“Whether the [Yard]’s obligation in Article X(A)(f) to provide a refund guarantee within 120 days of the novation of the relevant shipbuilding contract is a condition.”
“the [Yard] agrees to design, build, equip, launch, test and complete one [vessel] as described in the Specifications attached hereto … and to deliver and sell the same to the BUYER, and the BUYER after completion and successful trial hereby agrees to purchase and take delivery of the VESSEL from the SELLER and to pay for the same in accordance with the terms and conditions hereinafter set forth…”
“(a) No adjustment shall be made and the Contract Price shall remain unchanged for the first thirty (30) days of delay in delivery of the VESSEL beyond the Delivery Date as defined in Article VII hereof (ending as of twelve o'clock midnight of the thirtieth (30th) day of delay). (b) If the delivery of the VESSEL is delayed more than thirty (30) days but less than one hundred and twenty (120) days after the Delivery Date, the Contract Price shall be reduced by the sum of United States Dollars Twenty Six Thousand (USD 26,000) for each full day for which thereafter delivery is delayed. If the delivery of the VESSEL is delayed one hundred and twenty (120) days or more after the Delivery Date, the Contract Price shall be reduced by the sum of United States Dollars Twenty Eight Thousand (USD 28,000) for each full day for which thereafter delivery is delayed. However, the total reduction in the Contract Price shall be not more than as would be the case for a delay of one hundred and eighty (180) days counting from the midnight of the thirtieth (30th) day after the Delivery Date at the above specified rates of reduction. (c) However, if the delay in delivery of the VESSEL should continue for a period of two hundred and ten (210) days from the Delivery Date in Paragraph 1 of Article VII, then in such event, and after such period has expired, the BUYER may, at its absolute discretion, rescind this CONTRACT in accordance with the provisions of Article X hereof. The SELLER may, at any time after the expiration of the aforementioned two hundred and ten (210) days of delay in delivery, if the BUYER has not served notice of rescission as provided in Article X hereof, demand in writing that the BUYER shall make an election, in which case the BUYER shall, within twenty five (25) days after such demand is received by the BUYER, notify the SELLER of its intention either to rescind this CONTRACT or to consent to the acceptance of the VESSEL at an agreed future date. If the BUYER shall not make an election within twenty five (25) days as provided hereinabove, the BUYER shall be deemed to have accepted such extension of the delivery date to the future delivery date indicated by the SELLER and it being understood by the parties hereto that if the VESSEL is not delivered by such future date, the BUYER shall have the same right of rescission upon the same terms and conditions as hereinabove provided …”
“It is expressly understood and agreed by the parties that in any case, if the BUYER rescinds this CONTRACT under this Article, the BUYER shall not be entitled to any liquidated damages or any other recourse unless by means of the provisions of Article X hereof.”
“The VESSEL shall be delivered by the SELLER to the BUYER at the facilities of [the Yard] on or before6 July 2023 (but not before6 June 2023 ), except that, in the event of delays in the construction of the VESSEL or any performance required under this CONTRACT due to causes which under the terms of this CONTRACT permit postponement of the date for delivery, the aforementioned date for delivery of the VESSEL shall be postponed accordingly.”
“Provided that the SELLER and the BUYER shall have fulfilled all of their obligations stipulated under this CONTRACT, the delivery of the VESSEL shall be effected forthwith by the signature by the SELLER and the BUYER of two originals of the PROTOCOL OF DELIVERY AND ACCEPTANCE, acknowledging delivery of the VESSEL by the SELLER and acceptance thereof by the BUYER and the concurrent delivery of one original thereof by each of the parties hereto to the other.”
“The payments made by the BUYER prior to delivery of the VESSEL shall be in the nature of advances to the SELLER, and in the event that the BUYER exercises its right of rescission of this CONTRACT in accordance with the terms of this CONTRACT under and pursuant to any of the provisions of this CONTRACT specifically permitting the BUYER to do so, then the BUYER shall notify the SELLER in writing or by telefax, and such rescission shall be effective as of the date when notice thereof is received by the SELLER.”
