Euro-Asian Oil SA v Credit Suisse AG & Ors

A contractual description as CIF is a strong, but not conclusive, indication of the parties’ intentions concerning title and delivery. A different arrangement requires a sufficiently evidenced mutual intention. A buyer does not lose its contractual rights merely because it has tolerated earlier non-conforming performance while seeking to resolve a commercial relationship.

Under Sale of Goods Act 1979, section 51(3) supplies a prima facie market-price measure for non-delivery. That measure may be displaced where the parties contemplated that the same cargo would perform a particular sub-sale. A co-signatory to a letter of indemnity may be jointly liable to the buyer, but have full recourse against the principal obligor where the indemnity was given at that obligor’s request and for its benefit.

Abilo agreed to sell Euro-Asian a cargo of ultra-low sulphur diesel on CIF Constanza terms. Credit Suisse co-signed a letter of indemnity which enabled payment under a documentary credit without the original shipping documents. The cargo named in the documents had already been used to perform an earlier transaction. Abilo therefore had no marketable title, right to transfer title, or right to deliver the cargo when the letter of indemnity was presented.

The Commercial Court held that the fourth sale was a CIF contract, that Abilo and Credit Suisse were liable under the letter of indemnity, and that damages were capped by Euro-Asian’s sub-sale price. It gave Credit Suisse an 80% contribution from Abilo: [2016] EWHC 3340 (Comm). Credit Suisse appealed on liability and contribution. Euro-Asian cross-appealed on damages.

1. Appeal allowed in part. The court dismissed Credit Suisse’s appeal against liability, dismissed Euro-Asian’s cross-appeal on damages, and allowed Credit Suisse’s appeal on the extent of Abilo’s indemnity.

2. The judge’s factual findings could not be challenged. In any event, those findings established that Euro-Asian had not agreed to a separate arrangement under which Abilo could obtain payment by producing documents for a cargo already discharged and a later tank holding certificate. Although the word CIF was not conclusive, the contract, the parties’ intentions and the surrounding facts showed an ordinary CIF sale. There was no variation and no representation that Euro-Asian would not insist on conforming performance.

3. Abilo had already tendered the Ariadne cargo under the third sale. When the fourth letter of indemnity was presented, its warranties that Abilo had marketable title, authority to transfer title and authority to effect delivery were untrue. Those warranties procured payment under the documentary credit. Credit Suisse, having made itself jointly and severally bound by the indemnity, was liable with Abilo to Euro-Asian.

4. The market-price rule in section 51(3) of the Sale of Goods Act 1979 was prima facie applicable but displaced on the facts. The fourth sale was part of a financing arrangement in which both parties always contemplated that Euro-Asian would nominate the cargo bought from Abilo to perform its sub-sale to Real Oil. Euro-Asian’s recoverable loss was therefore capped at the sub-sale price, US$15,889,500.

5. As between Abilo and Credit Suisse, Abilo was the primary obligor. Credit Suisse had co-signed the letter of indemnity at Abilo’s request and for Abilo’s benefit. It was therefore entitled to recover 100%, rather than 80%, of its liability to Euro-Asian from Abilo.

• Court of Appeal (Civil Division): Allowed Credit Suisse’s appeal on its recourse against Abilo, but dismissed Credit Suisse’s appeal on liability and Euro-Asian’s cross-appeal on quantum: [2018] EWCA Civ 1720.
• High Court, Commercial Court: Held the fourth sale to be a CIF contract; held Abilo and Credit Suisse liable under the fourth letter of indemnity; capped Euro-Asian’s damages by reference to its sub-sale; and awarded Credit Suisse an 80% contribution from Abilo: [2016] EWHC 3340 (Comm).