UK: Ready or not?

Last Updated: 13 April 2010
Article by Caroline Brader-Smith and Matthew Montgomery

Court ruling brings clarification to the "readiness to load" requirement under a GAFTA agreement. Soufflet Negoce v Bunge S.A. (2009).

In a rising market, sellers may be inclined to consider means by which they can terminate existing contracts in order to sell their goods elsewhere at a higher price. One such argument put forward by sellers contracting under GAFTA terms is that the vessel in question had not been delivered in 'readiness to load' within the delivery period.

On 13 October 2009, Mr Justice Steel gave judgment in Soufflet Negoce v Bunge S.A, making short shrift of this argument and concluding that the readiness to load requirement between buyers and sellers under GAFTA terms should not be compared to the notice of readiness given by an owner to a charterer.

The facts

By a contract dated 19 September 2006, Soufflet Negoce (the "Sellers') agreed to sell 15,000 tons of feed barley, FOB Nikotera, Ukraine. Delivery was stated to be: "Between 9 - 22 October 2006 at Buyers' call both dates included. (No extension).' The contract also incorporated the terms of GAFTA contract form no. 49. Clause 6 of GAFTA 49 governed the period of delivery and stated:

"Provided the vessel is presented at the loading port in readiness to load within the delivery period, Sellers shall if necessary complete loading after the delivery period, and carrying charges shall not apply."

The vessel had given notice of readiness to load on the last day of the delivery period. The Sellers said that the holds were uncleandue to the presence of coal powder and thus the vessel was not presented "in readiness to load". Bunge S.A. (the "Buyers') disputed this and called upon the Sellers to load the barley after the expiration of the delivery period in compliance with Clause 6. The Sellers' refusal to do so was treated as repudiatory by the Buyers.

The Sellers argued that, because the vessel had not been presented in readiness to load during the delivery period, they had no obligation to complete loading after the prescribed delivery period. The Buyers contended that the vessel had been delivered in readiness to load within the delivery period and so loading could have commenced during the delivery period. The question for the court centred on the meaning of "in readiness to load".

According to the Sellers, Clause 6 imposed a requirement on the Buyers to deliver a vessel ready to load in all respects. They equated the position to that under a notice of readiness whereby owners represent that the vessel is ready in all respects for cargo operations. However, the Buyers argued that their obligations only extended insofar as having to present a vessel for loading which they had done within the delivery period.

The judgment

In his judgment, Mr Justice Steel first considered the basic elements of a FOB contract, namely that:

  • the risk passes to the Buyers on delivery;
  • the Buyers' call to deliver is valid and effective if it is possible and lawful for the sellers to comply with it; and
  • delivery occurs as the cargo passes the ship's rail and thereafter the Sellers have no interest in the cargo.

The judge said that a FOB contract does not require the Buyer to give any notice of readiness to load. The only reference to readiness was that in Clause 6 of GAFTA no. 49 and there was no indication that this was to be read as equivalent to a requirement to tender a notice of readiness. The vessel had been 'presented' to the Sellers within the prescribed period and they had no valid reason to refuse to obey the call to load.

Accordingly, Mr Justice Steel upheld the decision of the GAFTA Appeal Board, concluding that the vessel was indeed 'presented' for loading; there were no physical restrictions rendering it impossible to load and no legal restriction rendering it a breach of law to do so. Under an FOB contract, if the vessel's holds were not fit to receive the goods, the decision to load was at the Buyers' own risk. Further, under a FOB contract the Sellers would not be protecting any interest given that the contract contained a term making a certificate of quality final at loading port.


This judgment establishes that the reference to readiness to load under GAFTA terms does not impose the same obligations as the requirements of a notice of readiness under a charterparty. A buyer under a FOB contract is simply under a duty to provide a vessel at a suitable berth for mooring within the delivery period and to ensure that there are no restrictions, physical or legal, which prevent the sellers loading the cargo. The fact that the vessel may not be in a fit condition should be of no concern to the sellers, whose risk passes at the ship's rail.

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.

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