“In case the SELLER receives the notice stipulated in Paragraph 1 of this Article …the SELLER shall promptly refund to the BUYER the full amount of all sums paid by the BUYER to the SELLER on account of the VESSEL i.e. the instalment payments. together with the interest thereon and pay an amount equal to the cost of the BUYER's Supplies, unless the SELLER proceeds to the arbitration under the provisions of Article XII hereof.” “In such event, the SELLER shall pay the BUYER interest at the rate of six percent (6%) per annum on the amount required herein to be refunded to the BUYER, computed from the date following the date of receipt by the SELLER of each installment or, in the case of the BUYER's Supplies, the date the cost thereof was incurred by the BUYER, to the date of remittance by transfer of such refund to the BUYER by the SELLER…”
“As security for any refund under the terms of this CONTRACT of each installment of the Contract Price payable prior to delivery of the VESSEL as well as of the costs for BUYER´s Supplies, the SELLER shall furnish the BUYER at least five (5) Banking Days prior to the payment of the first installment with a letter of guarantee (the “[Refund Guarantee”]) by SWIFT of the Bank of China or the Bank of Communications or The Export-Import Bank of China or China Construction Bank, Industrial and Commercial Bank of China or Agricultural Bank of China (the selected bank, the “REFUND GUARANTOR”), covering the amount of each such installment (by way of automatic increase of the sum of each such installment upon payment of each such installment by the BUYER to the SELLER) in favour of the BUYER which [Refund Guarantee] shall have the same form and substance as Exhibit A annexed hereto.”
“If in connection with the terms and conditions of the CONTRACT the BUYER shall become entitled to a refund of the instalments or advance payments made to the SELLER prior to the delivery of the Vessel, we hereby irrevocably and unconditionally guarantee as primary obligor and not merely as surety the repayment of the same to the BUYER within thirty (30) days after our receipt of your written demand not exceeding United States Dollars Twenty Four Million Nine Hundred Ninety Thousand (USD 24,990,000) plus interest thereon at the rate of six percent (6%) per annum unless the said rescission by you is made under the provisions of Paragraph 4 of Article VIII of the CONTRACT from the date following the date of receipt of each instalment or advance payment by the SELLER to the date of remittance by telegraphic transfer of such refund.”
“The amount of this Guarantee shall initially be for United States Dollars Eight Million Three Hundred Thirty Thousand (USD 8,330,000) and will be automatically increased upon SELLER's receipt of the second instalment and the third instalment, by the amount of each instalment or advance payment plus interest thereon as provided in the CONTRACT, but in any eventuality the amount of this Guarantee shall not exceed the total sum of United States Dollars Twenty Four Million Nine Hundred Ninety Thousand (USD 24,990,000) (the “Guarantee Amount”) plus interest thereon at the rate of six percent (6%) per annum from the date following the date of the SELLER's receipt of each instalment or advance payment to the date of remittance by telegraphic transfer of the refund.”
“We will pay under this Letter of Refund Guarantee upon BUYER's simple first written statement stating that BUYER's demand for refund has been made in conformity with the CONTRACT and the SELLER has failed to make the refund. … This Letter of Refund Guarantee shall expire and become null and void upon the earliest of the receipt by the BUYER of the sum guaranteed hereby together with interest thereon as aforesaid or upon our receipt of a copy of the Protocol of Delivery and Acceptance of the Vessel executed by the BUYER and the SELLER in accordance with the provisions of the CONTRACT or [set out here date falling least 390 days after delivery date].”
