Commercial: International Sale Contracts Cases

Terms in this set (33)

The English court had jurisdiction to hear a claim relating to a contract for the sale and carriage of goods from England to Cyprus. The court construed the FOB contract, determining for the purposes of Regulation 44/2001 Art.5(1)(b) and the Sale of Goods Act 1979 s.32(1) that delivery of the goods had been effected upon the goods being shipped.

A contract on fob terms involved delivery upon shipment, for every relevant sense under art 5(1)(b) of Council Regulation (EC) 44/2001. The fact that the buyer would not in practice inspect the goods until after their arrival in Cyprus counted for nothing. It was commonplace in international sales. The agreement for payment 90 days after arrival was no more than a relaxed payment regime with no significance in relation to the place of delivery.

The appellant buyer (O), a company registered in Cyprus, appealed against a decision that the English court had jurisdiction to hear the claim of the respondent seller (S), a Scottish company, for the price of goods sold. O had agreed to buy cider from S. The parties' contract of sale was governed by English law. The cider had been shipped from Liverpool to Limassol where O had taken delivery, but had never paid. S had sued O for the price of the goods. The issue for determination was whether the English court had jurisdiction to entertain the action. It was common ground that in terms of Regulation 44/2001 Art.5(1)(b), the English courts did not have jurisdiction unless, according to English law, the cider was "delivered" on shipment at Liverpool. The sale contract had provided for S to send the goods to O and to pay the freight, but O had designated the carrier to be used. The contract was expressed to be "delivery cost and freight Limassol" and the invoices referred to the place of delivery as Limassol. The Court of Appeal had found that the delivery terms "delivery cost and freight Limassol" meant that possession would be transferred to O on shipment on terms that S would procure for O a contract of carriage to carry the goods to Limassol and that risk, title and possession were all intended to pass on shipment. It had found that the reference in the invoices to "place of delivery Limassol" did not turn the contract into an ex ship contract and that there was therefore no express term that delivery was to be effected at Limassol. O submitted that the instant contract was a typical CIF contract and that the Sale of Goods Act 1979 s.32(1) was of limited scope and did not apply where the carrier was the servant or agent of the seller.

Appeal dismissed. (1) The contract was in all essential respects an FOB contract. By shipping the containers on board the vessels at Liverpool with the intention that O should be in a position to take delivery of them immediately on their arrival in Limassol, S was deemed, under s.32(1) of the Act, to have delivered the cider to O at Liverpool. Therefore, in terms of Art.5(1)(b) of the Regulation, the English court had jurisdiction to hear the case. Although delivery of goods to a carrier did not automatically mean that delivery had been effected to the buyer, s.32(1) gave a prima facie rule, which would have to yield if the terms of the contract between the parties indicated that the seller was to keep, rather than to transfer, possession. In the instant case, the carriers were properly to be regarded as O's agents for the purposes of s.32(1) and S had no continuing interest in the cider once it had been shipped. (2) (Per Lord Mance) Although it was unnecessary to consider what the position might have been after the passing of property and risk on shipment if S had not only made a special contract with the carriers, but had also retained possession of the goods, it was clear, bearing in mind the general aim of Art.5(1)(b) and the general nature of FOB contracts, that the place of shipment was also the place of delivery in all types of FOB contracts, including those which provided for the seller to retain the bills of lading.
Where goods shipped in a chartered vessel under a bill of lading issued by the ship-owners are lost or damaged as a result of conduct which constituted a breach of the charterparty by the ship-owner, charterers who have transferred the property in the cargo to the indorsees of the bill of lading cannot recover as damages in an action against the ship-owner the full value of the goods lost or damaged. P Co. chartered the Albacruz (A), which was owned by D Co. They shipped a cargo of crude oil on board for carriage from Venezuela to Antwerp. Carriage was covered by a bill of lading issued pursuant to the charterparty naming the plaintiffs as consignees and the goods as deliverable to their order. In the course of the voyage the A and her cargo became a total loss owing to breaches by the shipowners of the charterparty. On a day prior to the loss, P's agents had indorsed the bill of lading to an Antwerp company and posted it to them. It arrived the day after the loss. P Co. brought an action against D Co. for damages, and arrested the A, which was also owned by D Co.

