The present case concerns the validity of a nomination of a substitute vessel made by FOB buyers (Agrifert SA) pursuant to its right under clause 6 (“Period of Delivery”) in GAFTA 49, where the contract of sale provided for an advanced notice of the vessel’s nomination of 10 days and the substitution is communicated after such period.
The facts of the case:
By a contract dated 3rd July 2012 Ramburs Inc (the “Sellers”) sold to Agrifert SA (the “Buyers”) 25,000 metric tonnes of maize on the terms set out in a contract confirmation signed by the parties. The said confirmation provided for a pre-advice that the Buyers shall serve to the Sellers at least 10 days prior to loading stating the particulars of the nominated vessel (name, flag, tonnage, draft, ETA, etc.), and incorporated GAFTA 49 form.
On 20th March 2013, the Buyers sent a message nominating the M/V “Puffin” and giving as estimated time of arrival (ETA) for loading at Nikolayev the 26th-27th March 2013. On 26th March 2013 the Buyers sent another message nominating the M/V “Sea Way” in place of the M/V “Puffin” and giving an ETA of 28th March 2013. The Sellers rejected both nominations and argued that the same constituted a repudiatory breach by the Buyers that they accepted. In turn, Buyers bought a substitute cargo and claimed the difference in price of over $800,000.
The parties’ submissions:
The Sellers argued that the nomination of the substitute vessel was an invalid one, since the pre-advice stipulated in the contract of sale was not served in time in respect of the said vessel; and therefore they were entitled to terminate the contract.
The Buyers contended that the nomination of the substitute vessel complied with the contract of sale. They argued that since GAFTA 49 provides for sufficient protection for the Sellers –a late substitution shall not affect the delivery period–, there is no need for further protection by way of pre-advice requirements. They further submitted that this interpretation is in accordance with the structure of the relevant clause (“Period of Delivery”) in GAFTA 49.
The Commercial Court decision:
In allowing the Sellers’ appeal, Andrew Smith J held that when exercising the right to nominate a substitute vessel under a FOB contract, the Buyer is also required to comply with the terms of the contract of sale as to nomination and pre-advice in respect of the nomination of the substitute vessel. Hence, since the Buyers had failed timeously to provide the required details of the substitute vessel, they were in default and their claim failed.
Andrew Smith J disagrees with the Board’s interpretation of the contract of sale and makes the Buyers’ right to substitute subject, not only to the limitations set out at clause 6 in GAFTA 49 –the delivery period shall not be affected–, but also to other contractual stipulations relating to nomination. The judge argues that the information about the vessel that is to load the cargo do matter for the Sellers, and, echoing Cargill UK Ltd v Continental UK Ltd,  1 Lloyd’s Rep 193, 197, says that such agreements as to nomination cannot be disregarded or dispensed.
See here for a copy of the Judgment_Ramburs_Agrifert