“(a) a winding up order is made by any court or a resolution is passed for the winding up of the [Seller]… (b) an administrator, administrative receiver or similar officer is appointed of the whole or a material part of the assets and undertaking of [the Seller] … (c) the [Seller] is dissolved, liquidated or ceases to be registered as a company… (d) it fails for more than ninety (90) days in the absence of any cause permitting delay in delivery under this CONTRACT to commence or continue the construction of the VESSEL in accordance with this CONTRACT; or (e) it is incapable, for any reason whatsoever, of completing the VESSEL in compliance with this CONTRACT and the Specifications by the cancellation dates set out in Articles III.1(c) Delay in delivery of 210 days. or VIII.4 Delay in delivery of 270 days. ; or (f) The [Refund Guarantee] is not delivered to the BUYER in accordance with the terms of this CONTRACT by no later than 120 days after the date this CONTRACT is amended, novated and restated or such later date as the BUYER may designate in writing from time to time, then and in any such case the BUYER may terminate, rescind or cancel this CONTRACT by notice to the SELLER in writing or by telefax confirmed in writing in accordance with the provisions of Article X hereof.”
“The BUYER shall be deemed to be in default of its performance or obligations under this CONTRACT in the following cases: (a) If any pre-delivery installment is not paid by the BUYER to the SELLER within five (5) Banking Days after such installment becomes due and payable as provided in Article II hereof; or (b) If the final installment is not paid by the BUYER to the SELLER concurrently with the delivery of the VESSEL as provided in Article II hereof; or (c) If the BUYER, when the VESSEL is duly tendered for delivery by the SELLER in accordance with the provisions of this CONTRACT, fails to accept the VESSEL within five (5) days from the tendered date without any specific and valid ground thereof under this CONTRACT. (d) A winding up order is made by any court… for the winding up of the Buyer (e) An administrator, administrative receiver or similar officer is appointed of the whole or a material part of the assets and undertaking of the Buyer…”
“(a) Should the BUYER make default in payment of any installment of the Contract Price on or before delivery of the VESSEL, the BUYER shall pay the installment(s) in default plus accrued interest thereon at the rate of six percent (6%) per annum computed from the due date of such installment to the date when the SELLER receives the payment, and, for the purpose of Paragraph 1 of Article VII hereof theDelivery Date of the Vessel shall be automatically extended by the period of continuance of such default by the BUYER. In any event of default by the BUYER, the BUYER shall also pay all charges and expenses incurred by the SELLER in consequence of such default. (b) If any default by the BUYER continues for a period of ten (10) days, the SELLER may, at its option, rescind this CONTRACT by giving notice of such effect to the BUYER by letter or telefax. Upon receipt by the BUYER of such notice of rescission, this CONTRACT shall be forthwith rescinded and terminated. In the event of such rescission of this CONTRACT, the SELLER shall be entitled to retain any installment or installments already paid by the BUYER to the SELLER on account of this CONTRACT and the BUYER's Supplies, if any.”
“29… An appeal on a question of law is confined to facts found by the Award. Steyn LJ conveniently summarised the position under the 1979 Act in Geogas SA v. Trammo Gas Ltd, The ‘Baleares’[1993] 1 Lloyd’s Rep 215 , at 227: ... The arbitrators are the masters of the facts. On an appeal the Court must decide any question of law arising from an award on the basis of a full and unqualified acceptance of the findings of fact of the arbitrators. It is irrelevant whether the Court considers those findings of fact to be right or wrong. Later in the same passage Steyn LJ identified the numerous means by which dissatisfied parties have sought to challenge the findings of fact. This catalogue of challenges to arbitrators’ findings of fact points to the need for the Court to be constantly vigilant to ensure that attempts to question or qualify the arbitrators’ findings of fact, or to dress up questions of fact as questions of law, are carefully identified and firmly discouraged. The same vigilance will be applied to cases under the 1996 Act. 30... Although all contracts must be construed against the commercial background which would have been available to the parties at the time the contract was made, see ICS v. West Bromwich BS[1998] 1 WLR 896 , Lord Hoffmann at 912-913, the only admissible findings in relation to the commercial background are those in the award.”
“considering the value of the vessels ordered by the Buyers and the volatility of the shipping market, timely delivery was obviously of paramount importance to the Buyers, and failure by the Yard to provide the RGs, despite the lengthy, but final, period of 120 days allowed for doing so, was a red flag which pointed strongly towards the Yard being unable or unwilling to perform as per the agreed timescales, or at all Nor did the Buyers advance factual matrix evidence before the Tribunal that the Refund Guarantee operated as an “earnest of performance.”
