Adv. Gill Nadel, Adv. Omer Wagner
The term “FOB” is a known term in the International Trade Law, and its meaning is that when someone who sells goods (an exporter) arranges the uploading of goods on the vehicle, his responsibility for the goods ends at that stage and passes on to the purchaser (the importer). But what happens when the person who sells refuses to load the goods on vessels, while claiming that it was not properly prepared by the purchaser? Lately, such a case was discussed in an English court.
The Facts of the Case (briefly):
“Sufflet” company ( the exporter) and “Bunge” company ( the importer) signed an agreement according to which the exporter would export from Ukraine to England 15,000 tons of barley, that are insect and odor free according to the FOB Ukraine terms. In other words – it was agreed that the goods will be uploaded on the vessel in the Ukrainian port and from the moment of the upload, the responsibility for the goods will be the importer’s in England.
The sides also agreed that if loading the goods will take more than three days, the exporter will compensate the importer for the delay.
In addition, it was agreed that the rest of the contract will be in accordance to the “Gafta 49” form which is a standard agreement that relates to the transport of goods in East Europe, under FOB terms. This agreement was formulated by an organization that promotes international trade of agricultural goods and is known as G.A.F.T.A.
One of the sections in this standard agreement states that it is the seller’s responsibility to prepare the goods for the buyer according to the agreement between them; and when the transporting mean will be at the port and ready for the loading of the goods on the agreed date of supply, it is the duty of the seller to load the goods on the vessel.
In this case, the importer arranged means of transport and brought it to the port and informed the exporter that the vessel is ready for the loading of the goods. The exporter sent an assessor to check the vessel on his behalf, and the assessor decided that the vessel was not fit to load the goods as the storage booth under the upper deck was covered with coal dust, which endangers the barley sacks.
In light of this, the exporter informed the importer that he would not load the goods on the vessel because in his opinion it was not ready for the loading as agreed in the agreement. And so the goods remained in the Ukraine and did not set off.
In light of this, the importer filed a claim against the exporter for not receiving the goods which the sides agreed by contract he would receive. The issue was discussed in several courts in England –
the first time the exporter won the claim but in the appeal the ruling diverted against him, stating that the term “ready for loading” refers to preparing the vehicle physically and legally for uploading the goods and that if the vessel is not clean and there is a concern for the goods safety, the seller must still load the goods, since according to the FOB terms after loading the goods the risk of damage to the goods becomes the buyer’s responsibility.
Lately a verdict on this matter was given by England’s court of appeals:
The verdict:
The court of appeals ruled that the term “ready for loading” refers to holds that are physically suitable to accept goods, meaning holds that have enough room to contain the goods.
The court ruled that in a transport contract under the FOB terms, the risk of loading the goods in the exportation port to a vessel that its holds are not clean is a risk of the buyer and not the seller, as the seller’s responsibility for the goods ends before they are loaded on the ship.
In light of this, the court ruled that as long as the sides did not agree otherwise, the seller has no responsibility to check the cleanliness of the holds of the vessel, and therefore, it was ruled that the seller breached the contract by refusing to load the goods even though the holds were not clean, and was obliged to compensate the buyer.
(Soufflet Negoce SA v Bunge SA, English Court of Appeal: Longmore, Wilson and Toulson LJJ: [2010] EWCA 1102: 13 October 2010 ).
This review was taken from www.onlinedmc.co.uk and was edited by David Martin Clark.
David Martin-Clark, Barrister, Maritime Arbitrator, Commercial Disputes MediatorBarrister, Stone ChambersShipping & Insurance Consultant
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