Held, that (1) in the circumstances of the case property in and the right to possession of the cargo had passed to the indorsees of the bill of lading at the time of the loss; (2) the rationale of Dunlop v Lambert could no longer apply in cases where the only contract of carriage into which the shipowner entered was that contained in the bill of lading and the goods passed to the consignee or indorsee named in the bill by reason of the consignment or indorsement, since the right of suit against the shipowner in respect of obligation arising under the contract thereupon passed to him from the consignor.
The Carriage of Goods by Sea Act 1924 s.1 provides that the Hague Rules "shall have effect in relation to and in connection with the carriage of goods by sea . . ." By the Schedule to the Act, Art.1, "'Contract of carriage' applies only to contracts of carriage covered by a bill of lading . . . in so far as such document relates to the carriage of goods by sea . . . 'Carriage of goods' covers the period from the time when the goods are loaded on to the time when they are discharged from the ship." By Art.2, ". . . under every contract of carriage of goods by sea the carrier, in relation to the loading, . . . and discharge of such goods, shall be . . . entitled to the rights and immunities hereinafter set forth." By Art.4(5), "Neither the carrier nor the ship shall . . . be . . . liable for any loss or damage to or in connection with goods in an amount exceeding [in effect, GBP 200]." The rights and liabilities under the rules do not attach to a period of time, but to a contract or part of a contract, their operation being determined by the limits of the contract of carriage by sea and not by the limits of time; the function of Art.1(e) is only to assist in the definition of contract of carriage and the reference therein to "when the goods are loaded on" is not intended to do more than identify the first operation in the series which constitute the carriage of goods by sea, just as "when they are discharged" denotes the last; "loading" covers the whole operation. Whenever a contract of carriage is concluded, and it is contemplated that a bill of lading will, in due course, be issued in respect of it, that contract is from its creation "covered" by a bill of lading, and is therefore from its inception a contract of carriage within the meaning of the rules and to which the rules apply. The benefits which a third party takes in a contract are those which appertain to his interest therein and he taken them subject to whatever qualification with regard to them the contract imposes. The plaintiff sellers delivered a fire tender sold under a contract of sale f.o.b. London alongside a ship nominated by the buyers. While the tender was being lifted on to the vessel by the ship's tackle and before it was across the rail it was dropped and damaged. Under the contract of sale the property had not then passed. All arrangements for the carriage of the goods had been made by the buyers. A bill of lading had been drawn up but had not been issued. The sellers sued the shipowners in tort for GBP 966 14s. 8d., the cost of repairing the tender. The shipowners admitted liability but claimed that the amount was limited by Art.4(5) of the Hague Rules. The sellers contended, inter alia, (1) that, as the tender had not crossed the ship's rail it was never loaded on to the ship and therefore, since (as they alleged) the accident occurred outside the period specified in Art.1(e), the rules did not apply; (2) that the rules were not incorporated in the contract of carriage because no bill of lading had been issued; and (3) that even if the rules could be applied to the operation of loading at the time of the accident, they had no application as between themselves and the shipowners because they were not a party to the contract of affreightment.

