In order to answer these questions, it requires the
discussion regarding the law in relation to FOB contract, the duties and
obligation of the parties under FOB contract, the buyer and seller remedies,
arbitration, governing law for arbitration and so on. Let’s have a detailed
discussion of the questions based on the facts of this case study are
considered as below.
From the facts, it seen that the seller London Exporters Ltd and the buyer
Berlin Trading Company agreed to sell 20k tones of the British potatoes under
the FOB terms. In this context, it can be argued that under an FOB contract the
seller duty is to load the goods on a ship which is nominated by the buyer at
the indicated port1. However, the main
duty of the seller under the FOB contract is lading. The seller must deliver
the goods on board of the vessel, at a place where the buyer has already
identified as the port of loading and within the period of shipment which the
parties indicated in the contract of sale. Name of the port in a FOB contract
is a condition. From the facts, it seen that the seller and the buyer is
identified in the contract of sale. In the given scenario, seller agreed to
ship 20,000 tones of British Potatoes under the contract FOB trade term within
20th December. Therefore, it also appears from the facts, that the
seller received the goods from the supplier on 15th December. But
for the unavailability of vessels the seller had to rent a warehouse for
storing the goods came from the supplier on 23rd December.
December, the goods had been loaded on the board of ship at the port of
shipment successfully. In this case, it can be argued from the facts that the
seller commits a breach of condition and the buyer received it after
discovering the potatoes as unsatisfactory quality and rejected the goods as
well as refused to pay money (Manbre S. Co Ltd V Corn Co. Ltd)2. Here it
can be argued that seller had a duty to inform to the buyer delaying shipment
and to insure him that the goods will be shipped at delay the notice must be
given without delay. But, London Exporter won’t take any measure or steps to
insure potato shipment to the Berlin Trading Co. Under the FOB contract any
fail to give notice, or information, make the seller still liable on the goods
during sea transit. However, the seller under the FOB contract has an
opportunity to get remedy for the shipment, if it has not enough time to do.
Here it can be argued that the seller delivered the goods on a ship’s rail,
London exporters will not be responsible of any damages or losses after that.
It is presumed that property has been delayed as a result of the failure of the
parties; this will not affect the passing of risk (Inglis v Stock)3.
FOB contract, from the facts, the buyer is identified to the port of shipment
and had a duty to nominate the vessel4. In the
given scenario, buyer was able to nominate a ship only named vessel “A”, where
he failed to nominate vessel as because of the unavailability of the other
vessel at that time. Before 24th December at the port of loading.
Under the FOB contract, it can be argued that, three options can be chosen.
Firstly the seller can choose the port of shipmen5, secondly,
the buyer chose it and finally, the contract is lift for ambiguously in (David
t.Boyd & CO. Ltd v Louis Louca)6. In this
context, it appears from the facts that the buyer had a duty to provide a
suitable vessel for loading. He had to determine a shipping period, place, and
also must give the notice for unavailability of vessel to the London Exporters
as well as it can be said that readiness to the vessel (Bunse
Corporation v TradaX Export SA)7. Moreover,
“Nomination of Vessel” is a condition of the contract. When the seller’s
failure to nominate vessel, the buyer can refuse the contract and claim
damages, unless otherwise agreed, the buyer can also make a second nomination
within a shipment period, if the first one is insufficient. In the given fact, the
buyer Berlin Trading CO. under the FOB contract, to pay the price is
determined, the buyer must pay the price in due as soon as the seller London
exporters delivered the goods to the contract.
to FOB contract, “Berlin Trading Company” must pay all costs to the goods for
the shipment. Therefore, it can be argued from the facts that, when the
potatoes are placed on board the vessel, the buyer has a title of the goods,
because property in goods passes at the same time. Another reason for this
Berlin Trading becomes a shipper of the goods after shipment and they had a
contractual relationship with the carrier. However, the problem may arise when
potatoes were supposed to be passed on the shipment. This could leave the
seller exposed to the risk of no to be paid the balance of the full price.
