Procter & Gamble Phillipine Manufacturing Corp v Becher
(CA) Court of Appeal
2 February 1988
[1988] 2 Lloyd's Rep. 21
Subject: Sale of goods
Keywords: Bills of lading; Breach of contract; CIF contracts; Measure of damages; Mistake
Catchphrases: C.i.f. contract; misdated bill of lading tendered by sellers; goods shipped within contract
period; acceptance of documents by buyers; measure of damages
Abstract: Where a seller in breach of a warranty in a c.i.f. contract tendered a mis-dated bill of lading in
respect of goods shipped within the contract period, the buyer was not entitled to damages calculated on
the basis that he had lost the right to reject the goods. S sold 500 tonnes of copra expeller cake c.i.f.
Rotterdam to B on a GAFTA Form 100. The contract originally provided for shipment before the end of
January 1984. By agreement, the period for shipment was extended to the end of February 1984 in
consideration of an allowance of 2 per cent of the purchase price. The bill of lading was dated January 31,
1984. The goods were in fact shipped between February 6 and 10, 1984. B paid S in April 1984. Upon
arrival of the goods in Rotterdam in July 1984, B discovered that the goods had not been shipped on
January 31 as shown on the bill of lading. B sold the goods realising only 57 per cent of the contract price.
B claimed the difference from S. B's claim was rejected in arbitration proceedings. The GAFTA Board of
Appeal allowed B's appeal and awarded damages in full. S appealed successfully to the Commercial
Court.
Summary: Held, dismissing B's appeal, that the goods were shipped within the contract period so that B
was not entitled to reject the goods. In presenting a mis-dated bill of lading, S was in breach of contract.
Having accepted the documents including the bill of lading, B had lost its right to reject the documents. In
the circumstances B was obliged to treat S's breach as a breach of warranty and claim damages. B was not
entitled to damages representing the difference between the market value of the goods and the contract
price on account of the fact that B was not by reason of the mis- dated bill of lading deprived of any right
to reject the goods. B had not demonstrated any loss arising from the fact that the bill of lading was misdated. B's only entitlement was to a reduction in the purchase price in accordance with the agreement
extending the time for shipment (Taylor & Son v Bank of Athens (1922) 10 Ll. L. Rep. 88 Finlay (James)
& Co v N.V. Kwik Hoo Tong Handel Maatschappij [1929] 1 K.B. 400, Kleinjan & Holst N.V. Rotterdam
v Bremer Handelsgesellschaft mbH Hamburg [1972] 2 Lloyd's Rep. 11, Vorgas Pena v Peter Cremer
GmbH [1987] 2 Lloyd's Rep. 46 considered).
Legislation Cited
Arbitration Act 1979 s. 1(7)
Sale of Goods Act 1979 s. 53
Sale of Goods Act 1979 s. 53(1)
Sale of Goods Act 1979 s. 53(2)
History of the Case
Direct History
Procter & Gamble Phillipine Manufacturing Corp v Becher, [1988] 1 Lloyd's Rep. 88 (QBD (Comm Ct))
Affirmed by
-->Procter & Gamble Phillipine Manufacturing Corp v Becher, [1988] 2 Lloyd's Rep. 21; [1988] F.T.L.R.
450 (CA)
Secondary Sources
Bills of lading; Breach of contract; Measure of damages; Mistake. Backdated bills of lading. J.I.B.L. 1989,
4(1), 40-42
Bills of lading; Breach of contract; Measure of damages; Mistake. Bill of lading falsely dated but within
shipping time. J.B.L. 1988, Nov, 501-502
Carriage of goods; Contract terms; Documents of title. Documents and cif contracts. Amicus Curiae 1998,
3(Jan), 4-6
Bills of lading; Breach of contract; Measure of damages; Mistake. Damages for breach of a c.i.f. contract.
L.M.C.L.Q. 1988, 4(Nov), 457-465
Bills of lading; Breach of contract; Measure of damages; Mistake. Backdated bills of lading. O.G.L.T.R.
1987/88, 6(11), 336-339
END OF DOCUMENT
Copr. (c) West 2001 No Claim to Orig. Govt. Works
FOR EDUCATIONAL USE ONLY
*21 Procter & Gamble Philippine Manufacturing Corporation v. Kurt A. Becher
G.M.B.H. & Co. K.G.