Held, (1) the rights and immunities under the rules extended to the whole of the loading carried out by the defendants; (2) the fact that a bill of lading was not issued was immaterial because the contract was covered by the contemplated bill of lading; (3) on the facts, it was the intention of all three parties that the sellers should participate in the contract of affreightment so far as it affected them; (4) accordingly, the plaintiffs were bound by the Hague Rules as embodied in the contract of carriage and could recover GBP 200 only.
By a contract of sale made in February 1961, Italian sellers agreed to sell to the charterers a quantity of fertiliser net fob stowed port of exit on terms that the property in the goods was to remain in the sellers until the bill of lading was delivered to the charterers in London. The charterers took out a charterparty, dated 6 June 1961, to implement the sale, whereby the shipowners agreed to carry the goods in their vessel from Italy to Madras. The charter provided that the master should sign bills of lading 'without prejudice to this charterparty', and by clause 17, that 'Any dispute arising under this charter shall be settled in accordance with . . . Arbitration Act 1950 . . .' The goods were shipped by the sellers and on 11 July 1961 the master issued to them a bill of lading, which was on the sellers' printed form stating that the goods were shipped by the sellers for carriage to Madras and on safe arrival were to be delivered to order, and that 'All conditions and exceptions as per charterparty'. The sellers then indorsed the bill of lading in blank and presented it to the charterers who took the bill, paid the contract price, and obtained delivery of the goods at Madras. A dispute arose between the charterers and the shipowners as to alleged short delivery of the goods and the charterers asked for arbitration of that dispute in accordance with clause 17 of the charterparty. The shipowners claimed that the goods were carried on the terms of the bill of lading which contained no arbitration clause and that the charterers must sue at law, but the limitation period had expired: Held even though the charterers were not the shippers and took as indorsee of the bill of lading, the charterparty (and not the bill of lading which was signed without prejudice to the charterparty) governed the relationship between the owners and the charterers and therefore the carriage of the goods; accordingly, the dispute as to short delivery was determinable by arbitration under clause 17 of the charterparty.
Where goods were shipped f.o.b. and 80 per cent of the purchase price had been paid, property in the goods did not pass to the buyers, in the absence of contractual provisions to the contrary, until the remaining 20 per cent of the purchase price had been paid. Cartons of prawns were shipped on the defendants' vessels by sellers under bills of lading which provided for delivery of the goods to the sellers' order. They were found to be damaged on discharge. The prawns had been sold to the second plaintiffs f.o.b. with 80 per cent of the contract price paid before shipment by means of a letter of credit. In an action brought against the shipowners by the second plaintiffs and their parent company to whom the prawns were sold on arrival, the judge held that the second plaintiffs became owners of the prawns on shipment and so could succeed in tort to the extent that damage had occurred while the prawns were in the custody of the shipowners. The shipowners appealed.

Held, allowing the appeal, that where goods were damaged on board ship, only the owner of the goods at the time when the damage occurred could sue the shipowner in tort. Since by the bills of lading the goods were deliverable to the order of the sellers, under the Sale of Goods Act 1979 s.19 there was a prima facie presumption that the sellers reserved the right of disposal and the property in the goods would not pass until the balance of the purchase price was paid. Generally it could be inferred that where goods were shipped overseas the seller would not wish to part with the property in the goods until he had been paid in full, even though 80 per cent had been paid before shipment, and the remainder was payable by letter of credit. There was no evidence that the presumption had been displaced or that the price had been paid in full before the goods were damaged, and so property had not then passed from the sellers.
In order for a plaintiff to claim in negligence for loss or damage to property he had to have either the legal ownership or a possessory title to the property concerned, and it did nor suffice for him to have contractual rights in relation thereto which had been adversely affected. Accordingly buyers under a c. and f. contract of sale had no right to sue shipowners in tort. Per curiam: 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. By the variation to which they agreed, the buyers were depriving themselves of the right of suit under the Bills of Lading Act 1855 s.1 which they otherwise would have had. In July 1976 the plaintiff buyers contracted to buy a quantity of steel coils to be shipped in Korea c. and f., free out, Immingham. The price was to be paid by a 180-day bill of exchange to be endorsed by the buyers' bank in exchange for a bill of lading. The buyers intended to resell the steel before the bill of lading was tendered but could not effect a resale and their bank declined to back the bill. After discussion by agreement, the bill of lading was sent by the sellers to the buyers, the goods to be at the disposal of the sellers until further notice, and sales by the buyers were to be notified to the sellers. Later the buyers forwarded the bill of lading to agents at Immingham telling them to clear the goods through customs and to place them in a warehouse to the sole order of the sellers, stating that the buyers would accept liability as the sellers' agents. The goods were loaded on the defendant ship owner's vessel, The Aliakmon, which was on time charter, the time charterers being responsible for the stowage of the cargo, with a power reserved to the master to intervene. Damages was caused to the goods owing to bad stowage. The buyers sued the defendants for the loss suffered as a result of the damage. The judge held that the shipowners were liable to the buyers in contract only. The Court of Appeal allowed the defendants' appeal. The buyers appealed to the House of Lords claiming that there existed a duty of care which had been broken by the shipowners.