“Looking at the totality of the evidence we do not accept that the [Yard] evinced an intention not to perform the SBCs.”
“3. Was the [Yard’s] failure to provide refund guarantees within 120 days a repudiatory breach and/or a breach of condition of the SBCs? 4. Did the [Yard] by their words and/or conduct renounce the SBCs by evincing an intention not to perform the SBCs in accordance with their terms?”
“A condition is a term, the failure to perform which entitles the other party to treat the contract as at an end And, it should be added, claim damages for loss of bargain (or, where appropriate, reliance loss). . A warranty is a term, breach of which sounds in damages but does not terminate, or entitle the other party to terminate, the contract. An innominate or intermediate term is one, the effect of non-performance of which the parties expressly or (as is more usual) impliedly agree will depend upon the nature and the consequences of breach… The first question is always, therefore, whether, upon the true construction of a stipulation and the contract of which it is part, it is a condition, an innominate term, or only a warranty. If the stipulation is one, which upon the true construction of the contract the parties have not made a condition It should be added, expressly or impliedly (see 717H). , and breach of which may be attended by trivial, minor or very grave consequences, it is innominate, and the court (or an arbitrator) will, in the event of dispute, have the task of deciding whether the breach that has [actually] arisen is such as the parties would have said, had they been asked at the time they made their contract it goes without saying that, if that happens, the contract is at an end.”
“I recognise that the lease relates to what could be fairly described as a commercial transaction. In commercial transactions, provisions as to time are usually but not always regarded as being of the essence of the contract. They are certainly so regarded where the subject matter of the contract is the acquisition of a wasting asset or of a perishable commodity or is something likely to change rapidly in value. In such cases if, e.g., the seller fails to deliver within the time specified in the contract, the buyer may well be seriously prejudiced. The time provision in a rent revision clause of the present kind, even in a lease concerning a commercial transaction, is however different in character and I regard it as not being of the essence of the contract unless it is made so expressly or by necessary implication. In the present case it is certainly not made so expressly nor, in my view, by implication. Nor is there anything to suggest that the tenant would be prejudiced by determination of the rent for the period from August 31, 1972, to August 31, 1982, being postponed until after August 31, 1972.”
“The modern law, in the case of contracts of all types, may be summarised as follows. Time will not be considered to be of the essence unless: (1) the parties expressly stipulate that conditions as to time must be strictly complied with; or (2) the nature of the subject matter of the contract or the surrounding circumstances show that time should be considered to be of the essence; or (3) a party who has been subject to unreasonable delay gives notice to the party in default making time of the essence.”
“In this present context it is clearly essential that both buyer and seller (who may change roles in the next series of contracts, or even in the same chain of contracts) should know precisely what their obligations are, most especially because the ability of the seller to fulfil his obligation may well be totally dependent on punctual performance by the buyer.”
“[t]he seller needed sufficient notice to enable him to choose the loading port: the parties were agreed that the notice to be given him was 15 days: this was a mercantile contract in which the parties required to know where they stood not merely later with hindsight but at once as events occurred.”
“In short, while recognising the modern approach and not being overready to construe terms as conditions unless the contract clearly requires the court so to do Again, echoing what Lord Roskill said in Cehave at 70-71. , none the less the basic principles of construction for determining whether or not a particular term is a condition remain as before, always bearing in mind on the one hand the need for certainty and on the other the desirability of not, when legitimate, allowing rescission where the breach complained of is highly technical and where damages would clearly be an adequate remedy.”
“It is to be noted that the balance between the need for certainty and the undesirability of treating trivial breaches as carrying the consequences of breaches of condition requires a more nuanced approach where there is a contractual termination clause. In such circumstances the desideratum of certainty may be fulfilled by the contractual right to put an end to the future performance obligations without the full common law consequences of repudiation attaching. This was not a matter which fell to be considered on the facts of that case.”
