Soufflet Negoce SA v. Fedcominvest Europe SARL [2014] EWHC 2405 (Comm)

The decision in this case provides helpful guidance on the construction of the “Notices” provision in GAFTA 64 (General Contract for grain in bulk FOB terms). The Court upheld the GAFTA Board of Appeal award which found that the provision in the contract, whereby any notice received after 1600 hours on a business day would be deemed to have been received the following day, applied only in the case of resales and repurchases (which was not the case here). The commercial reality was that, in those cases, it is particularly important that notices up or down the chain are served without delay because intermediary sellers or buyers in the chain may otherwise be prejudiced if the notice is not received in time to be passed on.

The background facts

Pursuant to a sale contract dated 4 October 2010, which incorporated GAFTA 64, the Sellers agreed to sell a quantity of French feed barley to the Buyers on FOB terms. The relevant terms of GAFTA 64 for the purposes of the parties’ dispute were as follows:

         "6. PERIOD OF DELIVERY

In case of re-sales all notices shall be passed on without delay, where possible, by telephone and confirmed on the same day in accordance with the Notices Clause.

8. EXTENSION OF DELIVERY

The contract period of delivery shall be extended by an additional period of not more than 21 consecutive days, provided that Buyers serve notice claiming extension not later than the next business day following the last day of the delivery period. …

19. NOTICES

All notices required to be served on the parties pursuant to this contract shall be communicated rapidly in legible form. Methods of rapid communication for the purposes of this clause are defined and mutually recognised as: - either telex, or letter if delivered by hand on the date of writing, or telefax, or E-mail, or other electronic means, always subject to the proviso that if receipt of any notice is contested, the burden of proof of transmission shall be on the sender who shall, in the case of a dispute, establish, to the satisfaction of the arbitrator(s) or board of appeal appointed pursuant to the Arbitration Clause, that the notice was actually transmitted to the addressee. In case of resales/repurchases all notices shall be served without delay by sellers on their respective buyers or vice versa, and any notice received after 1600 hours on a business day shall be deemed to have been received on the business day following. A notice to the Brokers or Agent shall be deemed a notice under this contract." (Emphasis added.)

The original agreed delivery period was 10 November – 10 December 2010 at the Buyers’ option. As 10 December 2010 was a Friday, “the next business day following the last day of the delivery period” on which any notice claiming an extension under clause 8 had to be served was Monday 13 December 2010. The Buyers’ nominated vessel was delayed and the Buyers tendered a notice claiming an extension at 1709 on 13 December. The Sellers argued that, as the notice was served after 1600 hours, it was deemed to have been received the following day, on Tuesday 14 December, pursuant to the deemed notice provision in clause 19 and was therefore out of time. The Buyers contended that the deemed notice provision only applied to resales/repurchases, which was not the case here, and they claimed damages from the Sellers for non-performance of the contract.

The GAFTA Board of Appeal found in favour of the Buyers, holding that the deemed notice provision in clause 19 did not apply and that, under clause 8, the Buyers had until midnight on 13 December 2010 to serve the notice claiming an extension. The notice served by them was therefore valid and they were entitled to damages for the Sellers’ wrongful repudiation of contract. The Sellers appealed.

The Commercial Court decision

The Court acknowledged that there was more than one way of construing the relevant wording in the contract but concluded that the Buyers’ construction was the more natural one in the context of GAFTA 64 when construed as a whole. In the Court’s view, the provision that any notice served after 1600 would be deemed to have been served the next day applied only to notices in the case of resales/repurchases and not to all notices.

There was a clear scheme within GAFTA 64, extending beyond the Notices clause 19, for notices in the case of resales/repurchases and that scheme sought to ensure that, so far as possible, intermediate sellers and buyers were in a position to pass such notices on the same day. In particular, under clause 6, vessel nomination notices in the case of resales had to be passed on, where possible, by telephone and then confirmed on the same day in accordance with clause 19, the Notices clause. Clause 19 required written notices to be given and served before 1600 hours in resales/repurchases cases if they were to be deemed as having been served on the same day.

Comment

The Court avoided what it referred to as an “over zealous semantic and syntactical analysis” of the contractual provision in question and side-stepped arguments on which interpretation made more business common sense. Instead, it construed the disputed wording in the context of the contract as a whole, this being more likely to result in a construction that accords with what the parties can objectively be taken to have agreed.