Ocean Chemical Transport Inc v Exnor Craggs Ltd

A contractual time bar may extinguish liability even where the relevant breach occurs only after the contractual period has expired, provided that this is the clause’s clear meaning. Commercial inconvenience or the unusual nature of the claim does not justify a narrower construction where the parties accepted the term.

For incorporation, the question is whether the existence, and where relevant the effect, of an onerous or unusual term was sufficiently brought to the other party’s attention in the circumstances. An express acknowledgement of incorporated standard terms may discharge that duty. Under the Unfair Contract Terms Act 1977, “parties” in an international supply contract means the contracting principals, not the agents who made the contract.

The claimants bought bunkers for a vessel from the respondent. The contract referred to the respondent’s general terms and conditions, which provided that all liability ceased unless suit was brought within six months after delivery.

The vessel was arrested approximately seventeen months after delivery following a dispute concerning payment to an earlier supplier. The claimants sought damages, alleging breaches of the statutory terms concerning title and quiet possession under the Sale of Goods Act 1979.

The Commercial Court decided three preliminary issues in favour of the respondent: the time bar extinguished liability, it was incorporated, and the contract was outside the relevant international-supply exemption in the Unfair Contract Terms Act 1977. The claimants appealed.

1. Disposition. The appeal was dismissed with costs here and below. Permission to appeal to the House of Lords was refused.
2. Unfair Contract Terms Act 1977. Section 26(3)(b) refers to the places of business of the parties to the contract. “Parties” means the principals who accept contractual liability, rather than the agents through whom the contract was made. The place of business of the brokers was therefore irrelevant.
3. Incorporation. Incorporation depends upon the meaning and effect of the particular clause, while the type of clause may also be relevant. The relevant duty was to bring the existence of the clause, and if necessary its effect, sufficiently to the other party’s attention in the circumstances. Although an extreme case might arise in which even a signature or acknowledgement was insufficient, the express acknowledgement of the general terms in the contractual documents, together with their longstanding availability to the buyers’ agents, was sufficient here.
4. Construction. The six-month provision operated as a time bar excluding liability after the period expired. The court was prepared to adopt the more stringent approach applicable to an exceptions or exclusion clause, taking account of the nature and extent of the rights affected. That did not justify departing from the clause’s clear meaning.
5. The fact that the alleged quiet-possession breach could arise only after the six-month period, and that this result was highly unusual, did not alter the construction. The parties could reasonably have accepted the small risk of such a claim in exchange for commercial certainty and finality.

• Court of Appeal (Civil Division): dismissed the appeal from the Commercial Court’s judgment of 26 July 1999 and upheld the decision on all three preliminary issues.
• Commercial Court: held that the time bar extinguished liability, was incorporated into the contract, and was not displaced by the Unfair Contract Terms Act 1977.