Held, that the appeal was dismissed. It was a long established principle that the plaintiff could only claim for negligence for loss of or damage to property if he had either the legal ownership of or a possessory title to the property concerned at the time when the damage occurred. It did not suffice for him merely to have contractual rights adversely affected by the damage. Since the plaintiff buyers were under a c. and f. contract of sale were neither legal owners nor did they have any possessory title they had no right to sue the shipowners in tort.
A contract, dated August 3, 1938, provided for the purchase of 15,000 units, 2 per cent more or less, of No 2 yellow American corn, with an option to the seller of shipping a further 3 per cent more or less on contract quantity. At the foot of the contract were the words: 'Separate documents for each 1,000 units and each 1,000 units to be considered a separate contract.' In pursuance of this contract, the sellers wrote to the buyers on August 27, giving notice of appropriation of about 15,444 quarters of corn as per 'Generton' bill of lading, and on September 6, sent a provisional invoice for 15,444 214/480 quarters, amounting to £17,471 10s 6d, and the provisional invoice stated that there were 15 bills of lading dated August 26, each for an amount of bushels equivalent to 1,000 units, and one for an amount equivalent to 444 214/480 units. On September 7 the buyers rejected the provisional invoice as not being in accordance with the contract, and on the same day the sellers sent an amended provisional invoice for 15,000 quarters amounting to £16,968 15s, stating that there were 15 bills of lading dated August 26, each for a number of bushels equivalent to 1,000 units. This provisional invoice was received by the buyers on September 8, and it was then arranged that the matter should proceed to arbitration.

Held (1) the buyers committed a breach by wrongfully refusing to accept the first documents which were in accordance with the contract and covered the total quantity which the sellers were bound to deliver; (2) the breach was not waived by the mere act of sending the amended invoice, which was no more than an attempt by the sellers to meet the buyers' objection; (3) the tendering of the amended invoice did not constitute a repudiation of the contract, as there was no categorical refusal on the part of the sellers, by words or conduct, to perform the contract.
At the date of the tender to the buyers of shipping documents under c.i.f. contracts those documents must be valid and effective.

Two c.i.f. contracts for the sale of beans to be shipped from Chinese ports to Naples and Rotterdam respectively each contained a provision that payment was to be in net cash in London on arrival of the goods at port of discharge in exchange for bills of lading and policies of insurance, but payment was to be made in no case later than three months from date of bills of lading or upon the posting of the vessel at Lloyd's as a total loss. The beans were shipped in July, 1914, on German vessels which on the outbreak of war between England and Germany on August 4, 1914, entered ports of refuge in the East, where they remained. At the expiration of three months from the date of the bills of lading the sellers tendered to the buyers the shipping documents, in one case a German bill of lading and an English policy of insurance, and in the other a German bill of lading and a German policy of insurance. The buyers in each case refused to accept the tender and pay the price:—

Held, affirming the decision of Scrutton J. [1915] 2 K. B. 379, that the buyers were entitled to refuse the tender, inasmuch as at the date of tender the documents had, by considerations of public policy, become void and unenforceable as regards any obligations of performance after the outbreak of war, and to carry out their original obligations would involve entering into contractual relations with the King's enemies.
In a cif contract the goods were 'delivered' to the buyer, within the meaning of the Sale of Goods Act 1893 (c 71) s 35 (repealed) when they were put on board a ship at the port of shipment. When the documents of title were given to the buyer, the true view would seem to be that he obtained the property in the goods subject to the condition that they would re-vest in the seller if, on examination, they were found to be not in accordance with the contract. So long as the buyer dealt only with the documents, he would be dealing only with the conditional property which he had, but if he dealt physically with the goods after they had been landed, eg, if he delivered them to a sub-buyer, he would be doing an act inconsistent with the seller's ownership, ie, his reversionary interest in the goods. But neither a pledge of the goods nor a sale of documents under an ordinary string contract would interfere with the seller's reversionary interest.

