Fleming & Wendeln GmbH & Co v Sanofi Sa/ag

Under clause 28(c) of GAFTA 78, the date for assessing damages is generally the date on which the party in default failed to perform the obligation which entitled the other party to determine the contract. A party’s decision to keep the contract open does not, by itself, move that date. The position may differ where the parties agree to postpone performance, or where one party represents that it will not insist on performance on the contractual date and it would be inequitable to rely on that date. The parties may adopt a contractual damages mechanism that differs from ordinary common-law principles. Where nomination of loading places is fundamental to fixing quantity, origin, price and delivery, failure to nominate may constitute the relevant default.

The Buyers challenged a GAFTA Board of Appeal award concerning an undelivered balance under a contract for Russian and Ukrainian sunflower seeds. The contract incorporated GAFTA form 78 and its default clause. The Board held that the Sellers defaulted by failing to nominate loading places and silos, but that the Buyers’ requests for further price proposals postponed the relevant date from 14 February to 1 March 1998. It therefore awarded no substantial damages.

The Buyers appealed on questions of law under section 69 of the Arbitration Act 1996 and also sought relief under section 67. The central issue was whether damages should instead be assessed by reference to the end of the delivery period.

1. Appeal on the date of default. The appeal was dismissed on the principal issue. Clause 28(c) of GAFTA 78 required damages to be assessed by reference to the date on which the Sellers failed to perform the obligation which entitled the Buyers to determine the contract.
2. The relevant obligation was the Sellers’ obligation to declare loading places and silos. In this unusual contract, that declaration would crystallise the loading places, origin, price and delivery arrangements. It was therefore a main obligation fundamental to performance, rather than a merely antecedent obligation.
3. The reasoning in Toprak v Finagrain [1979] 2 Lloyd’s Rep 98 was applicable. The Buyers were entitled to keep the contract open after the initial failure to nominate, but that choice did not itself alter the date of default. Clause 28(c) was intended to provide certainty and did not permit the innocent party to select a later default date.
4. The Buyers’ requests during January and February for further pricing carried an implied request that loading places be declared. They represented that the Buyers would not insist on strict performance on 14 February. It would therefore have been inequitable to treat 14 February as the date of default. The relevant date was postponed to 1 March 1998. The corresponding postponement of the price-fixing date meant that no damages arose.
5. The section 67 application failed. The consent order remitting the award was sufficiently wide to permit the Board’s supplemental reasoning and revised award. The Board had not exceeded its substantive jurisdiction.

The judgment concerned an appeal under section 69 of the Arbitration Act 1996 from a GAFTA Board of Appeal award, together with an application under section 67 of that Act. The Court upheld the Board’s determination that the relevant date of default was 1 March 1998 and rejected the jurisdictional challenge.