ERG Raffinerie Mediterranee SpA v Chevron USA Inc. (Trading as Chevron Teaco Global Trading)

JurisdictionEngland & Wales
CourtCourt of Appeal
JudgeLord Justice Longmore,Sir Martin Nourse,Lord Justice Buxton
Judgment Date22 May 2007
Neutral Citation[2007] EWCA Civ 494
Docket NumberCase No: 2006 1456 A3

[2007] EWCA Civ 494

[2006] EWHC 1322 (Comm)

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

COMMERCIAL COURT

MR JUSTICE LANGLEY

Royal Courts of Justice

Strand, London, WC2A 2LL

Before

Lord Justice Buxton

Lord Justice Longmore and

Sir Martin Nourse

Case No: 2006 1456 A3

Between
Erg Raffinerie Mediterranee SPA
Claimants/Respondents (Sellers)
and
Chevron Usa Inc (Trading as Chevron Texaco Global Trading)
Defendants/Appellants (Buyers)

JEFFREY GRUDER Esq QC and ROBERT BRIGHT Esq QC (instructed by Fishers) for the Appellant

STEPHEN MALES Esq QC (instructed by MFB) for the Respondent

Hearing date: 13th March 2007

Lord Justice Longmore
1

Introductory

This appeal from Langley J [2006] EWHC 1322 (Comm) requires the court to decide whether an fob contract which provides for a delivery period to be narrowed to a laycan period (viz a period before which laydays will not start and after which a seller may cancel the contract if the ship which is due to take the cargo has not served a notice of readiness to load) is a traditional fob contract in which the buyer can terminate the contract if the goods are not shipped within the period originally designated for delivery. In a traditional fob contract, time of shipment is of the essence of the contract, see Benjamin, Sale of Goods, 7th ed (2006) paras. 20–029 to 20–033. This means that the goods must have been placed on board the ship by the end of the shipment period. This in turn means that the buyer needs to get the vessel to the loading port in sufficient time for such loading to occur. There will often be provisions of the sort seen in Bunge v Tradax [1981] 1 WLR 711 whereby, if a shipment period is designated, the buyer will have to give a certain number of days notice stating the time of probable arrival of the vessel; this is so as to enable the contractual goods to be loaded by the seller before the end of the shipment period. Just as the requirement that the goods be loaded on board before the end of the shipment period is a condition of the contract, so also a provision that a notice of probable readiness to load be given on or before a certain day is a condition of the contract. I use the word “condition” in its technical legal sense to mean that, if the relevant party does not comply with the obligation, the “innocent” party can treat the “guilty” party as being in repudiatory breach, can accept the repudiation by bringing the contract to an end and sue for damages, if he has suffered any loss.

2

A laycan provision can operate in a not dissimilar way. The seller knows that he has to have his goods available for loading during whatever period the contract specifies but may stipulate for a narrowing of that period by requiring the buyer to nominate a shorter period within which he will make the ship available to take the goods. If, however, that period of availability is close to the end of the delivery period, that narrowing may have the consequence that, if the vessel presents towards the end of the narrowed period, the goods will not be shipped by the end of the shipment period. If this is the case, the natural conclusion might be (as the judge in this case held) that it cannot have been the parties' intention that there would be a breach of condition if the goods have not been shipped by the end of that delivery period.

3

That is essentially the problem in the present case. On or about 11th May 2005 the parties agreed a 4 day delivery period of 27th – 30th May but also agreed that that period would by 21st May be narrowed by the buyers to a 2 day laycan. On that day the buyers, as they were entitled to do, gave a 2 day date range of 29th/30th May 2005. The buyers say that, if notice of readiness to load was, in fact, given by such time as would permit the vessel to complete the loading of the cargo by 30th May (in other words by 06.00 hours on 29th May) then it was a condition of the contract that loading should be completed by midnight on that date. By contrast, the sellers say that, since no right to cancel could arise until the end of the laycan period, the vessel could serve notice of readiness at any time up to 24.00 hours on 30th May so it could not be a condition of the contract that loading had to be completed by that time, whenever it was that notice of readiness was given.

4

In these circumstances the sellers say that the only obligation is to deliver the cargo within the period allowed for by the laytime provisions of the contract (42 hours). Laytime provisions are never considered to be conditions of the contract since demurrage is intended to compensate the buyer for delay, at any rate until the lapse of time is such as to frustrate the contract. The fact, therefore, that the sellers were unable to provide the cargo by 30th May does not mean that the buyers were entitled to terminate the contract and sail away. The buyers did in fact wait until 3rd June but then terminated the contract ordering their vessel away from the port on that day. The market was falling so the buyers suffered no loss by reason of the unavailability of the cargo on 30th May. It was the sellers who suffered loss and they have sued the buyers for failure to take delivery.

