UK: Commodities Bulletin May, 2009

Last Updated: 1 June 2009

By Robert Wilson

The decision of the Court of Appeal in ED&F Man Commodity Advisers Limited v. Fluxo-Cane Overseas Limited (13 May 2009) illustrates some of the potential pitfalls for brokers in trying to balance compliance with directions of commodity exchanges, the need to maintain orderly markets and protection of credit limits and trading relations with their clients.

Man were among a number of parties who had acted as brokers for FCO on the New York International Commodities Exchange (ICE). ICE became concerned that FCO had acquired a high number of short positions in the Sugar No. 11 futures contract for delivery in March 2008, and on 14 January 2008 directed its Members to require an additional 20% "super margin" from FCO. On 16 January 2008, ICE directed Members to close out some of FCO's short positions by 23 January 2008 to reduce them to an acceptable level, with or without FCO's co-operation.

On 17 January 2008, Man made margin calls on FCO, which were not paid. On that same day, there was a meeting between FCO and ten brokers, including Man. The aim of the meeting was to discuss what action to take following ICE's directives and whether a co-ordinated approach could be taken to closing out FCO's short positions which would minimise FCO's exposure and the wider impact on the market.

It was agreed that a further meeting would be held the next day, 18 January 2008. However, before that meeting took place, Man liquidated positions they had placed for FCO's account. Man subsequently brought proceedings against FCO for about US$22m under their customer agreement. FCO responded by contending that Man's liquidation of their positions had been premature and had caused them substantial losses. FCO also argued that Man's action in closing out positions prior to the 18 January meeting was in breach of an oral agreement reached between FCO and all brokers at the meeting on 17 January.

Man applied to the High Court in London for summary judgment, asking the Court to rule that there no agreement was reached between FCO and the brokers on 17 January 2008. Man's application failed at first instance. In September 2008 the High Court held that there had been an interim binding contract under which Man and the other brokers had agreed not to take any individual action until a second meeting had taken place.

Man have now succeeded on appeal. The Court of Appeal rejected the first instance finding and held, based on a transcript of the 17 January meeting, that there was no consensus at that meeting on what action should be taken.

Nonetheless, the judgment at first instance decision remains a lesson on the risks of conducting open discussions with a view to possible variations or compromises of contractual rights. Such negotiations are typically conducted on an expressly without prejudice basis. This case demonstrates the wisdom of following that practice whenever appropriate, to avoid subsequent suggestions that contractual rights may have been waived or compromised in the course of unfinished discussions.

By Mark Morrison

The recent decision in Petroplus Marketing AG v Shell Trading International Ltd (14 May 2009) demonstrates again the willingness of the English courts strictly to enforce express terms of international sale of goods contracts.

The case arose from a contract made on 10 June 2008 by which Petroplus sold 29-32,000 MT of high sulphur fuel oil and 1-2,000 MT of light cycle oil to Shell, FOB Coryton. The contract contained the standard provisions that (1) the price of the oil would be set by reference to published market prices at and around the date of shipment; and (2) the price would be paid "without deduction, offset or counterclaim".

The cargo was shipped after the contractual shipment period, the market having risen between the end of the contractual shipment period and the shipment date. Petroplus invoiced Shell for the price of the cargo based on published prices at and around the shipment date. Shell insisted that they would only pay (and did pay) for the cargo as priced based on a shipment date within the contractual shipment period, contending that Petroplus bore responsibility for the cargo being shipped late.

Petroplus applied to the High Court for summary judgment for the difference between the amount of their invoice and the amount paid by Shell. Petroplus submitted that, even if Shell were right that Petroplus were responsible for the late shipment, the payment clause in the contract required Shell to pay "without deduction, offset or counterclaim", which essentially meant that Shell had to pay the invoice price and then pursue a claim against Petroplus if they considered they were entitled to partial repayment because of a breach of contract on the part of Petroplus.

Shell resisted Petroplus' summary judgment application, arguing that by demanding payment of a price calculated after the contractual shipment period Petroplus were seeking to benefit from their own breach of contract in shipping cargo late, and that in any event Petroplus' claim for the price and Shell's counterclaim for breach of contract were so closely connected that they ought to be heard together.

The High Court granted Petroplus' application for summary judgment. It was held that Shell's case, which was in substance a counterclaim, could not overcome the clear contractual provision that payment was to be made "without deduction, offset or counterclaim".

This decision, though not surprising, demonstrates that standard wording in sale contracts will be strictly enforced and should not be dismissed as surplusage. In particular, payment clause wording of the kind in issue in this case may have the effect of obliging a buyer to pay a seller's invoice in full notwithstanding that the buyer may have good and substantial claims against the seller arising from the seller's performance of the same contract. Most buyers will be able to do little about this, given the convention of incorporating such wording in international sale contracts, but they should at least be aware of the potential results.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.