Therefore, property in goods will not pass until the full price is paid and
hull of loading is delivered to the buyer (Mitsu & co Ltd v FLota
Mercante Grancolunbiana Sa)8.
facts, it appears that, Berlin Trading Co. against London Exporters agreed that
the discovery of potatoes was 20th December. It may argue from the
facts that in the formation of contract of the sale agreement between the
parties regarding the transference of the absolute legal title or ownership is
significant (Mercer V Craver)9. In this
circumstance, London Exporters received the goods from the suppliers on the 15th
of December, and Berlin Trading was able to nominate a ship only named Vessel
“A” as because of unavailability of the other vessel at that time. As a result,
the seller had to rent a warehouse for storing the goods came from the
supplier. It is clear that vessel “A” will not be available at the position of
loading in until 29th December.
From the fact,
it seen that London Exporters delivered the goods to the Berlin Trading at the
port of the destination. But the buyer refused to pay the money for the
potatoes were checked for not satisfactory as it was instructed to deliver. In
this particular case, it must be considered that whether contract of sale of
potatoes were not satisfied either it was not good or “bad” under the sale of
contract. For this reason, Section 5 of the Sale of Goods Act 197910
must be considered. By applying the fact that London Exporters potatoes fall
within the category of specific goods under Section 61 (1) of the Sale
of Goods Act 197911.
This means that the goods are known in a specified way to the seller and buyer
prior to the agreement12.
formation of sale of goods contract, it must require the discussion regarding
express and implied terms of the contract. In order to apply the express terms
of the contract, it seems that the seller agrees to ship 20,000 tones of
British Potatoes on 20th December. In this case it can be argued
that contract will have express terms which the parties in this case studies
have agreed. It seen from the fact that due to unavailability of vessel “A”
before 24th December at the part of loading, seller had to rent a
warehouse for storing potatoes, and therefore the potatoes were delivered to
buyers on 29th December. So, it would be treated as a breach of
express terms. Therefore, there may also be implied terms that are read into
agreement by the implied through statute. Terms implied through stature are
primarily for the purpose of consumer protection. Both conditions and
warranties may be implied A condition major term of the contract and currently
is a minor term. The distinction is irrelevant as it affects the remedies
available to the innocent party if the term is broken13.
It appears under Section 13 of the Sale of Goods Act 197914 that
the goods which are shipped must match the contract description. From the
facts, it is clear that shipping goods did not correspond to the contract
description. In this case, Section.16 of Sale of Goods Act 197915,
may apply and it can be argued that the goods must be ascertained for passing
of property16. In addition to, Section
17 of Sale of Goods Act 197917
property passes when the parties intend. But in FOB agreements, property mostly
passes when the goods cross the ship’s rail, the general principle is property
and risk pass on shipment. Therefore, the information above the property and
risk passed to the buyer when London Exporters loaded the British Potatoes
which is ascertained on board.
December, it seen from the facts, that London Exporters shipment of potatoes
was delivered to the Berlin Trading and the potato’s quality was checked by
Berlin. In this scenario, the terms implied by statutes must be considered. This
is because, Section 14(2) of Sale of Goods Act 197918
is relevant in this case study, which provides that the goods are of
satisfactory quality. In this context, goods are of satisfactory quality if
they meet the standard that a reasonable person would regard as satisfactory,
taking account of any description of the given goods, the price and all the
other relevant circumstances. It is unlikely that a reasonable person could
consider that a breach which was rendered unusable as a result of loose legs
was satisfactory (Stevanson V Rogers)19. From
the fact, it may be clear that Berlin Trading is in breach of the term implied
by Section 14(2) of Sale of Goods Act 197920.
From the facts, it may also argue Section 13 of Sale of Goods Act 1979,
a sale by description, this is because, there is an implied condition that
goods will correspond to the description given. By applying with the facts, it
seen that Berlin Trading received the potatoes and refused to payment.