Court of Appeal
CA
Dec. 2, 3 and 7, 1987; Feb. 2, 1988
Before Lord Justice Kerr Lord Justice Croom-Johnson andLord Justice Nicholls
Sale of goods (c.i.f.) - Rejection - Bills of lading incorrectly dated - Payment to be effected under all
contractual reserves - Buyers paid 98 per cent. of contract price - Whether buyers lost right to reject Whether incorrectly dated bills of lading a breach of condition - Whether buyers entitled to repayment of
purchase price.
The plaintiffs were sellers under two contracts of which 83/703 was one, both dated Oct. 10, 1983, for the
sale of copra expeller cake in bulk c.i.f. Rotterdam on GAFTA 100. Clause 6 of the contract provided
inter alia:
Period of shipment . . . as per bill(s) of lading dated or to be dated; the bills of lading to be dated when the
goods are actually on board. Date of bill(s) shall be accepted as proof of date of shipment in the absence
of evidence to the contrary.
The last shipment date was extended by agreement to Feb. 29, 1984.
On Jan. 30, 1984 the vessel commenced loading a considerable quantity of copra expeller cake in bulk.
The bill of lading tendered by the sellers was dated Jan. 31, 1984.
When shipping documents were presented to the buyers in Germany doubts were raised about the true
shipping date. On Apr. 10, 1984 the buyers sent a telex message to the plaintiff sellers in which they
stated that payment would only be effected under all contractual reserves. The sellers replied that the
goods had been shipped within the contractual period. The buyers then paid 98 per cent. of the price
which under the terms of the contract was due in exchange for and on presentation of shipping documents.
After the arrival of the vessel in Rotterdam the buyers sent the plaintiff sellers a telex message in which
they asserted that the goods had been loaded on Feb. 6 and 10 and they claimed repayment of the
purchase price and expressed an intention to reject the goods when they were discharged.
In the event the buyers sold the goods shipped under the contract at reduced prices and tendered to the
sellers debit notes in sums representing the shortfall between the price paid and the prices realized.
The dispute was referred to arbitration. The arbitrators held that the buyers had lost their right to reject the
goods by taking up the shipping documents and paying for them without reservation or protest.
The buyers appealed and the Board of Appeal of GAFTA held that the buyers had reserved their right to
reject before making payment and that the sellers had committed a breach of condition in that the bills of
lading were incorrectly dated.
The sellers appealed the question of law being whether the breach was of a condition or of an innominate
term. The sellers applied for the award to be set aside or varied.
Held, by Q.B. (Com. Ct.) (LEGGATT, J.), that
(1) the plaintiffs' right under cl. 11 to payment under the contract accrued when the shipping documents
identified by cl. 14 were presented to them; the shipping documents presented by the buyers complied on
their face with the requirements of contract and in the absence of fraud or of sufficient evidence that the
bills were not correctly dated, the sellers were entitled to payment; the buyers accepted the documents and
made payment under all contractual reserves; it was then too late to reject the documents and the buyers
had no right to reject the goods because they were shipped within the shipment period and conformed
with the contract;
(2) the measure of damages was the sum required to put the buyers in as good a position as they would
have been in if the bill of lading had not been misdated; the defendant buyers might have rejected the bill
of lading on the ground that it was wrongly dated but the sellers would still have been able to re-present it
and the fact that it was wrongly dated was not shown to have caused the buyers any damage; it was true
that there was no express finding that the goods were shipped on Feb. 6 and 10, 1984 but the sellers did
not contradict these dates; they contented themselves with saying that they had complied with their
obligations under the contract;
(3) in the circumstances it was proper to infer that the goods were shipped within the shipment period and
that they were shipped probably on Feb. 10, 1984 so that the contractual allowance of 3 1/2 per cent.
became payable; beyond that sum nothing was recoverable and the appeal would be allowed and the
award varied.
The buyers appealed.