A right of rejection is only a particular form of a right to rescind a contract. Wherever there is a breach of condition there is a right to rescind the contract, and if there are successive breaches of different conditions committed one after the other, each time there is a breach there is a right to rescind in respect of that breach. A c.i.f. contract puts a number of obligations upon the seller, some of which are in relation to the goods and some of which are in relation to the documents. These are distinct obligations, and the right to reject the documents arises when the documents are tendered, and the right to reject, or the moment for rejecting the goods arises when they are loaded and when after examination they are found not to be in conformity with the contract. The plaintiffs, merchants carrying on business in Hong Kong, agreed to buy from the defendants, importers and exporters carrying on business in London, goods to be shipped from Antwerp c.i.f. Hong Kong with payment against confirmed letter of credit. The plaintiffs instructed their bank to open the letter of credit, the bills of lading to be held by the bank, the plaintiffs giving the bank a pledge of the goods for the amount of the advance. In order to fulfil this contract with the plaintiffs, the defendants agreed to buy the goods from the third party, a Dutch firm. The plaintiffs entered into a contract to resell the goods to N, a Hong Kong firm, who, as the market was falling, insisted on October 31 1951 as the latest date for shipment. The plaintiffs informed the defendants accordingly, and the defendants passed the information on to the third party, who were endeavouring to find shipping, and instructed them to date the bill of lading not later than October 31. The goods were not in fact loaded until November 3, and words on the bill of lading, which had been inserted in order to alter the date for shipment, were subsequently deleted. The documents arrived in Hong Kong on November 19 and were presented two days later by the plaintiffs to their bank who accepted them. Towards the end of November N ascertained that the ship had not called at Antwerp until after October 31 and requested cancellation of their contract with the plaintiffs. On December 17, the goods arrived at Hong Kong and the plaintiffs took delivery on behalf of their bank. The market for the goods in Hong Kong had fallen rapidly from September onwards. In February 1952 the plaintiffs, having satisfied themselves that the bill of lading had been forged, commenced proceedings against the defendants in which they claimed the return of the price as money had and received to the use of the plaintiffs on a consideration which had wholly failed, alternatively, damages for fraudulent misrepresentation, and, in the further alternatively, damages for breach of contract.

Held, (1) the bill of lading was not a nullity; the transaction was merely voidable; and as the plaintiffs had taken delivery of the goods, acted upon the bill of lading and kept the goods, it was not now open to them to avoid the transaction; therefore, the claim for return of the money as for a consideration which had wholly failed was bad in law and on the facts, and could not succeed; (2) there was here a right to reject the documents, and a right to reject the goods, and the two rights were quite distinct; the former arose when the documents were tendered, the latter when the goods were landed and when after examination they were found not to be in conformity with the contract; therefore, although the plaintiffs had lost their right to reject the documents, they had not lost their right to reject the goods; the true measure of damages in this case was damages for the loss of the right to reject, which the plaintiffs would have exercised if the bill of lading had been truly dated, and, therefore, they must be put in the same position as they would have been in if they had that right to reject; consequently, the true measure of damage was the difference between the contract price and the market price at the time of delivery; (3) in the circumstances, the question whether the plaintiffs, by pledging the documents to their bank as they did immediately upon receipt of them, had not in any event dealt with the goods in such a way as to amount to an acceptance under the Sale of Goods Act 1893 s.35 and thereby lost their right to reject did not arise, but it would seem that in so dealing with the documents the plaintiffs were not purporting to do anything more than pledge the conditional property which they had and that they were not doing anything which was inconsistent with the defendants' ownership.
A Swedish merchant agreed to sell to an English company a quantity of guano in bags c.i.f. Norway to Kobe or Yokohama, terms net cash against documents in London; time of shipping as to the first instalment March/April, 1920. The seller, in anticipation of his obligations under the contract, agreed with L., the agent at Hamburg of a Japanese company, which ran a line of steamers from Hamburg to Japan but ran no steamers from Norway, for the conveyance of the guano from Hamburg to Japan on the terms that L. should sign through bills of lading as soon as the goods were in his possession. Between April 20 and 22 the guano was shipped by the sellers in several lots from various Norwegian ports, including B., on the steamship K. to Hamburg. On the arrival of the goods at Hamburg L. signed several documents in identical terms called through bills of lading bearing date May 5. The bill of lading relating to the B. consignment stated that the goods were shipped in apparent good order and condition on board the K. lying at B. and bound for Hamburg, for transhipment into the Japanese company's steamer A., to be delivered in the like good order and condition at the port of Yokohama unto "order," and the margin contained the statement: "Shipped from B. according to bill of lading on the 22nd April, 1920." On May 12 the seller tendered to the buyers documents relating to the first instalment, including the ocean bills of lading, but the buyers rejected the documents and refused to take up the goods. In an action for the price of the goods:-

