Under a FOB contract the sellers sold to the buyers a quantity of Argentine soya beans. The contract incorporated the provisions of GAFTA 64 (General Contract FOB Terms for Grain in Bulk) which included clause 24 default (set out in part at page 480 of the judgment). The contract was part of a string. The sellers failed to present documents. In the event the documents were tendered to the end buyer and receiver of the cargo and were accepted and paid for. Later, the vessel carried the goods to Odessa and discharge began. The buyers claimed damages in respect of the sellers’ default in not tendering documents, contending that the date of default was 29.9.87. The sellers argued (i) that the date of their (undisputed) default in failing to tender the documents to the buyers took place later again when the documents would normally have become available to the buyers and (ii) the market price of the goods (or the documents representing the goods) was ubstantially lower than the contract price and the buyers were only entitled to nominal damages. The dispute was referred to arbitration. The Board of Appeal accepted the buyers’ contention that the sellers’ default took place on 29 September. In their award they stated that the sellers were not in default until the day it was no longer possible for them to purchase the documents for the goods in order to fulfil the contract, which was 28 September. The basis for the award was that as the contract was silent as to the time for performance of the sellers’ obligation to tender the documents to the buyers, this was by legal implication a reasonable time, and such time continued until it became impossible for the sellers to obtain the documents. The sellers appealed, the question of law for decision being whether the Board were wrong in law in holding that the date of default was 29 September, and if so by reference to what criteria should the date of default be established? Evans J held that there was on the FOB seller who was obliged by his contract to obtain and tender the shipping documents, a duty to perform that obligation forthwith i.e. with all reasonable despatch, subject to there being no express provision or time limit to the contrary in the contract. The sellers’ duty to send forward the documents forthwith remained the same as in the general case even though a string, circle or insolvency was involved. Since the sellers’ obligation was to tender the shipping documents forthwith and they were in breach of contract if they failed to do so, it seemed likely that that duty should have been performed on or shortly after 5 August, but that was for the Board of Appeal to decide. The question raised is the ‘date of default’ for the purposes of the present contract. In Toprak Mansulleri Ofisi v Finagrain Compagnie Commerciale Agricole et Financiere S.A., [1979] 2 Lloyd’s Rep. 98 Mr Justice Robert Goff (as he then was) held at p. 109 that the same words ‘in default of fulfilment of contract’ in cl. 28 of GAFTA 27 -…meant, quite simply, the day on which [the buyers] failed to perform the obligation which entitled the sellers to determine the contract
Judges:
Evans J
Citations:
[1991] 1 Lloyd’s Rep 475
Jurisdiction:
England and Wales
Contract
Updated: 03 August 2022; Ref: scu.180032
