The Tai Hunter is a very interesting case that examines a situation where a FOB Seller terminated the sales contract following an alleged fatal breach of the Buyer.
Unfortunately for the Seller the English High Court held that he jumped the gun when he decided to hold the Buyer in repudiatory breach of the sales contract as a result of an alleged invalid ship nomination. Both the Gafta Board of Arbitration as well as the High Court judge (Mr. Justice Henshaw) decided against the Seller.
From a lengthy judgment that examines in great detail many authorities on the points discussed, Mr. Justice Henshaw makes the following summary that is worth reproducing in extenso:
- Where a contract of sale requires the buyer to nominate a vessel by a particular date (including by stipulating a notice period and a shipment period), then it is (subject to any contrary intention expressed in the contract) a condition of the contract that the buyer provide a valid nomination by the relevant deadline. That is a stipulation as to time in a mercantile contract in relation to which the parties should be taken to have intended time to be of the essence.
- Accordingly, if by the latest date on which a valid nomination could be made the buyer has failed to provide one, then there is a breach of condition that will entitle the seller to treat the contract as being at an end
- A valid nomination is one made honestly and on reasonable grounds, and otherwise in accordance with the contract terms. MR JUSTICE HENSHAW Approved Judgment A v B 29 iv) A valid nomination may be preceded by an initial nomination that is or becomes invalid, because either (a) it is ‘non-contractual’ in the sense of failing to provide the contractually stipulated notice period, or stating an ETA outside the contractual shipment window, (b) it is not made both honestly and on reasonable grounds, or (c) it becomes invalid due to subsequent events e.g. unforeseeable delays. v) The giving of the initial invalid nomination is not in itself a breach of condition: no breach of condition occurs provided that a valid and timely nomination is given in due course.
- An initial invalid nomination made otherwise than honestly and in good faith (e.g.of a vessel which the buyer knows could not possibly meet the contractual lifting deadline) may evince an intention not to perform the contract, and thus entitle the seller to treat the contract as having been renounced by the buyer. It is unnecessary to decide in the present case whether, and if so in what circumstances, a prior invalid nomination could amount to a breach of contract sounding in damages, no such claim having been advanced or arising on this appeal.
- I therefore consider that the Board in the present case was entitled to reach the conclusion to which it came. As the Board found, the Buyers had further time to make a valid nomination before the end of the delivery period; and the Buyer in due course did so.
- The initial nomination of the “Tai Hunter” was not a breach of condition entitling the Seller to treat the contract as having come to an end. 73. Accordingly, I dismiss this aspect of the section 69 appeal.
The Tai Hunter case offers a very useful reminder of the sort of circumstances and principles that need to be considered by Sellers and Buyers, and their advisors, during the execution of commodity sales contracts.
A copy of the judgment is available here.