P.T. Putrabali Adyamulia v Societe Est Epices

In a CIF or C&F sale, the validity of a declaration of shipment is generally assessed by its express terms and timing. Shipment means loading goods on board a vessel; it does not necessarily mean loading on a vessel which satisfies every contractual requirement. A declaration is valid if it does not expressly indicate that the vessel or voyage is non-contractual. Unless the buyer objects within the contractual period, the declaration is deemed valid.

Shipping documents may generally be rejected only where they expressly reveal a material non-conformity, contain materially false information, or fail to comply with an applicable trade usage. A seller who elects to terminate after rejection of documents may claim damages, but not the price. An arbitral award may be remitted where essential issues, including counterclaims and the measure of damages, have not been determined.

The sellers appealed against two awards of the IGPA Board of Appeal concerning sales of Muntok White Pepper on IGPA form no. 5. The goods were shipped on the unpowered barge INTAN 6, which sank before delivery. The Board held that the shipment declarations were defective because the vessel did not satisfy the contractual classification requirement and that the buyers were not liable for non-payment.

The appeals followed permission granted by Tomlinson J. The principal issues concerned the validity and deemed validity of the declarations, the buyers’ right to reject the shipping documents or goods, and the proper remedy following the sellers’ subsequent settlement of claims against the carriers.

1. The appeals succeeded. The Board of Appeal’s conclusion that the buyers were not in breach could not stand, and the awards were set aside.

2. The court inferred only those matters which followed by necessary implication from the awards’ express findings. It was proper to infer that INTAN 6 was not a first-class ship because its classification did not meet clause 6 of IGPA contract no. 5. Its physical characteristics as an unpowered barge did not, by themselves, make it non-contractual.

3. Following The Vladimir Ilich [1975] 1 Lloyd’s Rep. 322 and the reasoning in P.T. Putrabali v Fratelli de Lorenzi SNC, a declaration of shipment is a contractual notice identifying the vessel on which the seller intends to perform. Its validity depends on form and timing, not on whether the later performance complies with every contractual stipulation.

4. “Shipment” in clause 6 meant loading on board a vessel. A declaration naming a vessel was valid unless its express terms showed that the vessel, by its characteristics, or the voyage, by the manner in which it was being performed, was non-contractual. The declarations were therefore valid, despite the vessel’s classification.

5. Clause 10 operated strictly. A declaration became deemed valid unless the buyers objected in writing within three business days. The buyers’ lack of knowledge of the vessel’s classification did not suspend that time limit. Commercial certainty justified the same approach as that adopted for the Centrocon clause in The Himmerland [1965] 2 Lloyd’s Rep. 353 and The Stephanos [1989] 1 Lloyd’s Rep. 506.

6. The buyers could reject documents, absent fraud, only where they expressly disclosed a material non-conformity, contained materially false information about contractual performance, or failed to comply with an applicable trade usage. The documents did not, on their face, demonstrate a material contractual failure merely because they named INTAN 6.

7. A valid or deemed-valid declaration was a condition precedent to the sellers’ right to payment under clause 11, subject to tender of documents which were in order. By commencing and compromising proceedings against the carriers, the sellers had elected to treat the contracts as terminated. They could therefore claim damages for non-payment, but not the price. The awards were remitted for assessment of damages and, in the SEE arbitration, determination of the counterclaim. The buyers were permitted to advance any relevant arguments concerning liability for damages.

The judgment concerned appeals against awards of the IGPA Board of Appeal. Permission to appeal was granted by Tomlinson J. The appeals were heard together in the Commercial Court and the awards were set aside and remitted.