The Commercial Court in this case considered an appeal brought by Sharp Corp Limited (the ‘Buyer’) against a decision of the Grain and Feed Trade Association (GAFTA) Board of Appeal about the quantification of damages under sub-clause (c) of the default clause (the ‘Default Clause’) in GAFTA contract no.24 awarded to Viterra B.V. (the ‘Sellers’) in respect of two shipments of grains.

Factual background

In January 2017, the parties entered into two contracts for the sale of lentils and peas (the ‘Goods’) on C&F Free Out Mundra terms (the ‘Contracts’). On 10 May 2017, the Goods were shipped at Vancouver onto the “R B Leah” (the ‘Vessel’) and they arrived at Mundra on 19 June 2017.

Upon arrival in Mundra, the Goods were discharged from the Vessel against letters of indemnity as the Buyers had failed to pay for them. The Goods were customs-cleared by the Buyers and put into storage in a warehouse pending payment, with the Sellers retaining property in them and the Goods being held to their order.

Payment remained outstanding when the Indian government imposed import tariffs on the lentils and peas in November and December 2017. Sellers held Buyers in default under the Contracts and obtained a possession order in the Gujarat Court. The Goods became available to the Seller on 2 February 2018 and were resold to Agricore Commodities Ltd on 9 February 2018.

The GAFTA Appeal Board found that the Buyers were in default by their failure to pay for the Goods in accordance with the terms and conditions of the Contracts, and liable to pay damages for default to the Sellers in accordance with the Default Clause, which was incorporated into the Contracts.

The Default Clause provided (in part) as follows:


In default of fulfilment of contract by either party, the following provisions shall apply:

  1. The party other than the defaulter shall, at their discretion have the right, after serving a notice on the defaulter to sell or purchase, as the case may be, against the defaulter, and such sale or purchase shall establish the default price.
  2. If either party be dissatisfied with such default price or if the right at (1) is not exercised and damages cannot be mutually agreed, then the assessment of damages shall be settled by arbitration.
  3. The damages payable shall be based on, but not limited to, the difference between the contract price of the goods and either the default price established under (1) above or upon the actual or estimated value of the goods, on the date of default, established under (2) above”.

The date of default was held to be when the Sellers obtained possession of the Goods, namely February 2, 2018 (the ‘Default Date’). The Sellers argued that the market value for the Goods on the Default Date should be based on FOB Vancouver prices and freight rates for a carriage from Vancouver to Mundra on or about 2 February 2018. The Buyers contended that the market value for the Goods on the Default Date should be assessed by reference to the market value of the goods on the domestic market in India.

The GAFTA Appeal Board accepted the Sellers’ claim and valued the Goods on a constructed theoretical cost of (i) buying equivalent goods FOB Vancouver, Canada on the Default Date and (ii) shipping those goods to Mundra, where they would arrive over a month after the Default Date. The Buyers appealed and argued that ‘the actual or estimated value of the goods, on the date of default’ should be determined on the basis of the available market in Mundra at that date.

In practical terms, the issue at the heart of the Buyers’ appeal was which party should benefit from the substantial increase in the value of the Goods owing to the fact that they had been customs-cleared before the Indian government imposed the import tariffs in late 2017.

Legal issues

In deciding the case before it, the Commercial Court considered in detail and was influenced by the dicta of the Supreme Court’s consideration of sub-clause (c) in Bunge SA -v- Nidera BV [2015] 2 Lloyd’s Rep. 469 which suggested that a ‘notional substitute contract must be on the same terms as the contract which has been lost’. It was held that the authorities overall support the Sellers’ argument that the correct approach is to value the goods based on the same terms and conditions. In this case a sale as urged by Buyers was not a like for like sale: the goods benefited from the customs clearance and (more significantly) from the absence of tariff.

Mrs Justice Cockerill commented that as a matter of law, the most powerful point in Buyers’ favour was that the approach adopted by the GAFTA Board of Appeal placed Sellers in a far better position than if the breach had not occurred and there is considerable authority that this should not happen. However, the judge found that one of the parties would come out of this dispute with a windfall and given that the Buyers were responsible for the problem in the first place, it cannot be nonsense for Buyers not to reap the benefit of that windfall.

In her judgment, Mrs Justice Cockerill suggested that the critical question in this case, was the meaning of ‘value of the goods, on the date of default’ in subclause (c). The judge decided that there was no inconsistency between the Default Date being the date on which the Sellers were actually able to re-sell the goods, and the ‘value’ being assessed by reference to a notional sale on C&F FO Mundra terms if that provided the best evidence available to the GAFTA Appeal Board of that value.

However, the court noted that the GAFTA Board of Appeal had not been provided with any evidence of independent trades of goods of the contract description C&F FO Mundra. Therefore, the GAFTA Appeal Board was essentially faced with two imperfect proxies, with the result that one party would benefit from the later events. The judge commented that had the GAFTA Appeal Board been given clear evidence of the value of a substitute cargo at Mundra on the Default Date, there was no reason to think they would not have accepted that. Lacking any evidence of C&F FO Mundra values, the GAFTA Appeal Board had to form a view on the evidence of which price best equated to a value of a true substitute transaction, and they preferred the Sellers’ evidence over the evidence offered by the Buyers.

The court therefore concluded that there was no evidence that there was an error of law in the conclusions of the GAFTA Board of Appeal and dismissed the appeal.


The Commercial Court confirmed that the correct approach for assessing the damages under sub-clause (c) of the Default Clause in the GAFTA contract no. 24 for non-acceptance of goods which had been shipped to the buyer was to value the goods based on the same terms and conditions as the terms and conditions of the contract under which the dispute between the parties arose. In this case, the Goods were valued based on the cost of buying identical goods at their port of origin plus the freight to transport them to their destination, in preference to their value in the domestic market at the destination, where they were located on the Default Date.

The Commercial Court’s decision is a useful reminder of the importance of correctly analysing the value of the goods based on the contract delivery terms and submitting satisfactory price evidence of the value of goods on the relevant date of default to assist the GAFTA Appeal Board in their assessment of default damages. In the present case, the GAFTA Board of Appeal was provided with two imperfect proxies and preferred Sellers’ valuation evidence. It is understood that the Buyer has requested permission to appeal the decision to the Court of Appeal and it remains to be seen if permission will be granted.