The English High Court has recently been asked to consider the meaning of Clause 8 of GAFTA Contract 49, which gives the Buyer the ability to extend the period of delivery by up to 21 days.
In Nidera B.V. v Venus International Free Zone for Trading & Marine Services S.A.E. the delivery period for a cargo of Ukrainian corn ran from 16 to 31 October 2010. The Buyer’s vessel arrived and tendered a Notice of Readiness (NOR) in advance of the contractual delivery period, but due to an export restriction on various cereal products and a quota for corn export, the vessel was unable to berth for loading.
On 29 October 2010, the Buyer served notice and claimed an extension of the delivery period to allow them time to nominate a substitute vessel. On 2 November 2010, the Sellers sought to terminate the contract under Clause 13 of GAFTA 49, which provides that in the case of any executive or legislative act restricting the export of goods, the contract is cancelled. On 5 November 2010, the Buyers cancelled the contract due to the Seller’s repudiatory breach in wrongfully terminating the contract.
The question before the Court was whether the Buyer was entitled to extend the delivery period pursuant to Clause 8 of GAFTA 49.
Clause 8 is usually relied upon by a Buyer where it is unable to present a vessel at the load port within the delivery period. In practice, the clause benefits the buyer by giving it extra time to perform this obligation. However the Court took the view, following the GAFTA tribunal and the Board of Appeal, that there is nothing in Clause 8 which qualifies or limits a Buyer's right of extension to such circumstances.
Following the Court’s decision, where a timely notice is served, there is an unqualified right of extension under Clause 8. This position provides certainty for companies trading under GAFTA 49. From a Buyer's perspective, the decision is helpful where shipment is delayed for a reason other than the vessel's failure to present on time, for example when a vessel arrives within the delivery period but breaks down, or is unable to load because of a force majeure event (as in Nidera B.V. v Venus). The Buyer can use its right under Clause 8 to be granted time to decide whether to substitute a new vessel for the one previously nominated, or wait to see whether loading is possible at a later time.
Sellers will be required to continue to make attempts to load during the extended delivery period. Caution is advised to Sellers looking to exercise any options under the contract during this time. Nidera B.V. v Venus is an example of a Seller being held liable for repudiatroy breach following premature termination.