Septo Trading Inc v Tintrade Ltd

Where specially agreed terms prevail over conflicting standard terms, inconsistency exists if the provisions cannot fairly and sensibly be read together. The inquiry is practical and informed by commercial common sense. A standard term is likely to conflict if it transforms, negates or deprives a central specially agreed term of practical effect.

A contractual provision making an independent quality certificate binding ordinarily makes it binding for all purposes. A standard term which preserves a subsequent quality claim, while making the certificate conclusive only for invoicing, establishes a fundamentally different regime and may therefore be excluded by the inconsistency clause.

An international sale contract for fuel oil incorporated specially agreed terms in a transaction recap and, where not in conflict, standard BP terms. The recap made the load-port inspector’s quality determination binding absent fraud or manifest error. The BP terms made the certificate conclusive only for invoicing and preserved the buyer’s right to bring a quality claim.

The inspector certified that the cargo met the contractual specification. The Commercial Court nevertheless found that the cargo was off-specification and awarded the buyer US$3,058,801, holding that the BP terms merely qualified the recap: [2020] EWHC 1795 (Comm).

The seller appealed. The central issue was whether the standard provisions could fairly and sensibly be read with the recap or instead conflicted with, and therefore yielded to, its binding-certificate regime.

1. Appeal allowed unanimously. The contract made the independent inspector’s load-port quality certificate binding for all purposes. The buyer was therefore precluded from claiming that the cargo failed to meet the contractual quality specification.

2. Where standard terms apply only in the absence of conflict with specially agreed terms, the court asks whether the provisions can fairly and sensibly be read together. Mere qualification or supplementation does not establish inconsistency. A term conflicts, however, if it transforms or negates the specially agreed provision, or deprives it of practical effect. The inquiry is practical, takes account of commercial common sense and considers whether the special term is a central feature of the contractual scheme. The principles in Pagnan and Alexander were applied.

3. The recap had first to be construed provisionally without the allegedly inconsistent printed term. Its provision that the inspector’s determination was “binding” meant binding for all purposes. In this context, “binding”, “final” and “conclusive” had the same effect. The term precluded a later quality claim where the certificate showed that the cargo met the specification, subject to the stated exceptions for fraud and manifest error.

4. Section 1.2 of the BP terms established a fundamentally different regime. It made the certificate binding only for invoicing and expressly preserved a subsequent quality claim. In this documentary sale, the invoicing provision added no substantive protection because compliant documents already required payment under the letter of credit. It therefore deprived the recap’s binding-certificate provision of practical effect. The court approved the distinction drawn in Navigas between binding and non-binding inspection regimes.

5. The recap’s certification regime was central to the contractual scheme. It defined the seller’s quality obligation by reference to an independent determination and supplied commercial certainty where liquid cargo quality depended upon sampling and analysis. Section 1.2 conflicted with that regime and did not form part of the contract.

6. Section 1.3 of the BP terms was likewise inapplicable. It would replace the agreed independent certification process with an inadequately specified inquiry into quality at the vessel’s hose connection and could operate as a trap for the seller. The judge’s award to the buyer was accordingly displaced.

1. Court of Appeal (Civil Division): The seller’s appeal was allowed unanimously: [2021] EWCA Civ 718. The standard BP provisions conflicted with the recap, so the binding quality certificate precluded the buyer’s claim.

2. High Court, Commercial Court: Teare J held that the BP terms qualified rather than conflicted with the recap. The buyer’s quality claim succeeded and damages of US$3,058,801 were awarded: [2020] EWHC 1795 (Comm).