Moeve Trading SAU v Mael Trading FZ LLC

Under a sale contract providing for payment by documentary credit, the buyer’s obligation is ordinarily discharged conditionally, not absolutely. Construction depends on the contractual language and circumstances. If the credit fails and the buyer has accepted the goods and acquired title, the seller may recover the price even where the seller caused the failure to pay. A seller need not physically hand over shipping documents before payment becomes due where the contract requires concurrent performance. It is sufficient to offer the documents against payment while being ready, willing and able to provide them. A contractual no-set-off clause will generally be enforced, and a stay of a money judgment requires special or exceptional circumstances.

The claimant seller sold petroleum cargo to the defendant buyer on FOB terms. Title passed when the cargo was shipped. The contract required payment within 60 days and also required the buyer to arrange irrevocable documentary letters of credit. The issuing bank did not pay after documents were presented, for reasons that were not determined.

The seller claimed the price under section 49(1) of the Sale of Goods Act 1979 and sought summary judgment. The buyer argued that the letters of credit discharged its payment obligation, alternatively that payment was not due until the bills of lading were physically handed over. The buyer also sought a stay and maintained a counterclaim for loadport demurrage and delay-related losses.

1. Amendment. Permission was granted to amend the defence and withdraw an admission. The relevant considerations under CPR rule 14.5 included the early procedural stage, the prior indication of the proposed defence, prejudice, and its arguability.
2. Letters of credit. The contractual terms made the buyer primarily responsible for payment within 60 days, while requiring it to arrange credit to cover the payment. The credit was conditional payment. Whether a documentary credit is absolute or conditional is a matter of construction; there is no irrebuttable presumption. Absolute payment requires clear express or implied contractual language.
3. Where conditional payment fails for a reason unrelated to the seller, the seller may claim against the buyer. Where the seller caused the failure by non-compliant or late presentation, the seller ordinarily cannot recover if the buyer rejects the documents and goods. However, where the buyer has accepted the goods and title has passed, the seller may recover the price notwithstanding the seller’s responsibility for the credit failure. The requirements of section 49(1) were therefore satisfied.
4. Documents. Clauses 33.3 and 33.9 required concurrent performance. “Presentation” meant offering the documents for acceptance, rather than necessarily physically handing them over. The seller had tendered the documents by pleading that it offered them against payment and by maintaining that offer. The buyer therefore had no real prospect of defending the price claim on this ground.
5. Stay and counterclaim. The buyer showed no special or exceptional circumstances justifying a stay, particularly given the no-set-off clause. Summary judgment was granted for US$13,031,741.54, without deduction for the cargo remaining on board. The claims for lost profit were dismissed, but summary judgment was refused on the remaining demurrage claim because it might be supportable under the contractual regime.