PEC Ltd v Thai Maparn Trading Co Ltd

Under clause 7 of GAFTA Form No. 120, a buyer’s notice must clearly claim an extension and state its duration. The notice must be construed as a whole. A message which merely expresses readiness to extend, or makes extension conditional on a seller’s future response, is ineffective. Contemporaneous messages may be construed together. If they leave the existence, duration or conditions of the claimed extension unclear, the contractual delivery period is not extended.

On a section 69 appeal, the court should give some deference to a trade tribunal’s construction of commercial messages, but must correct an error of law.

The Buyers appealed under section 69 of the Arbitration Act 1996 from a GAFTA Board of Appeal award dismissing their claim for damages. The Board had overturned a first-tier GAFTA award of US$14,520,000.

The dispute concerned an FOB contract for 22,000 metric tons of Thai parboiled rice. The Buyers did not present a vessel during the contractual shipment period. They relied on two messages sent on 8 May 2008 as notices under clause 7 of GAFTA Form No. 120, which permitted an extension of up to 21 days.

The central issue was whether either message, or both construed together, validly claimed the extension. The appeal also raised whether a message referring to GAFTA Form No. 119 and a 30-day extension could be construed as referring to Form No. 120 and 21 days.

1. Appeal dismissed. The Board of Appeal correctly concluded that the contract period was not extended under clause 7 of GAFTA Form No. 120.
2. Clause 7 confers a unilateral right to claim an extension of not more than 21 consecutive days, provided that timely notice is served. The notice must clearly state both that an extension is claimed and its duration. It must be construed as a whole.
3. The Buyers’ own message was ineffective. Its statement that they were ready to extend suggested a future proposal. References to goodwill, reservation of rights and placing the Sellers in default were inconsistent with an unconditional extension. Read as a whole, the message offered the Sellers a choice between confirming readiness and an extension, or being put in default.
4. The solicitors’ message was clearer initially, but its demand for confirmation within seven days and proposed default created uncertainty. Construed together, the messages referred to different contracts, response periods and extension periods. It was unclear what extension was claimed or on what basis.
5. In construing a trade tribunal’s award and commercial correspondence, the court should read the award fairly and as a whole, avoid minute textual analysis and give some deference to the tribunal’s relevant trade experience.
6. The reference to GAFTA Form No. 119 and 30 days could not be corrected to Form No. 120 and 21 days. It was not clear what correction should be made, since the extension could have been any period up to 21 days.

1. GAFTA Board of Appeal: allowed the Sellers’ appeal from the first-tier GAFTA award dated 4 March 2010 and dismissed the Buyers’ claim.
2. High Court (Commercial Court): dismissed the Buyers’ section 69 appeal.