FOB Contracts COPY Flashcards

Question

Scottish & Newcastle International Ltd v. Othon Ghalanos Ltd [2008] (On seller's duty to deliver goods)

Answer 1

Liverpool / Limassol case. Delivery of the goods by the seller to the carrier at Liverpool, was deemed to be the point of delivery of the goods to the buyer, even though the buyer was in Cyprus. Thus, in an FOB contract the seller’s duty in respect of the goods is to deliver the goods ON BOARD THE VESSEL. But this duty is not merely to hand the goods over to the carrier at the port of shipment - It is actually the seller’s duty to put the goods on board the vessel. (Seems inconsistent with Wimble, Sons & Co v Rosenberg) SELLER'S DUTY IN RELATION TO THE GOODS IS ONLY TO PUT THE GOODS ON BOARD THE VESSEL - THAT IS THE ONLY PLACE OF DELIVERY THEY MUST COMPLY WITH, IN ENGLISH LAW - so if buyer requests to pick up the goods from seller's warehouse, seller entitled to say no. Significance: if delivery on board the vessel becomes impossible or illegal then contract may be discharged on the grounds of frustration - then seller not bound to deliver the goods anywhere else - will not be in breach of contract for refusing to deliver them somewhere else.

Answer 2

Buyer's duty relating to shipment also includes giving sufficient notice to the seller of the time and location of the delivery. Where the contract specifies an alternative place of shipment then it is the right and duty of the buyer to select the specific place of shipment. Buyer’s nomination must be in accordance with contract in relation to time and shipment.

Answer 3

As with CIF contracts, the FOB buyer has TWO RIGHTS OF REJECTION (documetns and goods). But one key difference: Whereas in CIF, buyer can only reject goods once they have been delivered, in FOB, the buyer can reject the goods DURING LOADING, AT THE PORT OF SHIPMENT (NOT DESTINATION!). Here, goods required surveyor's certificate. Loading began on 1st November. On 2nd November, buyer asked to suspend loading whilst surveyor inspected - showed goods to be defective. Buyer rejected goods on this basis. Seller argued that buyer could not rely on a defective DOCUMENT (the certificate) to reject the GOODS. Held; FOB buyer has the right to reject the goods and had the right to do so AT THE PORT OF SHIPMENT. If the parties wanted to exclude the right to reject the goods at this point, then they must use clear and unambiguous terms in the contract to do so. Here, there was nothing clear in the contract which excluded the buyer’s right to reject the goods.

Answer 4

(1) PROVIDE SHIPPING INSTRUCTIONS | (2) MAKE PAYMENT

Answer 5

Sometimes, contract will contain provisions dealing with events which prevent delivery on board the vessel - common with trade associations stadard term contracts: e.g. this one, commonly used, used to state that where delivery on board became impossible, seller could give notice cancelling contract. After Bunge SA v Nidera BV, this clause has been amended as of September 2017 - where there is a prohibition, the party affected can give notice not cancelling, but suspending delivery for 21 days - after this time, if ban is still in place for a further 14 days seller can then cancel. So the situation that arose in Bunge v Nidera wouldn't arise again.

Answer 6

An FOB buyer can withdraw a defective / invalid notice of nomination and replace it with a good one, as a CONTRACTUAL RIGHT as well (note in Agricultores Federados, said buyer has this right as a common law right too). Here, buyer had nominated vessel to load goods at the wrong port - defective - buyer withdrew and made a second nomination of the same ship, but this time correct port. Held; second nomination was valid because buyer had right to withdraw the defective notice and issue a correct one.

Answer 7

At COMMON LAW, the FOB buyer who has made a nomination of a vessel is entitled to withdraw that nomination and replace it with a substitute nomination, PROVIDED THAT there is still sufficient time to allow the goods to be loaded in accordance with the contract. This is a COMMON LAW right. Buyer also has a COMMON LAW right to withdrew a defective notice and issue a good one.

