SHV Gas Supply & Trading SAS v Naftomar Shipping & Trading Co Ltd Inc

In a CIF sale, a reference to “laycan” does not necessarily create an agreed shipment period. Where no shipment period is agreed, a term requiring shipment within a reasonable time is ordinarily implied, and reasonable time depends on the circumstances actually existing, including extraordinary weather.

A force majeure clause ordinarily relieves liability for breach; it does not convert conduct that is otherwise non-breach into breach, nor does it generally deprive the innocent party of the right to terminate unless its wording has that effect. An ETA undertaking requires an honest estimate based on reasonable grounds. That may require inquiries into loading-port conditions, even where the estimator has not been expressly put on inquiry.

The claimant sold the defendant a cargo of commercial butane on CIF terms. The contract referred to “Laycan Feb 17-19th 2003” and gave estimated arrival times at Tunisian discharge ports. The vessel arrived at Melilli within the stated laycan, but prolonged bad weather and berthing difficulties delayed loading until 3 March.

The defendant cancelled the contract, relying on the alleged shipment period, the expiry of a reasonable time, and defective ETAs. The claimant claimed damages for repudiation. The central issues were the construction of “laycan”, the effect of the implied reasonable-time term and force majeure clause, the contractual status of the ETAs, and the proper measure of any damages.

1. Construction of “laycan”. The reference to “laycan” did not mean an agreed shipment period. Its ordinary charterparty meaning was consistent with the incorporated maritime terms. The ETAs were intended to give assurance as to likely arrival, rather than to guarantee shipment within 17–19 February.
2. Reasonable time. Under section 29(3) of the Sale of Goods Act 1979, shipment within a reasonable time was implied. Reasonable time depended on the circumstances actually existing. The sellers were not in breach because the vessel was delayed by exceptional weather and berthing difficulties and there was no evidence of dilatory conduct.
3. Force majeure. The force majeure clause did not alter the ordinary content of the reasonable-time obligation. It was an exceptions clause to be construed strictly. Even assuming a breach measured against ordinary conditions, the clause relieved the seller from liability for delay but did not prevent the buyer from treating itself as discharged. The clause also applied to the loading difficulties at Melilli, and the notice given was sufficiently prompt. The notice provision was unlikely to be a condition precedent.
4. ETAs. The contractual obligation was a condition that the ETAs be given honestly and on reasonable grounds. Reasonable grounds could require inquiries into matters the maker ought reasonably to have known, not merely matters actually known or matters triggering an express inquiry. In the absence of any information about berthing prospects at an unfamiliar loading port, the estimates were not reasonably grounded. This entitled the defendant to terminate and also constituted a misrepresentation relied upon by the defendant.
5. Damages. The damages issue did not arise. Had damages been awarded, they would have been assessed under section 50(3) of the Sale of Goods Act 1979 by reference to the best estimate of the price obtainable within the period reasonably required to sell the cargo. The genuine March sale into storage at €300 per tonne would have been treated as mitigation.
6. Disposition. The defendant was entitled to terminate. The claimant’s claim therefore failed.

Not stated in the judgment.