FOB sale – demurrage clause – parallel obligation to pay carrying charges
A parcel of wheat was sold FOB Damman, Saudi Arabia.
The contract provided for demurrage, a guaranteed loading rate, sellers’ carrying charges if vessel arrived late and a right on behalf of the buyers to extend the delivery date.
The buyers exercised their right to extend the delivery date. At the same time, the sellers defaulted on the guaranteed loading rate.
The sellers were happy to pay demurrage but claimed carrying charges which they incurred as result of the extended delivery date.
The buyers’ case was that they were not liable for carrying charges incurred as result of the sellers’ failure to load at the agreed rate ie those charges incurred during the extra time taken to load (in the extended delivery period). The sellers contended that their failure to load at the agreed rate was compensated by demurrage and that their claim for carrying charges could not be reduced on account of their breach of the loading obligation.
The GAFTA Appeal Board found for the sellers. Potter J dismissed the buyers’ appeal on a point of law.
Potter J examined Aktieselskabet Reidar v Arcos (1926 Court of Appeal) and Suisse Atlantique (1967 House of Lords) and concluded that payment of demurrage as liquidated damages precluded a claim for additional damages.
The ratio discerned from Reidar v Arcos was that to recover additional damages there had to be a breach of a separate obligation which was absent in this case.
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