyers' submission that there was no reason why the position should be different in the sale of goods context.
Sellers' Second Submission
While bearing in mind Donalson LJ's observations in The "Hermosa" as to whether conduct is to be taken as constituting a repudiation of a contract, the judge inclined to the view that, in the light of the evidence before the Board, their findings of fact could not be said to be legally unsustainable and such that no reasonable tribunal could have made them. In all the circumstances, the judge considered that it was open to an experienced Board to conclude that Sellers' messages were repudiatory.
At first blush this decision on liability appears contradictory to the normal consideration of time being of the essence/a condition of a sale of goods contract. This case highlights that it is always a matter of the true construction of all the terms of the contract properly set in their context in the particular circumstances of the case that are determinative of whether or not a failure to comply strictly with a time related obligation is fatal to the party in breach. Greater leeway will be accorded where the nature of the time provision is estimated rather than absolute, provided the contract does not expressly provide to the contrary and the other terms of the contract are not undermined.
Footnote 1: The relevant contracts were materially on the same terms, save for shipment period, as follows:
(1) Other relevant main terms:
"Quantity: Exact quantity to be declared on Buyers nomination of vessel. Partial shipment/cargo/part cargo allowed at buyers' option
Loading terms: Buyer to give minimum 7 (seven) working days written pre-advise [sic] of vessel's ETA. Notice of Readiness (NOR) tenderable in writing between the normal business hours…
Governing contract(s) All other terms and conditions as per GAFTA 120 where not in conflict with terms contained herein …"
(2) Relevant clauses of GAFTA 120:
"PERIOD OF DELIVERY ... 6…Nomination of vessel – Buyers shall serve not less than…..consecutive day's (sic) notice of the name and probable readiness date of the vessel and the estimated tonnage required…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 … 10. LOADING … Notification of the vessel's readiness to load at the port of loading shall be served on sellers at their office at the port between [specified hours]. … Any time lost at Port of Loading through riots, strikes or any cause whatsoever beyond Seller's control, not to count as laytime. …
Footnote 2:  1 WLR 711 (HL)
Footnote 3:  2 Lloyd's Rep 290 (CA)
Footnote 4:  1 Lloyd's Rep 570 (CA)
Footnote 5:  EWHC 2974 (Comm),  2 Lloyd's Rep 159 (CC)
Footnote 6: Voyage Charters (3rd ed) para 4.19, Time Charters (6th ed) paras 7.19, 7.20 and 15.14, Laytime and Demurrage (6th ed) paras 3.255 and 3.258, and Commencement of Laytime (4th ed) para 131