“There is no way of deciding that question except by looking at the contract in the light of the surrounding circumstances, and then making up one's mind whether the intention of the parties, as gathered from the instrument itself, will best be carried out by treating the promise as a warranty sounding only in damages, or as a condition precedent by the failure to perform which the other party is relieved of his liability.”
“To my mind the most important single factor in favour of Mr. Staughton’s Leading Counsel for the sellers. submission is that until the requirement of the 15-day consecutive notice was fulfilled, the [sellers] could not nominate the one Gulf port as the loading port, which under the instant contract it was their sole right to do. I agree with Mr. Staughton that in a mercantile contract when a term has to be performed by one party as a condition precedent to the ability of the other party to perform another term,especially an essential term such as the nomination of a single loading port, the term as to time for the performance of the former obligation will in general fall to be treated as a condition. Until the 15 consecutive days' notice had been given, the respondents could not know for certain which loading port they should nominate so as to ensure that the contract goods would be available for loading on the ship's arrival at that port before the end of the shipment period.”
“26. In my opinion very different considerations apply to clause 42 of the charterparty in this case A non-payment time stipulation requiring the laycan to be narrowed 32 days prior to the first layday. . In Bunge v Tradax the sellers could not nominate the loading port until the buyers had given the 15 days notice of probable readiness so that clause 7 was an example of a clause in which the performance by A was a condition precedent to the ability of B to perform another term of the contract. Thus the contract could not be performed in accordance with its terms unless the notice was given… 32. Given that the charterparty could be performed in accordance with its terms whether or not the charterers discharged their obligations to narrow the laycan spread in accordance with clause 42, it does not seem to me to be likely that the parties intended that clause 42 was a condition of the contract such that any breach of it would entitle the owners to treat the charterparty as at an end. It makes no commercial sense to hold that the parties intended that the owners should be able to treat the whole contract as at an end if the charterers served a notice, say, two days late.”
“if, as Popplewell J held, the obligation in question was not a condition, then GCS’s failure to make punctual payments of hire entitled Spar to terminate the charterparties pursuant to the express provisions of the withdrawal clause in cl 11 thereof—so putting to an end future performance obligations and also to claim the balances due under the charterparties at the date of termination. However, mere breach of this obligation did not entitle Spar to claim damages for loss of bargain. On the judge’s reasoning, that entitlement flowed instead from GCS having renounced the charterparties. Conversely, if the obligation in question was a condition, then Spar was not only entitled to terminate the charterparties but also, on this ground alone, to claim damages for loss of bargain.”
“In the present case, cl 11 of the charterparties with which we are concerned, is a payment term. Further and without diminishing in any way the over-arching importance of the punctual payment of hire in advance to the scheme of the charterparties, compliance by [the charterers] with cl 11 was not a condition precedent to the performance by [the owner] of their obligations under the charterparties in the same direct or immediate sense that the terms were inter-dependent in Bunge v Tradax. Put another way, it could not be said that any failure to pay hire punctually in advance, no matter how trivial, would derail [the owner’s] performance under the charterparties... it is readily apparent that the consequences of a breach of cl 11 can vary dramatically—from the trivial to the grave; in such circumstances it is one thing to give effect to an express contractual termination clause but quite another to treat that clause as a condition.”
“Classifying a contractual provision as a condition has advantages in terms of certainty; in particular, the innocent party is entitled to loss of bargain damages (such as they may be) regardless of the state of the market. Where, however, the likely breaches of an obligation may have consequences ranging from the trivial to the serious, then the downside of the certainty achieved by classifying an obligation as a condition is that trivial breaches will have disproportionate consequences. In a time charterparty, it is only necessary to contemplate a five-minute delay in the payment of a single instalment of hire, for whatever reason not covered by an anti-technicality clause.”
“(i) it is a matter of the intention of the parties on the true construction of the contract; (ii) where, upon the true construction of the contract, the parties have not made the term a condition, it will be innominate if a breach may result in trivial, minor or very grave consequences; (iii) unless it is clear that a term is intended to be a condition or (only) a warranty, it will be innominate.”