Held, first, that the ocean bills of lading were not through bills of lading, inasmuch as they afforded no protection to the buyers on the initial voyage, and did not satisfy the conditions of the contract; secondly, that on a sale on c.i.f. terms the contract of affreightment must be procured on shipment, and that a bill of lading issued thirteen days after the original shipment at another port in another country was not procured on shipment.
By a contract made in April, 1940, the sellers, an Argentine company, sold to the buyers, a Belgian company, 500 tons of rye for shipment "c.i.f. Antwerp," on the terms contained in Form 41 of the London Corn Association. The contract provided for payment "on first presentation of and in exchange for first arriving copy/ies of bill/s of lading .... and/or delivery order/s and policy/ies and/or certificate/s .... of insurance." The sellers were to pay for any deficiency in weight; they guaranteed condition on arrival and made themselves responsible for all averages. The rye sold was part of a larger parcel covered by a bill of lading signed before the contract was made and the policies of insurance effected by the sellers covered a quantity different from that sold and that covered by the bill of lading amount. Both the bill of lading and the policies remained throughout in the possession of the sellers or their agents. The sellers exercised their option to demand payment in exchange for a delivery order. The sum to be paid, by cable transfer to New York, against the delivery order, was stated in a provisional invoice handed to the buyers to be $4,999.33, i.e., cost less freight plus a proportion of insurance. A delivery order directed to the sellers' agents at Antwerp was handed to the buyers against payment of this sum. It was indorsed by the agents with an undertaking to honour it. The sellers delivered to their agents two certificates of insurance and the delivery order in terms recognized the buyers' interest in these to the extent of their purchase. The charterparty under which the ship sailed recognized no port of discharge but Antwerp. While she was still at sea the Germans invaded Belgium and occupied that town. By arrangement between the owners and the sellers as charterers, but without the buyers' consent the ship discharged her cargo at Lisbon, where it was sold by the sellers. It was admitted that the property in the rye had never passed to the buyers, who claimed total reimbursement of the sum paid by them:-

Held, that despite the designation of the contract as "c.i.f." the true effect of all its terms must be taken into account and, in the light of these, the contract was not "c.i.f." but a contract to deliver at Antwerp. The payment made was not for the documents as representing the goods but for delivery of the goods themselves. There was a frustration of the adventure and no part performance and the consideration had wholly failed so that the buyers were entitled to recover the amount paid.
Application under Order XLI rule 3, to have the judgment of the Court of Appeal antedated to July 29, 1919, the date of the judgment of Rowlatt J. The claim was for a liquidated sum, and the plaintiffs contended they ought to be allowed interest on the amount of the judgment from the date when judgment in their favour ought to have been pronounced. For this purpose it was necessary to have the judgment of the Court of Appeal antedated. Borthwick v Elderslie SS Co (no 2) [1968] AC 1, was distinguishable, because there the claim was for unliquidated damages, and the judgment of the Court of Appeal was for a sum to be assessed by a referee. The court in that case expressly refrained from saying what the result would have been had the amount claimed at the trial been a fixed sum. If the judgment were not antedated, great hardship would be inflicted on the plaintiffs, because they were in all probability being financed in this transaction by a bank to whom they will have to pay interest. There was no delay in bringing the appeal to this court. If special circumstances are necessary the facts above mentioned constituted special circumstances.

