The High Court's decision in Cereal Investment Co (CIC) SA v. ED&F Man Sugar Ltd [2007] EWCA Comm. 2843 concerns how parties define delivery periods in international sale contracts.
The case concerned a sale of sugar by ED&F Man to CIC FOB Santos. The "Shipment Period" clause in the contract stated, "One vessel only presenting October 2006 Shipment at Buyer's Option, with 10 days pre-advise of vessel arrival". The contract incorporated the Refined Sugar Association rules, which provide that if a vessel is presented for loading within a contractual delivery period and loading is not completed by the last day of the period, the seller must deliver and the buyer must take delivery of the cargo.
CIC opened a letter of credit requiring presentation of a bill of lading dated no later than 31 October 2006. Man rejected the l/c on the basis that it should allow presentation of a later b/l. CIC terminated the contract and claimed damages from Man. CIC argued that under the contract loading had to be completed by the end of October 2006, and that the "Shipment Period" clause should be read as "One vessel only presenting [for] October 2006 Shipment at Buyers option, with 10 days preadvise of vessel arrival.".
The High Court rejected CIC's arguments and found that the l/c did not comply with the terms of the contract. The Court held that the contract did not provide for a defined shipment period, and that the "Shipment Period" clause was to be read in two parts as (1) "One vessel only presenting October 2006" amd (2) "Shipment at Buyers option...". Shipment should commence when the buyer's vessel was presented for loading but did not have to be completed by 31 October 2006.
This case underlines again the need for care and precision in setting out delivery obligations in international sale contracts to avoid uncertainty and unpredicted consequences.
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