Therefore, it may be clear that it was breach of Section 13 of Sale of
Goods Act 1979.
contrast with the application under Section 27 of Sale of Goods Act
where London Exporter Ltd. can argue that the Berlin Trading Co. cannot refuse
the potatoes, wrongfully. This is because, London Exporter Ltd. for the
contract with, Berlin trading can argue that according to the Section
27 of Sale of Goods Act 1979 must be read in conjunction with the Section
37 Sale of Goods Act 197922.
That apportion liability on the buyer for refusing or being negligent is not
talking delivery of the goods23. Thus,
in case of payment, the duty to pay the price is fundamental to contract of
sale under application under Section 8(2) of Sale of Goods Act 197924.
case study, it also requires the discussion whether the parties can go for
arbitration or not. In this case, it can be said that the parties can go for
arbitration by the rules laid down under the retention of title clause, into
their contract of sale, it will go along to protect them in the event of goods
supplied not being paid for. In this case, the parties must rely on Section
19(1) Sale of Goods Act 197925
which provides that where there is a contract for the sale of specific goods or
where goods are subsequently appropriated to the contract. However, from the
facts it can be argued that London Exporters may, by the terms of contract or
appropriation, reserve right of disposal of the goods until certain conditions
are fulfilled, and in such a case, notwithstanding the delivery of the goods to
the buyer, the property in the goods does not pass to the buyer until certain
conditions imposed by the seller are full filled. In this context, the
condition of London Exporter would want to impose would be reserve to
themselves property in the goods until payment has been made (Alumunium
industrie Vaassen BV v Romalpa ALumumium Ldt)26. The
parties in this case study can also resolve the disputes by applying
arbitration rule for the extra warehouse payment and the remedies the loss
occurred. Therefore, when the buyer received the goods here potatoes, they have
a right to reject under FOB contract. Having accepted the goods if the buyer
found any non-conformity on the goods with contract, they can still reject the
discussing the arbitration matter the next issue is to arise regarding the
governing law for arbitration. In this case the parties can rely on Section
46 of the Arbitration Act 199628,
which provides that the law chosen by the parties as an applicable to the
substance of the disputes29. In
this case, it appears from the fact that the contract between UK’s seller named
“London Exporters LDT” are regulated under the sale of goods. The governing
statute will be the Sale of Goods Act 1979. The defining
characteristic of the contract of sale are contained in Section 2 of Sale
of Goods Act30.
The contract of sale may be conditional Section 2(3), a future sale, Section
2(5), or an agreement to sell, Section 2(6) of Sale of Goods Act 1979.
From the contracts between the parties it seems that London Exporters Ltd is
original seller and “Berlin Trading Company” would be treated as original buyer
of the contract. In this case, both the seller and buyer must have capacity and
committed to selling and buying (Weiner V Harris)31. It appears from the fact that London Exports
agreed to ship 20,000 tones of British Potatoes. As the given scenario, Berlin
Traders refused to pay the due amount to seller. This is because, the goods
were not satisfactory when it was discovered.
argued that if the goods are damaged whilst at the seller risk and the goods
will not be required or replaced, the seller will be liable for breach of
contract, unless the London Exporters is able to be excused. But in this case
vessel A will not be available before 24th December at the part of
loading, and it was the duty if Berlin Trade to arrange another vessel
therefore London Traders had to rent a warehouse for storing potatoes, so,
London terms claim for remedy under Sale of Goods Act 1979.