Held, by C.A. (KERR, CROOM-JOHNSONand NICHOLLS, L.JJ.), that
(1) if cl. 6 had been duly performed by the sellers the buyers would have had no right to reject the
shipping documents when tendered; the buyers did not lose their right to reject the documents and the
goods by reason of the breach of cl. 6; what they lost was the opportunity to exercise one of the remedies
i.e. rejection afforded by the law in respect of the breach and they lost that opportunity because they did
not know of the existence of the breach at the time so that their remedy was confined to recovering the
actual financial loss if any suffered by them by reason of the breach (see p. 28, cols. 1 and 2; p. 32, col.
1);
(2) the buyers had suffered no financial loss;*22 they paid the contract price and they received the goods
which conformed to the contract in all respects including as to the date of shipment; the buyers were
entitled to no damages and the appeal would be dismissed (see p. 29, col. 1; p. 30, col. 2; p. 33, cols. 1
and 2).
-James Finlay & Co. Ltd. v. M.V. Kwik Hoo Tong Handel Maatschappij, (1928) 32 Ll.L.Rep. 245,
considered.
The following cases were referred to in the judgment:
Bowes v. Shand, (1877) 2 App. Cas. 455;
Doyle v. Olby (Ironmongers) Ltd., (C.A.) [1969] 2 Q.B. 158;
Finlay (James) & Co. Ltd. v. M.V. Kwik Hoo Tong Handel Maatschappij, (C.A.) (1928) 32 Ll.L.Rep.
245; [1929] 1 K.B. 400; (1928) 31 Ll.L.Rep. 220; [1928] 2 K.B. 604;
Kastellon, The [1978] 2 Lloyd's Rep. 203;
Kleinjan & Holst N.V. Rotterdam v. Bremer Handelsgesellschaft G.M.B.H. Hamburg, [1972] 2 Lloyd's
Rep. 11;
Kwei Tek Chao v. British Traders and Shippers Ltd., [1954] 1 Lloyd's Rep. 16; [1954] 2 K.B. 54;
Panchaud Freres S.A. v. Etablissements General Grain Co . [1970] 1 Lloyd's Rep. 53;
Saunders v. Edwards, (C.A.) [1987] 1 W.L.R. 1116;
Taylor & Sons Ltd. v. Bank of Athens, (1922) 10 Ll.L.Rep. 88; (1922) Com. Cas. 142;
Vargas Pena Apezteguia Y Cia. SAIC v. Peter Cremer G.M.B.H., [1987] 1 Lloyd's Rep. 394.
This was an appeal by the buyers, Kurt A. Becher G.m.b.H., from the decision of Mr. Justice Leggatt
([1988] 1 Lloyd's Rep. 88) allowing the appeal by the sellers, Procter & Gamble Philippine
Manufacturing Corporation, reversing the arbitrators' award of damages in favour of the buyers made on
the basis that the sellers were in breach in presenting an incorrectly dated bill of lading.
Representation
Mr. Christopher Russell (instructed by Messrs. Clyde & Co.) for the buyers; Mr. Graham Dunning
(instructed by Messrs. Ingledew Botterell Roche & Pybus of Newcastle) for the sellers.
The further facts are stated in the judgment of Lord Justice Kerr.
Judgment was reserved.
Tuesday, Feb. 2, 1988
JUDGMENT
Lord Justice KERR:
Many commercial cases turn on the dates of bills of lading. Normally they have three common features.
The date shown is the last day of a calendar month. This is also the last day of the contractual shipment
period. But the cargo was in fact only loaded a few days later, during the following month. Presumably
some cargoes are really loaded in full on the last day of a month and covered by a correctly dated bill of
lading. But one never hears of such cases in the Courts. When we see a bill of lading dated on the last day
of a month we know that it was ante-dated to serve a clear-cut, though dishonest, commercial purpose: the
pretence that the goods were in fact put on board before the expiry of the contractual shipment period.
The reason lies in the decision of the House of Lords in Bowes v. Shand, (1877) App. Cas. 455 (at pp.
468, 475 and 480) that the shipment period stipulated in a c.i.f. contract forms part of the description of
the goods. It follows that late shipment involves a breach of condition which gives rise to a right of
rejection.
In times of falling prices this rule, and its attempted avoidance by the presentation of misdated bills of
lading, have given rise to innumerable disputes against the background of commodity dealings in 'futures'.
