COURT OF APPEAL (CIVIL DIVISION)
[1983] 2 Lloyd's Rep 171, on appeal from (and upholding)
Queen's Bench Division (Commercial Court)
SJ/160/78
29 February 1980
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Iansa purchased from Cubazukar a quantity of sugar c. & f., to a Chilean port, shipments to be effected between January and October, 1973. Because of an uprising in Chile, and the replacement of a regime friendly to Cuba with one less so, the performance of the contracts was affected by decisions made at high level in the Cuban government. Later, performance of the contracts became illegal under Cuban law.
As a consequence of the government action (to which Cubazukar were party), The Playa Larga, which was in the process of delivering cargo (which had already been paid for) in Chile left before completion of the delivery; The Marble Island, which was en route for Chile, was diverted elsewhere (although documents were tendered under the documentary credit, against which the price was paid). The charterparty for The Aegis Fame, which was about to load, was cancelled. Thus, some sugar never reached Iansa athough they had paid for it, and although (in the case of The Playa Larga and The Marble Island) the cargo had been loaded by Cubazukar. The sellers had thus arguably performed their duties c.i.f., by loading the cargo aboard the vessels, and argued that they were not responsible for its delivery to the buyers.
After the coup, there was no further performance of the contract by either party. The market had steadily risen since the contract had been made, and continued to rise after the coup, and Iansa sued Cubazukar.
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In respect of The Playa Larga cargo, IANSA could succeed on the basis of SOGA s. 12, and in the tort of conversion (the CA upholding Mustill J on this point); it was accepted, however, that s. 12(2) could not be applied without limitation, and that the seller could not be responsible where the buyer's possession was disturbed by the wrongful act of a third party totally unconnected with the seller. That was not the situation in the case, however. Mustill J. did not see that any term could have been implied apart from s. 12(2), but the CA would have been prepared to apply a term at common law also, had s. 12(2) not been enacted.
The conversion claim depended on the buyer having sufficient immediate right to possession to found the claim.
In respect of The Marble Island, the contract was frustrated prior to any breach by Cubazukar, nor did IANSA ever obtain sufficient title to sue in conversion, and IANSA was unable to recover damages (but it could reject the documents, which were discrepant, and recover the price already paid); again, the CA upheld Mustill J.
In respect of the unshipped balance, the contract was frustrated and Cubazukar was therefore not in breach.
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The main importance of the case is in establishing the nature of the liability of c.i.f. sellers who, having loaded the goods in accordance with the contract, later act in such a manner as to prevent them from reaching the buyer.
In the CA the rejection in respect of The Marble Island cargo was justified on the grounds that the documents were discrepant, but Mustill J. also considered the validity tender of documents representing carriage contracts that were no longer being, or could not be carried out. He concluded (in the light of cases such as Arnhold Karberg & Co. v. Blythe, Green, Jourdain & Co. [1915] 2 KB 379, [1916] 1 KB 495 and Manbre Saccharine Company Limited v. Corn Products Company Limited [1919] 1 KB 198):
(1) The seller is obliged to tender documents representing contracts which are valid and effective at the time of tender.
(2) This requirement does not however entail that the contracts must necessarily give the buyer enforceable rights against the carrier in relation to the future performance of the contract. Thus, the tender of a bill of lading representing a contract which has already been frustrated can, in appropriate circumstances, be a proper compliance with the contract of sale.
(3) Where the bill of lading contract has already ceased to confer enforceable rights as to future performance at the moment of tender, it is not clear on the cases how the line is to be drawn between those documents which are and those which are not a valid tender. There are three possible views as to the type of document which can properly be rejected: (a) Those relating to contracts of carriage which have become illegal under English law (as the lex fori); (b) Those relating to contracts whose performance has become illegal either by the lex fori or by the proper law of the contract; (c) Those relating to contracts which have been discharged by frustration on any ground, except the destruction of the goods themselves.
In my opinion, the authorities are best reconciled by holding that documents in category (b) are open to rejection.
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Mail Paul Todd : toddpn2@cf.ac.uk
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