Soufflet Negoce SA v Bunge SA

In an FOB sale using GAFTA 49, a vessel is presented in readiness to load when loading is lawful and possible in normal fashion, without abnormal hindrance. The phrase does not, without clear words, incorporate the technical charterparty requirements for a valid Notice of Readiness, including clean holds. Where a valid Notice of Readiness is expressly required for laytime and demurrage, that requirement is confined to those matters and does not qualify the seller’s obligation to load once the vessel is sufficiently ready within the delivery period. Commercial allocation of risk may reinforce that construction where the buyer assumes the risk of loading into unclean holds.

Soufflet Negoce agreed to sell Bunge 15,000 metric tons of Ukrainian feed barley on FOB terms incorporating GAFTA 49. The delivery period ended on 22 October 2006. Bunge nominated a vessel, but the sellers considered its holds unsuitable because they required cleaning. The first-tier arbitration panel held that the vessel was not ready to receive cargo. The GAFTA Board of Appeal held that Bunge could nevertheless claim for non-delivery, and David Steel J agreed with the Board in [2009] EWHC 2454 (Comm).

The sellers appealed. The central issue was whether the GAFTA 49 requirement that the vessel be presented in readiness to load required compliance with the technical charterparty rules governing a valid Notice of Readiness, or merely that lawful and possible loading could take place.

The appeal was dismissed unanimously. Longmore LJ delivered the leading judgment. Wilson LJ agreed with both judgments, and Toulson LJ agreed with Longmore LJ while adding a limited observation.

1. Meaning of readiness. The phrase in GAFTA 49 requiring presentation of the vessel in readiness to load within the delivery period required no more than that the vessel was ready in the sense that loading was lawful and possible in normal fashion, without abnormal hindrance. It did not require the vessel to satisfy every technical requirement applicable under a charterparty, including the requirement for clean holds or a valid Notice of Readiness.
2. Separate contractual functions. Clearer words would be required to transport the elaborate charterparty law on readiness into an FOB sale contract. The contract expressly required a valid Notice of Readiness for laytime and demurrage purposes. That express incorporation did not mean that the same technical rules applied to determine whether the vessel had been presented during the delivery period. The sellers therefore remained obliged to load, including after the delivery period where clause 6 so required.
3. FOB allocation of risk. An FOB buyer must give effective shipment instructions, meaning instructions with which it is possible and lawful for the seller to comply. Where the buyers assumed the risk of loading into unclean holds, the sellers had no legitimate commercial interest in refusing to load on that ground. The contract contained no separate seller inspection right that would justify a different construction.
4. Demurrage and despatch. The sellers would not be liable for demurrage under the sale contract unless a valid Notice of Readiness had been tendered. That was distinct from the buyer’s contractual right to require loading when the vessel was ready within the meaning of GAFTA 49. Toulson LJ stated, hypothetically and without the point having been argued, that a buyer could not both assert that the vessel was ready for loading and deny an effective notice for the purpose of defeating a despatch claim.
5. Authority. The dictum in Compagnie Commerciale Sucres et Denrees v Czarnikow Ltd (The Naxos) concerned the seller’s obligation to have cargo available when the vessel was ready, not the buyer’s obligation concerning the vessel’s state of readiness. It did not decide the issue before the court.

• Court of Appeal (Civil Division): In [2010] EWCA Civ 1102, the sellers’ appeal was dismissed unanimously.
• Queen’s Bench Division, Commercial Court: David Steel J agreed with the GAFTA Board of Appeal and granted permission to appeal in [2009] EWHC 2454 (Comm).
• GAFTA Board of Appeal: Held that the buyers could claim for non-delivery although the vessel’s holds were said to require cleaning.
• First-tier arbitration panel: Held that the vessel’s holds were not ready to receive the cargo on 22 October 2006.