FOB sale – buyers rejecting goods at load port based on certification by surveyors – whether the certificate contractually compliant
Buyers purchased 30 000 metric tons of Russian milling wheat. They on sold to an Egyptian state wheat procurement body, GASC (General Authority for Supply Commodities).
The main contract provided:
“Quality as per GASC tender terms
Weight, quality and condition final at time and place of loading as per relevant GASC tender. Buyers right to appoint a first class GAFTA approved surveyor. Should there be a major discrepancy between the two analysis results carried out by the two surveying companies then a first class GAFTA approved third surveyor (to be mutually agreed upon) should act as arbitrator”
Insofar as there was no conflict, GAFTA 49 terms were incorporated.
GASC tender terms (GTT) contained detailed specifications for the wheat cargo, payment terms which set out which documents were necessary to obtain payment under the letter of credit and included the following clause:
“5) Superintending certificate … to be issued by the inspection company nominated by the buyer indicating quality, weight, specifications, packing, quality, goods kind at loading time and indicating also that holds and hatches of carrying vessel are clean and free from alive and dead insects and fit for shipping wheat”
Clause 5 went on to set out the required contents of the certificate including sampling methodology.
GTT contained the following notes:
“3) The buyer has the right to nominate who represents him in inspection operation at loading or discharging port.
4) GASC reserves the right to appoint a superintendent company of its choice with a deduction of $1 per metric ton from the price.
9) If inspection of consignment and load port states that it is not identical to GASC’s conditions and specifications (in this tender document), it will be rejected immediately on site, the performance bond will be confiscated and the contract will be cancelled.”
Clause 19 of GAFTA 49 provided as follows:
“19) Sampling, analysis and certificates of analysis
The terms and conditions of GAFTA Sampling Rules No 124 are deemed to be incorporated into this contract. Samples shall be taken at time and place of loading. The party shall appoint superintendents for the purposes of supervision and sampling of the goods, from the GAFTA register of superintendents. Unless otherwise agreed, an analyst shall be appointed from the GAFTA register of analysts.”
GAFTA 124 contained the following rules:
“1.2 Pursuant to the contract terms and for the purposes of these rules, superintendents shall be appointed from the GAFTA register of approved superintendents …
- Non-compliance with the rules
In the event of non-compliance with the preceding provisions of these rules being raised at arbitration as a defence, any quality and/or condition and/or rye terms arbitration claimed shall be deemed to be waived and barred unless the arbitrators or Board of Appeal as the case may be shall in their absolute discretion determine otherwise.”
The surveyor appointed by the buyers to inspect the cargo at the load port was not GAFTA approved.
The surveyor issued a certificate which buyers relied on to reject the cargo. The certificate did not contain the information required by clause 5 of the GTT relating inter alia to the sampling methodology.
The First Tier tribunal found in favour of the buyers.
The GAFTA Appeal Board found that the certificate was not contractually compliant (a) because the surveyor was not a GAFTA approved surveyor and (b) the certificate itself did not comply with the information requirements of the contract.
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