Answer 8

Qualification of rule in JJ Cunningham Ltd v Robert A Munro & Co Ltd - that buyer can select any time within shipment period... Held; if the buyer makes a nomination towards the end of the shipment period and does not give the seller sufficient time to load the goods within the specified shipment period then that constitutes a breach of contract, thereby entitling the seller to refuse to load the goods. Here, deliver of 15,000 tonnes of soya bean - buyer needed to give sellers at least 15 days' notice of ship's readiness to load. Notice given 4 days late. Sellers treated contract as repudiated. Judgment for sellers. Note, this was a repudiatory breach NOT because notice gievn late, but because notice gievn after the last date on which it could legitimately have been given for seller to be still be able to perform their side of the contract in time.

Answer 9

RE buyer's duty to make an effective nomination, the ship must be physically suitable for the task at hand. Here, sale of a large quantity of scrap left over from building works that had taken place on a harbour. Both buyer and seller had an interest in making sure the ship was efficiently filled – due to the way freight was to be paid (not relevant here), it would otherwise have meant that the buyer would have to pay for deadfreight – i.e. empty space. MUSTILL J held there was an “implied term of the contract that the vessels tendered by the buyers would be reasonably fit to receive cargo...and to accommodate the cargo in a reasonably efficient manner”.

Answer 10

Court here criticised the idea that the FOB seller is not under a duty to arrange shipping space. Said that in cases of small parcels of goods, the buyer will not have an agent at the port of shipment, and that when seller makes the shipping arrangements for the buyer, it is difficult to agree with a view that the seller is doing so only as a friendly gesture to the buyer or as agent of the buyer. In other words, since the commercial practice is that the seller is the one who makes these arrangements, the law should catch up with this reality and hold that the duty to arrange shipping space is actually the seller’s contractual duty; not merely doing a favour for the buyer or acting as his agent.

Answer 11

Where the FOB seller delivers goods to the carrier, that delivery is deemed to be delivery of the goods to the buyer.

Answer 12

Held; in the absence of an express notice provision in the contract of sale, the buyer’s duty was would be to “name the vessel and give shipping instructions reasonably in time to enable the sellers to send forward the goods so that they could be shipped in accordance with the instructions”. Cite alongside Bunge v Tradax and JJ Cunningham v Robert A Munro.

Answer 13

Court went even further than D. H. Bain v. Field & Co. (1920) Here, actually held it to be FOB where seller undertook to find shipping space, even though there was no express provision to that effect. But this view is not the dominant view - prevailing view is still that, in making shipping arrangements, the FOB seller is doing it as a friendly gesture for the buyer or is acting as an agent of the buyer.

Answer 14

FOB is a "FLEXIBLE INSRUMENT" Justice DEVLIN identified 3 types: Key question: Who has contract of sale with the carrier? (1) CLASSIC FOB - where it is duty of buyer to nominate vessel, make shipping arrangements + pay - seller puts good on board vessel + obtains bill of lading on terms usual in the trade. - if seller takes out b/l in SELLER's own name, contract of carriage directly with seller, until seller delivers b/l to buyer. - but if seller takes out b/l in BUYER's name, contract of carriage will be with buyer (2) FOB TYPE 2 - seller makes shipping arranagements - seller makes shipping arrangements and obtains b/l in his own name - seller has contract with carrier, until delivers b/l to buyer - then buyer bound by it as if he has made contract with carrier. - 'FOB with additional services' - e.g. The El Amria and The El Minia (3) FOB TYPE 3 - buyer makes shipping arrangements (as in the case itself) - Buyer makes shipping arrangements - nominates vessel, pays etc. - Seller only has to take goods and put them on board - The shipper (party transporting goods from seller's warehouse to the carrier) delivers goods to the carrier, the carrier gives shipper a 'MATE'S RECEIPT' - Shipper gives it back to seller who then gives it to buyer's agent ("the forwarding agent"), in the country of origin, who then takes out b/l in the BUYER's name. - Mate’s receipt is a document that serves as a receipt confirming the type and quantity of goods that have been delivered to the carrier - the forwarding agent will need to complete it and return it to carrier, for b/l to be issued, telling them who it should be made out in favour of. - B/L will then be in buyer's name; contract of carriage with buyer. - SELLER IS THUS NEVER A PARTY TO THE B/L CONTRACT.