“Bunge v Tradax plainly involved a paradigm time clause (a time by when loading notice was to be given); performance of that obligation by buyers was a condition precedent to the ability of sellers to perform their obligation (nominating a loading port). The terms were thus inter-dependent. The context, as explained in Spar Shipping (ibid) “carefully choreographed the sequence of actions required”
“(i) The classification of a term as a warranty, condition or innominate term is a matter of contractual construction. (ii) The courts should not be too ready to interpret contractual clauses as conditions and unless the contract makes clear that a particular stipulation is intended to be a condition or a warranty, it should be treated as an innominate term. (iii) Where breach of a term may have a range of consequences from the trivial to the grave, that militates against that term being a condition since otherwise it would lead to results by which trivial breaches would have disproportionate consequences.”
“The Refund Guarantee obligation should be construed as a condition in accordance with the usual practice of, or preference for, treating time stipulations (other than those relating to payment) as conditions in mercantile (or commercial) contracts.”
“29. Regrettably, whilst accepting that the SBCs were mercantile contracts, the Tribunal approached the construction of the [Refund Guarantee] obligation from the wrong starting point and with the wrong mindset or emphasis, with a positive disinclination to construe it as a condition (“the starting point is that a term will not be treated as a condition unless its wording or context point otherwise” [217]), and on the incorrect basis that Spar Shipping “makes clear that there is no presumption that a clause fixing time for performance in a mercantile contract should be treated as a condition” [219]. It is, therefore, hardly surprising that the Tribunal came to the wrong conclusion. Given that the RG obligation comprised an important term in mercantile (or commercial) contracts, the Tribunal should have approached its construction, not with some disinclination to conclude that it was a condition, but rather with a preference, indeed a strong preference, for doing so, at least starting with an assumption that, in the interests of certainty, this clearly expressed stipulation as to time is to be strictly construed. 30. As explained in later sections of this skeleton, there are no countervailing factors to count against, still less outweigh, what should be a clear preference for construing the RG obligation as a condition in the present context; further, there are powerful additional factors that support andreinforce a conclusion that the RG obligation should be construed as a condition.”
“Should the purchaser fail to complete the said purchase in accordance with this agreement any deposit paid by the purchaser shall be forfeited to the vendors who may rescind the sale and resell the property either by public auction or private contract subject to such stipulations as they may think fit.”
“The fact that the Claimants were given an option to extend the period as they wished “from time to time” suggested that the parties did not treat the time limit as entitling the Claimants to terminate i.e. at common law. regardless of the seriousness of the breach.”
“As security for the refund of Instalments prior to delivery of the Vessel, the Builder shall (as a condition of the Buyer’s obligation to make payment of any of the Instalments of the Contract Price) furnish the buyer with the letter of guarantee covering the amount of the instalments and any interest thereon …”
“236. We do not accept that the provision of the Refund Guarantees was a condition precedent to the Respondents’ obligation to construct the Vessels under the SBCs. The comments in Teekay that were said to support this proposition were certainly obiter. We accept the [Yard’s] argument that these comments addressed a hypothetical and ambitious submission on the part of a yard that had been financially unstable at the time of contracting and which then denied that it was under an enforceable obligation to provide a refund guarantee. We distinguish them as unlikely to reflect what the parties to the SBCs would have expected, especially where at the time of contracting there was no question as to the [Yard’s] solvency and ability to start work on construction even if the first instalment was not paid. 237. In addition, the wording of the SBCs did not support the [Buyers’] case on this (e.g. provisions that the drydock was selected at the outset). In Bunge v Tradax the ability of the seller to fulfil its obligations was found to be totally dependent on the punctual performance of the buyer. The obligations here were not interdependent and we distinguish Bunge v Tradax on this basis. The Respondents would still be under a contractual obligation to build the Vessels even if they failed to provide the Refund Guarantees. 238. It was common ground that the provision of a Refund Guarantee by the Respondents was a necessary pre-condition to the Claimants’ obligations to make payment of instalments. In reality no instalments would be paid otherwise. We also accept that where no refund guarantee or instalments are paid then the commercial practical reality is that delay in progress is likely to arise. However, the SBCs had made express provisions with agreed timescales addressing delay in progress, delay in providing the Refund Guarantee and also delay in delivery (including liquidated damages and a range of rights of cancellation). Therefore while the absence of a refund guarantee and instalments would, as a matter of commercial reality, impede practical progress it was incorrect to suggest that the SBC would fall into unworkable disarray unless the obligation was construed as a condition.”