Here, the seller may argue that, he is able to be paid remedy where buyer fails
to perform his obligations under the contract. The seller remedies are divided
into real and personal remedies. In the context of personal remedy Section
49 of Sale of Goods Act 197932
provides that the seller can satisfy the statutory claim there is no
requirement to prone less. London express can also consider Section 50
of Sale of Goods Act 197933,
which provides that where the seller is unable to satisfy a statutory claim for
the price that it may proceed for damages where the buyer wrongfully refuses to
accept and pay for the goods. The seller expected to mitigate their loss by
seeking and alternate buyer for the goods in the market (Ben V
There are two possibilities in this case study, the seller delivered the
potatoes as mentioned above and goods were damaged for unavailability of
vessels. Another possibility is more applicable for this case. London Exporters
is seeking to reject to potatoes or to gain compensation for the reduction in
its quality. Under common law, there are two concepts of breaches which are the
breach of condition and the breach of warranty. If Berlin Trading reject the
goods, it will be breach of condition and he can claim for damages for
non-delivery according to Section 50 of Sale of Goods Act 197935. If
Berlin trading decided to gain compensation for the reduction in the goods
quality, it will be breach of warranty and he can claim for damages for breach
of warranty according to Section 53 of Sale of Goods Act 197936 and
if acceptable Section 54 of Sale of Goods Act 197937. It
should not be forgotten; the buyer has a right to partial rejection according
to the new Section 35A of Sale of Goods Act 197938. If
the goods were not completely damaged, the buyer might accept the goods which
were not damaged and reject the goods which were damaged.
Up above discussion it may conclude
that the contract the FOB contract between the parties. It may also conclude
that the parties can go for arbitration before going to the Court and they can
settle the disputes. In this case, the contract was held in UK and the
governing law is under the UK contract law. Therefore, the parties can rely on
the Sale of Goods Act 1979. On the other hand, the parties can also go
to the court to settle the disputes arise between them. For this reason, they
buyer and seller can get remedies under the Sale of Goods Act 1979.
1 Indira Carr, International Trade law (4th
Edition, Routledge-Cavendish, 2010), P.32
2Manbre S. Co Ltd V Corn Co.
Ltd 1915 1KB 198
3 Inglis v Stock 1885 10. APP. Cas.263.
4 Indira Carr, International Trade law (4th
Edition, Routledge-Cavendish, 2010), P.34
5 Indira Carr, International Trade law (4th
Edition, Routledge-Cavendish, 2010), P.35
6 David t.Boyd & CO. Ltd v Louis
Louca 1973 1 LIYAD” s Rap.209
7 1918 All ER
8 1989 ALER951
10 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/5 (access date:
11 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/61 (access date:
12 Indira Carr, International Trade law (4th Edition,
Routledge-Cavendish, 2010), P.35
13 Indira Carr, International Trade law (4th Edition,
Routledge-Cavendish, 2010), P.36
14 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/13 (access date:
15 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/16 (access date:
16 Ewan mckendric, Contract law (8th Edition, Palgrave
macmillan, 2009), p.165
17 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/17 (access date: 10.12.2017).
18 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/14 (access date: 15.12.2017).
19 1999 1
All ER 613
20 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/13 (access date:
21 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/27 (access date: 16.12.2017).
22 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/37 (access date: 16.12.2017).
23 Ewan mckendric, Contract law (8th Edition,
Palgrave macmillan, 2009), p.165
24 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/8 (access date:
25 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/19 (access date: 17.12.2017).
26 1976 WLR 676
27 Indira Carr, International Trade law (4th Edition,
Routledge-Cavendish, 2010), P.39
28 Indira Carr, International Trade law (4th Edition,
Routledge-Cavendish, 2010), P. 635
29 Chukwumerije, ‘Applicable substantive law in International Commercial
Arbitration’ (1994) Anglo-Am LR 265.
30 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/2 (access date: 16.12.2017).
31 1910 1
32 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/49 (access date: 16.12.2017).
33 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/50 (access date:
34 1999 1
Lloyd’s Rep. 729
35 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/50 (access date: 17.12.2017).
36 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/53 (access date:
37 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/54 (access date:
38 Available at: http://www.legislation.gov.uk/ukpga/1979/54/section/35A (access date: 17.12.2017).