Miller Magazine Issue: 118 October 2019

89 ARTICLE MILLER / OCTOBER 2019 the Goods on board reached the port of discharge and the issues with alive insects, payment for the Goods and provision of original documents were getting more and more acute. The seller stated that all the expenses re- lated with demurrage of the Vessel which would result in late issuance of the invoice and delay in payment shall be on the buyer’s account. Interlegal team faced the following questions: 1. May the buyer terminate the contract due to the seller’s breach of quality terms and refuse to accept goods at the port of discharge? 2. Whether the buyer should commence negotiations with the seller regarding non-conformity of the quality of the Goods and claim discount? 3. Whether the buyer is liable for demurrage of the Vessel due to late presentation of documents? Search of solution: The right to terminate the contract under English law depends directly on the nature of terms, which were breached, namely: whether such a term is deemed as condition, warranty or innominate term. The innocent party is entitled to terminate the contract only when the breach of condition took place; other- wise the remedies available are limited to the recovery of damages caused by the breach. For instance, Sale of Goods Act prescribes that terms regarding compliance of goods with agreed quality shall be deemed as condition. In our case, the contract con- tained the following clause: “Absence of alive insects in the goods is warranted”. Obviously, the Parties intended to determine this term as warranty (not condition). Also, pursuant to Clause 2 of FOSFA Contract No. 11, “if the seeds upon arrival are damaged by seawater or otherwise, or are in unsound condition, such contract shall not be deemed as invalid, but the cost shall de- crease in the amount prescribed by agreement or arbi- tration award”. In such circumstances the buyer is not entitled to ter- minate the contract and reject the Goods at the port of discharge. Where a warranty for the absence of alive in- sects is breached the buyer is entitled to claim damages arisen out of this breach. The key issue in the given situation was the issue of possibility to import goods with alive insects, since phy- tosanitary rules of the import country were rather strict. At the same time, depending on the species of insect, if additional fumigation is made, import is still possible. There was also a chance that the fumigant already used was enough to eliminate alive insects during the voyage. Having analysed the fumigation certificate, Interlegal lawyers concluded that there was enough and sufficient dosage of fumigant for killing alive insects. Therefore, no alive insects should have been present in the Goods by the time of the Vessel’s arrival to the port of discharge. Interlegal lawyers served on the seller substantiated letter of claim together with notification on liability for all damages incurred by the buyer due to presence of alive insects in the Goods, as well as requested from the seller so called Letter of Undertaking in respect of losses caused to the buyers due to breach of contract on the part of the seller. Liability for demurrage was influenced by provision of a set of shipping documents by the seller on the one hand, and by payment for the goods by the buyer on the other hand. Under CIF contracts these two stages are essential and strictly consequential (submission of documents prior to payment). In other words, until the documents are provided, the buyer is not obliged to pro- ceed with the payment. Usually the term for provision of documents is limited, e.g. not later than two days before the vessel’s arrival to the discharge port. Accordingly, the contracts often set the seller’s liability for late provi- sion of documents: e.g. Seller shall be liable for any ex- penses, costs, and losses due to such late submission. The seller’s statement of impossibility to issue the invoice without the analysis results were overcome by pressing him to issue the invoice on the basis of the mean quality with further possible allowance allocation. At the end of the day the seller did exactly so. The buyer seemed to be protected against the seller’s claims for the demurrage, since it was the latter who failed to provide documents in due time. Although it is first and common impression, yet pitfalls bearing addi- tional risks for the buyer needed closer attention. For instance, the contract contained the following payment clause: “100% cost shall be paid against scans of the doc- uments specified therein, not later than two days prior to the vessel’s arrival to the discharge port, but anyway before opening holds”. This wording expresses that in any case the buyer should pay for the Goods before the discharge process commences; otherwise there is a risk of default and li-