There is usually no difference whatever between goods loaded at the end of January instead of the
beginning of February. The goods are the same. But this is not a trade in goods but in contracts for the
shipment of goods. A January contract may be far more valuable than one for shipment in February. More
important, on a plunging market the inability to present a bill of lading evidencing shipment within the
contract period can have very serious financial consequences; the difference between the right to demand
payment of the contract price on the one hand, and having to deal with 'spot' goods of far lesser value,
possibly involving considerable expenses in their disposal, on the other hand.
The misdated bill of lading in the present case probably had its origin in commercial considerations of
this nature. It would be unrealistic to attribute a misdated bill of lading at the end of a calendar month to a
purely clerical error. But there is nothing to show that in this case the plaintiff sellers had any part in the
misdating, or even knowledge of it. The originators may have been anywhere up a string of contracts
before this bill of lading reached these sellers. This is not unusual, since proof of complicity on the part of
the sellers under the contract in question is not an essential ingredient of the buyers'*23 rights. The cases
show that if the bill of lading against which payment is made had been wrongly dated within the contract
period, for whatever reason, when the goods which it purported to cover had in fact only been shipped
after its expiry, then the buyers' right of rejection based on Bowes v. Shand remains prima facie
unaffected. The unprecedented feature of the present case, however, is that although the bill of lading was
falsely ante-dated, the shipment of the goods, albeit in the early part of the following month, still took
place within the contract period agreed between these particular sellers and buyers. This raises a novel
problem and explains why Mr. Justice Leggatt granted a certificate under s. 1(7) of the Arbitration Act,
1979, that the case involved a question of general public importance fit to be considered by the Court of
Appeal (See[1988] 1 Lloyd's Rep. 88). Given the fact that the buyers paid the contract price against
presentation of a bill of lading which had been falsely dated, as they would not have done if they had
known this fact, what is the measure of damages to which they are entitled when the goods purportedly
covered by this bill of lading were only shipped later, but still within the contract period?
The facts were relatively simple, but the arguments raised at different stages of this dispute were
somewhat confused. In October, 1983, Procter & Gamble ('the sellers') concluded two contracts (Nos.
83/701 and 83/703) with Kurt A. Becher ('the buyers') for 500 tonnes each of Philippine copra expeller
cake c.i.f. Rotterdam/Hamburg at a price of U.S.$199.50 per tonne. Both contracts incorporated GAFTA
100 and provided for arbitration in London. Payment was to be net cash against documents of 98 per cent.
of invoice value on first presentation in Bremen. The original shipment periods were extended so as to
include January, 1984, in both cases. The relevant contract (No. 83/703) was then further extended to the
end of February, 1984, in consideration of a price allowance. Clause 9 of GAFTA 100 provides for an
extension of shipment at the sellers' option for up to eight days subject to a graduated deduction from the
contract price rising to 1 1/2 per cent. for eight days. In this case the parties further agreed that for
shipment from Feb. 9 to 29, 1984 there should be an additional allowance of 2 per cent.
Before going on with the facts, I must refer to three further clauses of GAFTA 100 on which the buyers
rely, although in my view they do not affect the outcome.
Clause 6, headed 'Period of shipment' provided:
As per bill(s) of lading dated or to be dated . . . the bill(s) of lading to be dated when the goods are
actually on board. Date of the bill(s) of lading shall be accepted as proof of date of shipment in the
absence of evidence to the contrary . . .
Clause 10, headed 'Appropriation', provided that in relation to cases such as the present, notice of
appropriation had to be given within 14 days from the date of the bill(s) of lading, stating the name of the
vessel and the date or presumed date of the bill of lading; but the latter was for information only and not
binding.
Clause 27, headed 'Default', provided as follows, so far as material:
In default of fulfilment of contract by either party, the other, at their discretion, shall, after giving
notice . . . have the right to sell or purchase as the case may be, against the defaulter and the defaulter
shall make good the loss, if any, on such purchase or sale on demand . . .
In the event of default by either party entitling the other to damages, such damages shall be assessed upon
the actual or estimated value of the goods on the date of default, to be fixed by arbitration unless mutually
agreed, and nothing contained in or implied under this contract shall entitle the defaulted party to recover
any damages in respect of loss, or loss of profit upon, any sub-contracts made by themselves or others
unless the Arbitrator(s) or Board of Appeal, having regard to special circumstances, shall in his/their sole
and absolute discretion award such damages . . .
