UK Case Law: Septo Trading Inc -v- Tintrade Ltd [2021] EWCA Civ 718

Sale of goods (fob) — Cargo of fuel oil — Whether Certificate of Quality binding — Whether cargo complied with contractual specification — Measure of damages

The dispute involved the buyer, Septo Trading Inc, and the sellers, Tintrade Ltd, under a sale contract for a consignment of fuel oil, which was shipped on board the MT Nounou in July 2018.

The terms of the contract were evidenced by an email recap dated 20 June 2018. The recap stated that the quantity and quality of the cargo was to be ascertained at the port of loading by a mutually acceptable surveyor, whose findings would be binding on the parties. The recap also incorporated general terms as follows “where not in conflict with the above, the BP 2007 Terms and Conditions for FOB Sales (BP terms) to apply”. 

According to the BP terms “… the certificates of quantity and quality …shall, except in cases of manifest error or fraud, be conclusive and binding on both parties for invoicing purposes… but without prejudice to the parties’ right to bring a quality claim”.

On 25 June 2018, the parties jointly instructed SGS to perform quantity and quality determinations at the port of loading, Ventspils, Latvia. The certificate issued by the surveyor certified that the cargo was in accordance with the contractual specifications.

The subsequent events of the case are summarised as follows:

• The cargo was transported to Gibraltar, where it was transferred to two other vessels pursuant to a separate contract of sale between the buyer and a third party.
• Samples of cargo from one of the two vessels were taken and the results indicated that the cargo was off spec.
• Further analysis of the samples taken at the port of loading by SGS, revealed that while most of the samples were on spec, some were off spec.

The buyers commenced proceedings against the sellers for damages.

The sellers argued that the buyers were precluded from bringing a claim pursuant to the recap according to which the certificate issued by the surveyor at the port of loading was binding on the parties. In contrast, the buyers argued that, as per the BP terms, the certificate was binding only for invoicing purposes and payment.

The question for the court was whether the seller was bound by the certificate of quality issued at the port of loading. In determining this, the court considered whether there was conflict between the recap and the BP terms.

High Court decision

The Commercial Court decided in favour of the buyer and held that there was no inconsistency between the BP terms and the recap. It was noted that the BP terms supplemented the recap, in that the clause could be read together by qualifying that, but for this part of the clause, the surveyor’s findings would be binding only for purposes of invoicing and payment.

Court of Appeal decision

The decision was appealed and was overturned. The Court of Appeal held that that the BP terms and the relevant recap clause conflicted and that the two provisions could not be “fairly and sensibly” read together. The BP terms did not qualify the recap, but instead it deprived it of its practical effect. It was concluded that the recap clause should be applied, without the BP terms, and that the quality certificate issued at the load port would be binding, with the consequence that the buyer was precluded from bringing its claim in this case.

Comment

The decision, although not new law, provides a useful reminder as to how courts will approach conflicting terms in contracts. Generally, courts will seek to give effect to both clauses, where possible. However, if this is not achievable and the clauses cannot be read together sensibly, the courts are likely to give effect to the special terms agreed, whether by way of a recap, or additional clauses, over standard printed forms.

1. Link to article on the Standard Club website can be found here
2. Link to i-law can be found here (Commercial Court decision)
3. Link to the Court of Appeal decision can be found here
4. Link to commentary by TLT Solicitors can be found here

Category: Caselaw