5

The Facts

At trial there was some limited dispute about the terms of the contract which was made orally, although to some extent evidenced in writing. The judge heard evidence and then found in paragraph 13 of his judgment that discussions began on 6th May when Mr Montefiori of the claimants ERG Raffinerie Mediterranee Spa (“the Sellers”) told Mr Patterson of the defendants Chevron USA Inc (“the Buyers”) that he had a parcel of gasoline for loading at the end of May, say 28th – 30th May. Mr Patterson expressed interest in that parcel. On 11th May Mr Patterson suggested that they work on the basis of a previous contract known to them both; they agreed that the price of the cargo should be the average of certain Platt's fob quotations for the period 25th May to 1st June plus 2.25 USD per metric ton premium. In their final conversation on 11th May they agreed “loading period 27–30”“to be narrowed to 2 days laycan”. Other clauses were to be “as per their previous deal”. Both dealers produced their contemporaneous notes or Deal Sheets and there was no marked dissimilarity between them. Mr Montefiori then sent a written wording as he had said he would. This written wording was never expressly accepted as the contract but it was not disputed that the material terms of the wording accorded with what had been orally agreed.

6

These terms were:—

PRICE

IN USD/MT, FOB ISAB REFINERY NORTH SITE (PRIOLO TERMINAL – AUGUSTA BAY) ON B/L WEIGHT CORRECTED IN AIR, CALCULATED AS FOLLOWS:

AVERAGE OF ALL PLATT'S HIGH FOB QUOTATIONS FOR PREM UNL AS PUBLISHED BY PLATT'S EUROPEAN MARKETSCAN UNDER THE RUBRIQUE “FOB MED (ITALY)” EFFECTIVE AND VALID IN THE PERIOD 25/05–01/06/2004,

PLUS 2.25 USD/MT.

7. DELIVERY

FOB ISAB REFINERY NORTH SITE (PRIOLO TERMINAL – AUGUSTA BAY) IN A SINGLE LOT BY M/T “TBN”/SUBS TO BE NOMINATED BY BUYER AND TO BE ACCEPTABLE TO SELLER IN THE PERIOD 27–30/05/2004.

BUYER WILL NARROW SUCH PERIOD TO A TWO DAY LAYCAN LATEST BY 21/05/2004 C.O.B. ITALIAN TIME.

THE LAYCAN IS AN ESSENTIAL ELEMENT OF THE CONTRACT, IN FAVOUR OF SELLER.

9. LAYTIME

36 RUNNING HOURS SHINC WEATHER PERMITTING PLUS 6 HOURS NOTICE ALWAYS DUE, (NOTICE OF READINESS MUST BE TENDERED ONLY AFTER THE VESSEL HAS ARRIVED WITHIN THE CUSTOMARY ANCHORAGE) PROVIDED VESSEL CAN RECEIVE THE TOTAL CARGO IN A PERIOD OF TIME EQUIVALENT TO THE TWO THIRDS OF THE AGREED LAYTIME HOURS.

IF THE VESSEL TENDERS N.O.R. AFTER THE FIRM AGREED LAYCAN, LAYTIME SHALL BEGIN UPON BERTHING.

LAYTIME SHALL COMMENCE EITHER 6 HOURS AFTER N.O.R. TENDERED AT LOADPORT OR UPON BERTHING, WHICHEVER IS EARLIER AND EXPIRE AT HOSES DISCONNECTION, OR RECEIPT OF DOCUMENTS, WHICHEVER IS EARLIER. TIME USED FROM HOSES DISCONNECTIONS TILL RECEIPT OF DOCUMENTS ON BOARD SHALL BE EQUALLY SHARED BETWEEN BUYER AND SELLER AFTER THE THREE HRS USUALLY GRANTED BY SHIP.

10. DEMURRAGE

DEMURRAGE, IF ANY, WILL BE REQUESTED BY BUYER ONLY IF SHIP-OWNERS ACTUALLY CLAIM IT. DAILY RATE AS PER CHARTER PARTY …. ”

7

On 17th May the Buyers nominated the vessel “LUXMAR” to load the cargo and the sellers accepted that nomination on the same day. On 20th May the vessel gave 28th May as the expected date of arrival at Priolo. The next day the Buyers narrowed the laycan period to the two day date range of 29th-30th May 2004. On 26th May the Sellers started to blend the cargo but encountered technical problems with the plant. Repairs at the plant were begun but not completed before 3rd June.

8

At 10.00 hours on 28th May the vessel arrived at Priolo and gave notice of readiness, but due to the problems at the plant it could not then load....

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3 cases
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