I do not think that we ought to grant this application. If we were to accede to it there would be few cases in which we could refuse. Borthwick v Elderslie SS Co (no 2) [1968] AC 1, shows that the court has jurisdiction to make the order, but that it ought to be exercised with great caution, which indicates that there must be something exceptional in the facts to justify the making of the order. I do not think that there is anything exceptional in the facts of this case, and the order ought not to be made (Bankes LJ).
Although a freight forwarder had been negligent in giving a warranty that vehicles would be shipped below deck without checking that that was true, and that had resulted in the insurer refusing to cover the loss of the vehicles after they had been shipped on deck, that had not caused the loss to the vehicles' buyer. Under Incoterms 2000, the seller under the relevant CIP contract had only been obliged to provide cover that, on the facts, would not have covered the loss.

The appellant vehicle seller (M) and freight forwarder (G) appealed against a decision that they were liable for breach of contract. The respondent buyer (B) had agreed to buy three ambulances from M under a CIP contract on terms as set out in Incoterms 2000. M engaged G to arrange shipment of the ambulances from the United Kingdom to Libya. G arranged for them to be shipped as roll-on roll-off cargo with a carrier (X), and sent M an insurance certificate containing a warranty stating that the cargo would be shipped under deck. X's booking note to G stated that vehicles were shipped with an "on deck option" which would be remarked on the bills of lading. The bill of lading contained a liberty clause allowing goods to be carried on deck or under deck. The ambulances were shipped on deck and two were washed overboard during the voyage. The insurers refused to pay for their loss as there had been a breach of the warranty of under-deck shipment. B brought proceedings against M under the CIP contract and M joined G in an additional claim. The judge found in favour of B in its claim against M, and in favour of M in its claim against G. He held that the contract of carriage had permitted on-deck shipment as the terms of the booking note did not preclude carriage on deck, that G should not have given the under-deck warranty without checking the true position, and that M was liable to B as it had failed to provide a valid contract of insurance and that had caused the loss. M and G argued that (1) although the usual terms of the trade would include a clause such as the liberty clause, their obligation had been to procure a contract of carriage that prevented the clause from being exercised in such a way that the ambulances would be carried on deck, and they had discharged that obligation because the booking note constituted an antecedent agreement preventing shipping on deck; (2) any breach of M's obligation to B to provide insurance had caused B no loss, as the cover to which B was entitled would not have covered the loss in any event.

Appeals allowed. (1) The judge had been wrong to find that the booking note was not clear enough to override the liberty clause. It was long-standing practice that if goods were shipped on deck, a statement to that effect would ordinarily be found on the bill of lading. Although the booking note could have been clearer, anyone in the trade would have understood it to mean that if the goods were to be placed on deck, the bill of lading would have been so claused. There was therefore an antecedent agreement to that effect, and under the contract between G and X there had been no right to carry on deck. (2) It was clear that freight forwarders acting with due care and sellers discharging their obligation under Incoterms 2000 should not have given the under-deck warranty unless the contract of carriage provided clearly for under-deck shipment. G had been negligent in giving the warranty: it had been incumbent on it to check that the facts that it was warranting were true were in fact true. As it had not dealt with X before, it could not rely on the fact that it had arranged a contract with X which, if performed in accordance with its terms, would have resulted in the matter warranted as being true being true. The consequences of a breach of warranty were so severe that the warranty should not have been given without checking that the cargo was under deck. However, that had caused no loss. Under Incoterms 2000 M was only obliged to provide cover which, on the facts, would not have covered the loss. There was no authority obliging a seller, where there was an express contractual stipulation as to the terms of the insurance to be obtained, to obtain insurance that matched the carriage actually performed, and the judge's decision on that point had therefore been wrong.
A cif contract for the sale of 500 tonnes of beans provided for a specified inspection certificate to be conclusive as to quality. 55 tonnes were overcarried and shipped back later; a certificate was issued only in respect of the other 445 tonnes. When the sellers tendered that certificate together with the shipping documents relating to the whole 500 tonnes, the buyers rejected all the documents. The sellers thereupon rescinded the contract and sued the buyers for damages. The buyers sought to argue that they had been entitled to reject the goods as being non-contractual in that beans of a different kind were admixed:

