Newland Shipping and Forwarding Ltd v Toba Trading FZC

A contractual cancellation right arises when the contract says it arises and may generally be exercised together with a common-law right to terminate for repudiatory breach, provided the consequences are not inconsistent. The notice must clearly convey the right or rights being exercised. A clause allowing cancellation for late payment does not ordinarily make payment time of the essence or make late payment repudiatory. Where contractual provisions regulate repayment but a restitutionary right existed before the contract, that right is not extinguished without express words or necessary implication. A contractual repayment mechanism may postpone or regulate recovery while the contract remains in force, but does not necessarily provide the exclusive remedy after premature termination.

Newland claimed compensation under a contract for the sale and carriage of gasoil after Toba failed to pay for cargo and Newland purported to terminate the contract. Toba argued that the payment clause did not apply, that subsequent communications varied the contract and postponed payment, and that Newland’s notice was ineffective or engaged only a common-law remedy excluded by the contract.

Toba also counterclaimed for restitution of advance payments made under earlier contracts. Newland argued that contractual provisions for repayment replaced Toba’s restitutionary rights. The court determined the construction and operation of the payment and cancellation provisions, the effect of the termination notice, the recoverability of consequential losses, and whether the pre-existing restitutionary claim had been extinguished.

1. Payment obligation. The cargo designated by Newland constituted a shipped lot exceeding the contractual threshold. Clause 7 therefore required payment within two banking days after the final price was known. The payment obligation was not displaced by the fact that the cargo was loaded in two groups or covered by separate invoices.
2. No variation. The communications concerning carriage to Turgundi amounted to continuing negotiations, not a concluded variation. They did not postpone the accrued payment obligation. In any event, clause 17 required an amendment to be agreed in writing and signed by both parties, and no such agreement existed.
3. Termination rights. Under section 10(1) of the Sale of Goods Act 1979, time of payment was not of the essence because no contrary intention appeared. Toba’s initial failure to pay was therefore not itself repudiatory, although it gave Newland the contractual right to cancel under clause 7. Toba’s later statement that it would not pay until its own buyer received or controlled the cargo was an anticipatory breach sufficiently substantial to amount to repudiation.
4. An express cancellation clause does not ordinarily exclude common-law termination for repudiatory breach. The contractual and common-law rights could be exercised concurrently because their consequences were different but not inconsistent. The notice clearly exercised both rights: it invoked clause 7 and accepted the repudiatory breach. Newland was entitled to recover the contractual compensation, including losses resulting from cancellation. The contractual exclusion of damages did not exclude that clause 7 compensation.
5. Counterclaim. The contractual repayment provisions regulated repayment while the contracts remained in force, but did not expressly or by necessary implication extinguish Toba’s pre-existing restitutionary right. Toba could recover the unpaid balance after premature termination. The 20 per cent credits did not constitute repayment where the underlying invoices were never paid.
6. Judgment was entered for Newland for the three claimed categories of loss and for Toba on its counterclaim in the sum of US$2,495,592.60.

On 15 November 2013 judgment was entered against Toba in the present action after failure to comply with case management directions. On 6 February 2014 Hamblen J granted Toba relief from sanctions in this action. The present judgment determined the substantive claim and counterclaim at first instance.