404. Aruna Mills Ltd v Dhanrajmal Gobindram (the “Leipzig”) [1968] 1 QB 655

CIF sale – late delivery – sellers liable for loss suffered because of devaluation of currency promulgated after date of delivery.

 The Facts

Sudan Cotton was sold CIF Bombay.

Buyers expressly agreed to pay an enhanced price in the event of currency fluctuations. 

Disputes were to be referred to arbitration with the right of appeal to the Liverpool Cotton Association Ltd.

After an extended date of delivery, the currency of payment, the Indian rupee, was revalued, resulting in an increased purchase price.

 Findings

 Certain questions of law were put to the Commercial Court, the most important of which was whether an award of the price difference to the buyers as a result of the devaluation was competent.  Referring to the classic decisions (the Parana, Hadley v Baxendale, Heron II and Victoria Laundry) Donaldson J answered the question in the affirmative, comfortably holding that losses due to currency revaluation were within the parties’ reasonable contemplation.

 Commentary

 Donaldson J’s decision was assisted by the fact that the parties had expressly made provision for losses suffered by currency fluctuations albeit with reference to rates of exchange generally and not to revaluation by deliberate governmental intervention.

 Referring to the Cotton Association’s rule excluding legal representation, Donaldson J said: 

 “Members of trade associations are fully entitled to agree that their rules shall forbid all legal representation at arbitrations conducted in accordance with those rules, but I venture to think that they are most unwise to do so.  Contrary to popular belief, lawyers do not regard it as any part of their duty either to their client or to the tribunal to make confusion worse confounded.  On the contrary, they can and do bring their professional expertise to bear upon the problem of crystallizing the issues, thus saving time and money to all concerned, whilst at the same time ensuring a just result in accordance with law”.

 

 

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