Held under a cif contract a seller was not obliged to tender a certificate of quality, but only had to tender the invoice, bill of lading and insurance policy or certificate. The sellers had tendered those documents; the buyers' rejection of them constituted a fundamental breach entitling the sellers to rescind. This rescission meant that all unperformed primary contractual obligations between the parties ceased and that the sellers became entitled to claim damages for any loss sustained by them through the buyers' non-performance, future as well as past. The measure of such damages was the difference between the contract price and the market price at the date when the sellers accepted the buyers' repudiation. This measure might fall to be reduced by any sum established by the buyers for breach of warranty as to description or quality of the goods. The certificate provisions of the contract thus did not affect the issue of liability; they were relevant only to the measure of damages. Where a certificate of quality was to be final, it was final even if it was inaccurate; the buyers were thus bound by the certificate covering the 445 tonnes. As there was no suggestion of a difference in quality between the 55 tonnes and the 445 tonnes, the buyers were unable to prove that the like certificate would not have been issued in respect of the 55 tonnes. The damages payable by them would thus not be reduced in respect of either the 445 or the 55 tonnes.
Where a seller in breach of a warranty in a c.i.f. contract tendered a mis-dated bill of lading in respect of goods shipped within the contract period, the buyer was not entitled to damages calculated on the basis that he had lost the right to reject the goods. S sold 500 tonnes of copra expeller cake c.i.f. Rotterdam to B on a GAFTA Form 100. The contract originally provided for shipment before the end of January 1984. By agreement, the period for shipment was extended to the end of February 1984 in consideration of an allowance of 2 per cent of the purchase price. The bill of lading was dated January 31, 1984. The goods were in fact shipped between February 6 and 10, 1984. B paid S in April 1984. Upon arrival of the goods in Rotterdam in July 1984, B discovered that the goods had not been shipped on January 31 as shown on the bill of lading. B sold the goods realising only 57 per cent of the contract price. B claimed the difference from S. B's claim was rejected in arbitration proceedings. The GAFTA Board of Appeal allowed B's appeal and awarded damages in full. S appealed successfully to the Commercial Court.

Held, dismissing B's appeal, that the goods were shipped within the contract period so that B was not entitled to reject the goods. In presenting a mis-dated bill of lading, S was in breach of contract. Having accepted the documents including the bill of lading, B had lost its right to reject the documents. In the circumstances B was obliged to treat S's breach as a breach of warranty and claim damages. B was not entitled to damages representing the difference between the market value of the goods and the contract price on account of the fact that B was not by reason of the mis-dated bill of lading deprived of any right to reject the goods. B had not demonstrated any loss arising from the fact that the bill of lading was mis-dated. B's only entitlement was to a reduction in the purchase price in accordance with the agreement extending the time for shipment.
PT, the sellers, sold tapioca chips and pellets to the buyers, S, under two cif contracts, to be delivered to "one port out of Lorient/Brest/Montoir/La Pallice". The contract specified that the delivery port had to be declared, at the latest, when the vessels passed Suez. S failed to declare the discharge port, and PT claimed that S were in default of the contract. S replied that, despite this, the bills of lading supplied were defective, so S were entitled to reject the documents. PT had supplied letters of guarantee against discrepancies in the bills of lading. They claimed that those guarantees were effective, that S were not entitled to reject the documents and were thus in breach of contract. The arbitrator's decision, at first instance, was for S. The Board of Appeal reversed the decision and held that the letters of guarantee from PT were part of "normal practice". S were wrong to reject the documents and were in default of contract. S appealed.

Held, allowing the appeal, that the bills of lading were discrepant in several material areas: they gave a significantly wider range of discharge ports than the four specified in the contracts and were thus defective; they stated that freight was "payable as per charterparty", which left open the possibility that the shipowners would demand freight at the discharge port. The finding that it was customary practice for such documents to be provided fell short of a finding that S were obliged to accept the documents. The custom was inconsistent with the basic nature of a cif contract, and a custom could not be relied on if it was inconsistent with the terms of the contract. S were entitled to reject the documents and were not in breach of contract for doing so. The failure to declare a discharge port had made no difference to events, PT would still have (wrongly) held S in default for rejecting the documents. The award in favour of PT would be substituted by an award in favour of S.