(7) remedies (Gill & Duffus v Berger (parties ( S’s position…
Gill & Duffus v Berger
Key facts in chronology
- 22 December 1976: Berger (S) agrees to sell to Gill & Duffus (B) ‘Argentine bolita beans—1974 crop’ cif Le Havre
21 March 1977: 445 (of 500) tonnes discharged at Le Havre; sails to Rotterdam with remainder
22 March 1977: S presents documents; B rejects and does not make payment
30 March 1977: S re-presents documents; again B rejects
1 April 1977: S treats contract at an end
S believe entitled to claim
- S’s position (innocent)
S entitled to terminate contract due to B’s wrongful repudiation (i.e. refusal to accept documents and make payment)
S claims damages for B’s repudiation of contract
B disputed. Had not been served w certificate that goods were in good condition. Counter0sued and said it was a case of non-delivery
- B’s position
S did not provide the relevant certificate (‘GSC’) confirming the goods discharged at Le Havre conformed to the sample seen prior to contract
B claims damages for non-delivery of goods
History of proceedings
Held: S was right. B did breach k.
- Started off in Arbitration proceedings: S successful
GAFTA’s Board of Appeal: B’s appeal upheld and decision reversed
QBD: S appeals and is successful in part
CA: Donaldson MR and Slade LJ find in favour of B; Goff LJ finds in favour of S
HL (Lord Diplock with whom others agreed): appeal by S allowed; B liable to pay the contract price in relation to 500 tonnes of beans
Legal question: Was B entitled to reject the documents without GSC certificate? (if it wasn't provided)
Putting it another way: was S obliged to provide the certificate as a condition of payment?
S tenders BOL, insurance etc. it doesn’t include S certificate. S had not been in breach, is not part of S obligations
Depends on how one interprets the obligations of the seller under a CIF contract
Answer: S not obliged to provide certificate with CIF documents
S not in breach and B has no right to terminate for breach
What are the key obligations under cif k?
If there is a conforming tender, B must accept it
- Central to Gill & Duffus is the legal position that, under a CIF contract, the buyer has twin rights of rejection in relation to …
Documents, and then - if docs don't conform, B can reject them
Those rights are ‘separate and successive’: Lord Diplock at 395
See Treitel  LMCLQ 565, it doesn't reflect pragmatic reality .. Pay now argue later
Note criticism in Goode on Commercial Law (2016) at 34.39–41
Lord Diplock at 389:
[The kind of doc the B were claiming S had to give is incapable of what S is expected to tender. Arrangements what B were arguing for are just not what is expected in cif]
- ‘My Lords, a certificate by GSC as to the quality of the goods at port of discharge under the certification clause in the contract is not, and is indeed incapable of being, included among shipping documents which a seller is required to tender to his buyer in return for payment of the price under a contract of sale in ordinary c.i.f. terms.’
[Property revests in the S. in CIF contract and pays against them, property is passed.
- ‘ … when a buyer under a c.i.f. contract accepts shipping documents which transfer the property in the goods to him, the property in the goods that he obtains is subject to the condition subsequent that it will revest in the seller if upon examination of the goods themselves upon arrival the buyer finds them to be not in accordance with the contract in some respect which would entitle him to reject them, and he does in fact reject them.’
If goods are not of satisfactory quality, B can reject and it revests in the seller]
[If there is a conforming tender of document to the B, and if its all in order, B mustaccept n make payment. Doc tender and ability to reject/accept is separate from things to do w actual goods themselves]
- ‘ … it is, in my view, a legal characteristic of a c.i.f. contract so well established in English law as to be beyond the realm of controversy that the refusal by the buyer under such a contract to pay to the seller … the purchase price upon presentation … of shipping documents which on their face conform to those called for by the contract, constitutes a fundamental breach of contract, which the seller is entitled to elect to treat as rescinding the contract and relieving him of any obligation to continue to perform any of his own primary obligations under it’.
Diplock explains there r exceptions to this - wrong types of goods hav been shipped (total failure of consideration). fraudLord Diplock at 390:
‘Your Lordships in the instant case are thus not dealing with the converse of the example of conduct that was the subject of Lord Black-burn's well-known aphorism in Bowes v. Shand (1877) 2 App.Cas. 455 , 480: “if you contract to sell peas, you cannot oblige a party to take beans.” Parenthetically, I may add that in the case of a c.i.f. contract it is difficult to see how, without fraud upon his part, the seller could ship beans but nevertheless be in a position to tender shipping documents conforming to those called for by a c.i.f. contract to sell peas; and nothing that I say is intended to cover cases of fraud.’
Therefore two exceptions to principle that B must accept and pay against apparently conforming documents
(1) Fraud by S
E.g. S obtains and tenders, with the intention to mislead, a BoL with an incorrect shipping date [buyer shows S is fraudulent) misrep: lord Herschell: what is a fraudulent misrepresentation ? Must prove it cannot just alledge it
(2) Where goods are fundamentally different from contract description
E.g. the contract is for beans, but the goods are in actual fact peas
Could be fraud if S was also the party who shipped the goods; certainly a ‘total failure of consideration’
What if the documents appear to conform but in fact are not genuine (e.g. false shipping date)? Because S knows if its real info, B will reject. In Gill & Duffus Lord Diplock speaks of B paying against documents that conform ‘on their face’
- Bridge: the point was ‘unreasoned’ and ‘unnecessary’
No tender of false documents in Gill & Duffus - the issue was cert confirming quality of goods and whether it was part of obligations? Unreasoned because if genuine date of shipments is put on documents, why should they not be able to reject document that appears to confirm but it does not. Bridge: reasoning goes against diplock's,
Genuine document that reveals a breach can be rejected; why not one that conceals the truth about the breach?
Case law indicates S has a duty to tender documents that are genuine: James Finlay  1 KB 400, 408
See Bridge chapter in Sarah Worthington (ed), Commercial Law and Commercial Practice (Hart 2003)
- CIF contracts can raise particular issues with regards to remedies for breach
- In general two main remedies for any breach of a contractual obligation
(1) Termination of the contract and/or (2) damages
- Two key questions relevant where there is a breach
(1) Can innocent party terminate the contract for breach? (2) Measure of damages available?
Involve tender of documents as separate obligation from the goods.
Recall: k law (sem 5): 2 key remedies: termination of k and damages
Not always obvious when k can be terminated on breach. Big qn of ct: who is the first person to validly exercise right to terminate case? (see yam seng case - good faith).
Damages qn: how do we measure dges? If innocent party, what can u claim?
CIF contract: separate and successive obligations (and rights of rejection) in relation to the documents and then the goods
- No duty on S to deliver goods to B; only a duty to ship goods that conform to the contract -> (mandarine saccharine last week. Ship sunk - Can claim under insurance policy)
- S has duty to tender documents representing goods
- B may have to accept conforming documents and pay against them, even if it knows of a physical breach in relation to the goods