UK: GAFTA 49 and FOB Sale Contract – Court of Appeal Construes "Readiness to Load"

Last Updated: 21 October 2010
Article by Daniel Jones and Reema Shour

Soufflet Negoce v Bunge SA. [2010] EWCA Civ 1102

In a classic FOB sale contract, the risk of loss or damage to the goods passes from the sellers to the buyers on the loading of the goods onto the vessel chartered by the buyers. The sellers will have no real legitimate interest in what happens after that, particularly where the sale contract provides for weight, quality and condition of the cargo to be final at the load port as per surveyors' certificates.

In this dispute, the sellers argued that they had been entitled to refuse to load the cargo of Ukrainian feed barley onto the buyers' nominated vessel because the cargo holds were allegedly not fit to receive or carry the cargo due to coal residue. The matter went through the GAFTA arbitration procedure and then to the courts, right up to the Court of Appeal, where the sellers lost.


The sale contract provided for delivery to be "between 9th - 22nd October 2006 at Buyers' call both dates included (no extension)". It was also agreed that weight quality and condition were to be final at load port as per surveyor's certificates "sellers' option and costs".

All other terms and conditions not inconsistent with the sale contract were to be "as per GAFTA 49" (standard form of GAFTA contract for delivery of goods from Eastern Europe in bulk or bags on FOB terms). Clause 6 of GAFTA 49 provides that "the sellers shall have the goods ready to be delivered to the buyers at any time within the contract period of delivery... provided the vessel is presented at the loading port in readiness to load within the delivery period, sellers shall if necessary complete loading after the delivery period...".

The sale contract also contained "shipping terms" which included laytime and demurrage provisions expressly requiring a valid tender of a notice of readiness (NOR) and stating "all other terms and conditions as per relevant c/p". The references to a charter party and charter party rates in these shipping terms showed that the buyers had to charter a vessel or buy space in an already chartered ship in order to perform the contract. Accordingly, the buyers nominated, then chartered, a vessel.

The ship-owners did not serve NOR on the buyers / charterers until 0520 hrs on 22 October, which meant that the buyers would (under clause 6, GAFTA 49) have to ask sellers to complete loading after the delivery period had expired. However, the sellers' surveyors issued a certificate on that same day saying the vessel's holds were not fit to receive and carry the cargo due to coal residue (the buyers' surveyors had meanwhile issued a certificate of cleanliness). The next morning, the Master advised the vessel's holds were ready for re-inspection. By that time, the sellers had already declared the buyers in default of the sale contract on the grounds that the vessel had not been presented ready to load within the delivery period. The buyers sued the sellers for damages for non-delivery of the goods.

GAFTA Arbitration Proceedings

The first-tier GAFTA tribunal found in favour of the sellers but that decision was reversed by the GAFTA Board of Appeal. The Appeal Board said it was the buyers' responsibility to provide a vessel for shipment within the time agreed at the place agreed for shipment but that "as long as it was physically and legally possible for sellers to load, on the nominated ship, the agreed goods at the agreed place within the agreed time, then buyers would have discharged that responsibility and sellers were under a duty to load". In other words, whether or not the cargo holds were clean and fit to receive the cargo was irrelevant from the sellers' point of view because they were not at risk if the goods were damaged in the ship's holds.

On Appeal to the Court

Mr Justice David Steel dismissed the sellers' appeal but gave them leave to appeal to the Court of Appeal because GAFTA 49 is commonly used in the grain market and its construction was considered to be of general interest for grain traders.

The Court of Appeal dismissed the appeal. The appeal judges distinguished NOR within a charter party/shipping context from "readiness to load" in an FOB sale contract. "Readiness to load" did not mean a valid NOR must have been given or must have been capable of being given by the shipowners, because that was not what GAFTA 49 said. Rather, the reference in the shipping terms of the sale contract to an NOR being given was only relevant in relation to the commencement of laytime and that made sense because the buyers were also the charterers and wanted to have terms in the sale contract which reflected the charterparty terms in respect of laytime and demurrage.

According to Lord Justice Longmore, all that had to happen within the delivery period was that the vessel had to be presented in readiness to load at some time between 00.01 hours on 9 and 24.00 hours on 22 October. The fact that the holds may have needed some cleaning on arrival did not mean that the sellers could throw up the sale contract on the basis that no vessel had arrived during the period fixed for delivery. Lord Justice Toulson highlighted the fact that this was not a dispute for demurrage (where, under the sale contract, the sellers would not be liable for demurrage unless a valid NOR had been tendered under the charter party) but rather a simple claim under the contract for failure to load by the shipment date.


This is another in a number of recent cases which have gone on appeal to the courts from commodity arbitrations but the appeals have been dismissed. Here, the Court of Appeal upheld the GAFTA Board of Appeal's analysis of the "fundamental commercial dynamic" of an FOB sale, which meant that if goods were damaged by shipment into unclean holds, the shipment was the buyers' decision and at their risk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions