In KG Bominflot Bunkergesellschaft Fur Mineraloele MBH & Co v Petroplus Marketing AG (The “Mercini Lady”), the Claimant buyers claimed against the Defendant sellers for damages arising from a FOB sale of gasoil. Under the sale contract, quality and quantity of the goods were to be determined by independent inspection at the loadport, the results of which were to be final and binding for both parties. Further, the contract contained an exclusion clause which stated that “there are no guarantees, warranties or representations, express or implied, of merchantability, fitness or suitability of the oil for any particular purpose or otherwise which extend beyond the description of the oil set forth in this agreement”.
The goods conformed to specification at the loadport, but on arrival at the discharge port the Claimant rejected them, alleging that they no longer conformed to the sediment specifications in the contract. The Claimant commenced proceedings in the High Court, alleging that the Defendant was in breach of contract terms implied by the Sale of Goods Act 1979 (the “Act”). In particular, the Claimant alleged that because the gasoil had been on-specification, but no longer was upon arrival at the discharge port, it was not capable of remaining of satisfactory quality, meaning that the Defendant was in breach of s.14(2) and (3) of the Act. Further, the Claimant argued that the Defendant was also in breach of an implied term at common law that the gasoil would be capable of enduring a reasonable voyage and for a reasonable time thereafter, so that it would still then be of satisfactory quality and/or in accordance with the contractual specification.
The Court of Appeal dealt with two issues. The first was whether, in addition to the statutory implied term of satisfactory quality, there was to be implied a further common law term extending the quality clause beyond the point of loading. The second issue was whether the basic statutory implied term could survive the existence of the exclusion clause in the contract, which did not specifically refer to “conditions”.
On the first issue, the Court held that nothing in this case required the implication of this common law term. The clear intention of the contract was that the specification should be determined conclusively at the loadport, and such a clause replaced or at least redefined the implied terms as to quality. On the second issue, the Court stated that there was a wellestablished line of authority establishing the point that exclusion clauses needed to be in very clear terms in order to exclude conditions implied by the Act. The clause in this case was not clear enough.