“It was more significant that the parties had bargained in clear terms to allow the [Buyers] to cancel the SBCs after 120 days under Article X if refund guarantees had not been provided. It would have been more favourable to the [Buyers] if, at that stage, they could also claim damages for repudiatory breach with certainty but there was no clear basis to suggest this had been agreed, and Article X(3) suggested otherwise.”
“The Claimants argued that it would be uncommercial for them to have to maintain finance for the first (and subsequent) instalments on a longer term in case the Respondents produced a Refund Guarantee. However, there was no clear evidential weight for this argument.”
“However, under Article X(3) the parties to the SBCs (unlike the parties in Gearbulk) had expressly agreed that the consequences of a contractual termination would be different to a common law repudiation. Article X(3) means that the consequences of a contractual termination triggered under Article X(A)(f) would be a discharge comparable to rescission ab initio. This would be different from, and inconsistent with, the consequences of a repudiation (or renunciation) at common law including the recovery of secondary liability for damages at common law. This suggested that the parties had not intended to treat the trigger for contractual termination as deeming a repudiation at common law.”
“…the decision in The Hansa Murcia suggested that a breach in provision of refund guarantees would not go to the root of the contract unless the buyers are exposed to a real practical risk of losing the instalments to be secured.”
“We did not consider that an appropriate analogy could be drawn from a buyer’s obligation to put up a letter of credit in the case of an international sale of goods, since this reflects payment for the goods where there is necessarily interdependence with the seller’s delivery obligations. As explained below, we were not satisfied that there was interdependence between the Claimants’ right to a refund guarantee to secure the return of instalments when paid, and the Respondents’ obligation to build the vessel. Spar Shipping makes clear that there is no presumption that a clause fixing time for performance in a mercantile contract should be treated as a condition.”
“This is another case concerned with the modern practice whereby a buyer agrees to provide a banker's confirmed credit in favour of the seller. This credit is an irrevocable promise by a banker to pay money to the seller in return for the shipping documents. One reason for this practice is because the seller wishes to be assured in advance not only that the buyer is in earnest but also that he, the seller, will in fact obtain his money when he delivers the goods. Another reason is because the seller often has expenses to pay in connexion with the goods and he wishes to use the credit so as to pay those expenses. He may, for instance, be himself a merchant, who is buying the goods from the growers or the manufacturers, and has to pay for them before he can obtain delivery, and his own bank will only grant him facilities for the purpose if he has the backing of a letter of credit. The ability of the seller to carry out the transaction is, therefore, dependent on the buyer providing the letter of credit, and for this reason the seller stipulates that the credit should be provided at a specified time well in advance of the time for delivery of the goods.”
“39. By the very nature of the July and August COAs, which each provided for four shipments a year for periods of five and a quarter and six years respectively, with a total value in excess of US$300 million , and the limited financial standing of Limbungan, a provision for a guarantee in such agreements must be considered so fundamental to them that the obligation to provide the guarantee amounts to a condition precedent to performance by Classic. This is a similar situation to that set out in Trans Trust SPRL v Danubian Trading Co Ltd[1952] 1 Lloyd’s Rep 348 where Denning LJ found that the provision of a bankers’ confirmed letter of credit was an essential term of the contract of sale and had to be seen as a condition precedent to the obligation of the seller to deliver the goods. There, if the buyer failed to provide the credit, the seller could treat himself as discharged from any further performance of the contract and could sue the buyer for damages for not providing the credit.”