ARTICLE
10 January 2025

GAFTA Default Clause Again: What Is The Date Of Default For An Anticipatory Repudiatory Breach Of Contract?

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Quadrant Chambers

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In Ayhan Sezer v Agroinvest [2024], the High Court clarified the date of default in the context of anticipatory repudiatory breaches under the GAFTA Default Clause. The court held that the default date should be the date of the first anticipatory repudiatory breach, aligning with previous case law and providing consistency in the interpretation of such breaches.
United Kingdom Corporate/Commercial Law

Prior to the Supreme Court's judgment in Sharp v Viterra, there was another judgment in 2024 dealing with the GAFTA Default Clause and grappling with the implications of Bunge v Nidera.

In Ayhan Sezer v Agroinvest [2024] EWHC 479 (Comm), HHJ Pearce, sitting as a judge of the High Court in the London Circuit Commercial Court, addressed the apparent tension between an obiter dictum of Lord Sumption in Bunge v Nidera and earlier decisions of the Courts setting out the approach to the identification of the date of default for the purposes of the GAFTA standard form default clause in the context of a claim for damages based on an anticipatory (and not actual) repudiatory breach of contract.

The issue in the case was whether the date of default in the case of an anticipatory repudiatory breach was the date on which (i) the party in breach first repudiated the contract or (ii) the last date on which the innocent party could have permissibly performed its obligations under the contract.

Agroinvest contended that it was the latter by reference to Bunge v Nidera. Ayhan Sezer contended that it was the former by reference to Thai Maparn Trading Co Ltd v Louis Dreyfus Commdities Asia Pte Ltd [2011] 2 Lloyd's Rep 104.

Having considered the relevant cases, HHJ Pearce stated as follows:

  • He was left in some doubt as to what date Lord Sumption was referring to in paragraph 28(3) of his judgment in Bunge v Nidera.
  • He accepted that the reference to ‘default of fulfilment' in Lord Sumption's judgment could mean that the parties to the contract had not fulfilled their obligations rather than one of the parties had declared an intention not to be bound by them.
  • He considered that the “most natural explanation” of Lord Sumption's comments in paragraph 28(3) was that he was not purporting to identify the date of default in the case of an anticipatory repudiatory breach of contract but rather that he was simply stating that where the contractual obligations are renounced, there is non-fulfilment of the contract and, therefore, the date of default needs to be determined.

In the light of those conclusions, it was necessary for the Judge to determine what the date of default was in an anticipatory repudiatory breach situation. He analysed the position as follows:

  • Once the breach was accepted, there was no remaining fulfilment obligation, the failure of which might be the basis of calculation of the date of default such that the ‘date of default' had to be no later than the date of acceptance of a repudiatory breach.
  • The interpretation of a ‘date of default' as meaning the date of breach, whether or not anticipatory, has the “benefit of avoiding uncertainty as to the date of calculation of losses under the GAFTA default clause”.
  • Where the interpretation of the clause was arguable, there was a powerful argument for consistency in the law i.e. the same approach should apply to actual and anticipatory repudiatory breaches.

He, therefore, held that the date of default was the date on which the first in time anticipatory repudiatory breach occurred.

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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