I then return to the facts. In relation to both contracts notices of appropriation were passed in accordance
with cl. 10 showing shipment from the Philippines on Manila on Jan. 31, 1984, and in both cases bills of
lading dated Jan. 31, 1984 were thereafter presented. Manila had commenced loading 4000 tonnes of
copra expeller cake in bulk on Jan. 30, 1984 and completed loading on Feb. 11. In the subsequent
arbitration under both contracts it was found that the goods covered by these bills of lading had been
loaded on Feb. 6 and 10, 1984. Both dates were out of time for contract No. 83/701, but in time for
contract No. 83/703 with which this appeal is concerned. However, since the sellers were unable to
establish whether the goods covered by the notice of appropriation and bill of lading presented under the
latter contract had been loaded on Feb. 6 or 10, they accepted below and before us that the later date was
to be assumed against them, with the result*24 that they had to suffer a deduction of 3 1/2 per cent. from
the contract price in any event.
It is only necessary to mention some of the salient points of subsequent events, which appear to have
related equally to both contracts. I therefore do not distinguish between them, but for present purposes
they only fall to be considered in relation to No. 83/703, in which the shipment period had been extended
to include February, 1984.
In addition to the bills of lading dated Jan. 31 the documents presented to the buyers included weight
certificates and survey reports. These had not been contractually required, but they suggested that both
parcels had only been shipped in February. On Apr. 10, 1984 the buyers telexed the sellers:
As we are seriously concerned whether goods have been actually shipped in contractual period, payment
will only be effected under all contractual reserves.
The sellers replied:
Our position is that we shipped within the contractual period and therefore have to demand payment.
The buyers thereupon paid 98 per cent. of the price, presumably against invoices for 100 per cent. in both
cases. Meanwhile Manila appears to have been delayed due to financial problems on the part of her
owners. She did not sail from the Philippines until May 28 and arrived in Rotterdam on July 8, 1984. The
cargo interests - including the buyers in the present case - had to advance funds to finance her berthing
and the discharge of her cargo. The buyers then telexed the sellers:
On arrival of the vessel it has been ascertained that the above goods were loaded . . . on February 10 1984
only. Needless to say this is obviously distinct from the date(s) of the captioned bills of lading and does
constitute a breach of contract . . .
They claimed repayment of the purchase price and informed the sellers that . . . the goods are presently not yet discharged but will be rejected by us. There was no response from the
sellers. The buyers then suggested that the goods should be sold without prejudice . . . on basis c.i.f. Rotterdam ex m.v 'Manila' in order to avoid any further costs and expenses.
The sellers ultimately responded by claiming that buyers . . . have been aware of all the circumstances surrounding shipment.
There is no evidence explaining this cryptic remark, helpfully followed by the statement:
. . . It is of course your prerogative as owner of the goods to sell the same or take steps to avoid costs and
expenses, but we deny any liability in this connection.
There the relevant exchanges rested.
After the discharge of the goods they were sold at prices of $113 to $115 per tonne, i.e. realizing only
about 57 per cent. of the contract price. Together with all the expenses of procuring the berthing of the
vessel and the discharge and sale of the goods the buyers' claim under the contract 83/703 was about
$41,000. But the precise amount is not clear since both contracts were arbitrated together. We have not
been concerned with any dispute about figures, and I have already referred to the sellers' agreement that
the buyers are in any event entitled to an allowance of 3 1/2 per cent. under this contract. The issue is
solely one of principle: to what measure of damages, if any, are the buyers entitled under contract 83/703?
The damages awarded under contract 83/701 - where the goods were shipped outside the contractual
period - followed the settled state of the authorities mentioned below, and the ultimate arbitration award
under that contract was not appealed.
Before coming to the somewhat confused history of the subsequent proceedings it is necessary to bear in
mind the main authorities in this field. These were no doubt present in the minds of those involved in the
GAFTA arbitrations, but the issue of principle only emerged subsequently.
