A term that goods are to be of a satisfactory quality not only when delivered but also for a reasonable time thereafter is implied into FOB contracts.
In KG Bominflot Bunkergesellschaft Fur Mineralole mbh & Co KG v Petroplus Marketing AG (2009), the Commercial Court considered whether a term could be implied into a FOB contract that a cargo of gasoil would be of satisfactory quality and fit for purpose, notwithstanding a "final and binding" clause as to quality.
The buyer contracted to purchase a cargo of Gasoil from the seller, to be shipped FOB Antwerp onboard the "MERCINI LADY". The specifications of the gasoil were set down in clause 4 with quality and quantity to be determined by an independent inspector at loadport, such determination to be "final and binding for both parties".
The contract also provided that delivery would be completed when the gasoil passed the vessel's hose connection at the loadport. The contract was governed by English law and clause 18 provided that there were no "guarantees, warranties or representations" as to the fitness for purpose or suitability of the oil, other than the contractual specifications.
Pre-shipment, the oil conformed with the specifications. However, four days after discharge following an uneventful voyage, the buyer alleged that the oil was off-spec. The buyer claimed damages for breach of contract and the question of implied terms was referred to the Commercial Court as a preliminary issue.
The buyer alleged that a term should be implied into the contract that the gasoil would be of satisfactory quality and reasonably fit for purpose following a normal voyage and for a reasonable time thereafter in accordance with, respectively, s.14(2) and 14(3) Sale of Goods Act 1979 ("SGA") and at common law.
The sellers argued to the contrary, relying on, inter alia, clause 18 to assert that the contract contained no implied terms as to quality or condition.
The Court held that absent any inconsistency, a term should be implied into a FOB contract that goods are of satisfactory quality not only when delivered onto the vessel but also for a reasonable time thereafter, and at common law, the goods should remain in accordance with the contractual specification for that period. What constituted a "reasonable time" would depend on the circumstances of the individual contract.
The Court rejected the seller's argument that clause 18 operated, finding that the contract was subject to English law, the parties were aware of the difference between conditions and warranties and that any clause purporting to exclude liability for breach of a condition such as that in s.14(2) SGA must do so expressly.
An FOB seller is, therefore, obliged to deliver cargo that is of satisfactory quality and/or in compliance with the contractual specifications not only when delivered but for a reasonable time thereafter, under s.14(2) SGA and at common law.
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