I have already mentioned that in Bowes v. Shand (sup.) the House of Lords held that a stipulation in a
c.i.f. contract that the goods be shipped during a particular period forms part of the description of the
goods and is accordingly in the nature of a condition. In the present context there then followed a line of
three important cases in which the measure of damages for breach of this condition was considered
against the background of bills of lading which had been wrongly ante-dated within the contract period.
In Taylor & Sons Ltd. v. Bank of Athens, (1922) 10 Ll.L.Rep. 88; (1922) 27 Com. Cas. 142 the buyers
did not rely on the misdating of the bill of lading as in itself constituting a breach. Having paid against
documents - including a wrongly ante-dated bill of lading - without being aware of any breach, the buyers
only claimed damages for late shipment when they subsequently discovered that the goods had been
shipped about six days out of time,*25 during the following month. The arbitrators held that the buyers
were only entitled to nominal damages, since the late shipment made no difference to the value of the
goods. This was upheld by Mr. Justice McCardie on the ground that, having accepted the documents and
the goods, the buyers were no longer entitled to treat the breach as a breach of condition, but only as a
breach of warranty. The Judge applied the provisions which are now to be found in s. 53 of the Sale of
Goods Act 1979:
(1) Where there is a breach of warranty by the seller, or where the buyer elects (or is compelled) to treat
any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only
of such breach of warranty entitled to reject the goods; but he may . . . (b) maintain an action against the seller for damages for the breach of warranty.
(2) The measure of damages for breach of warranty is the estimated loss directly and naturally resulting,
in the ordinary course of events, from the breach of warranty.
In the subsequent cases, however, the buyers relied upon the presentation of a misdated bill of lading as a
breach which was separate from, and additional to, the breach of shipping the goods out of time. In that
situation, it was held in James Finlay & Co. Ltd. v. M.V. Kwik Hoo Tong Handel, Maatschappij (1928)
31 Ll.L.Rep. 220; [1928] 2 K.B. 604 by Mr. Justice Wright and affirmed by Lords Justices Scrutton,
Greer and Sankey in this Court in (1928) 32 Ll.L.Rep. 245; [1929] 1 K.B. 400that the buyers were
entitled to substantial damages based - broadly speaking - on the difference between the contract price
and the market price of the goods realized after their arrival. Since James Finlay is the leading and
unchallenged case in this field, and since the issue is whether or not its reasoning applies equally in the
present case, it is necessary to cite some of the important passages from the judgments.
Mr. Justice Wright distinguished Taylor v. Bank of Athens(sup.) on the ground that the point concerning
the misdated bill of lading had not been taken and said at pp. 225 et seq and 611 et seq:
. . . In any case the buyer is, I think, entitled to rely on the accuracy of the bill of lading date, and to
regard the seller as impliedly guaranteeing its accuracy, unless there are express terms of the contract to
the contrary . . . . The buyer under such a contract as those in question has the right to reject the tender of
documents and refuse to pay the cash or accept the draft, if the shipment is not made in the contract
month. The effect of misdating the bill of lading is to deprive them of that right by rendering its exercise
impossible, if he relies, as in practice he generally must rely, and in law is entitled to rely, on the accuracy
of the bill of lading date. He takes delivery of the goods and pays for them, because on the face of the bill
of lading he is bound to do so under the contract, whereas if the bill of lading showed because it was a
true document that the sellers could not enforce the contract, because the shipment was out of date, the
buyer could and would refuse the tender and could obtain the same goods at their market price, which I
assume to be lower than the contract price, that is, at a great saving to himself. . . . In such a case the
difference between the market price and the contract price, the latter being higher than the former,
represents, in my judgment, the measure of damages in favour of the buyer for breach by the seller of his
obligation to deliver a correct bill of lading. The obligation is in its nature, I think, a condition, and if the
breach were known in time the buyer could reject the documents; but from its very nature the breach is
often only ascertainable when it is too late to reject the documents or treat the contract as repudiated, and
no remedy is possible to the buyer except a claim for damages, as on the footing of a breach of
warranty . . .
He then referred to s. 53 of the Sale of Goods Act and went on:
In the present case it seems to me clear that the parties must have contemplated that the buyers would, by
taking up the documents and accepting the goods on the faith that they were bound to do so, pay the
higher contract price instead of the lower market price, and lose their right to reject and suffer damage
accordingly.
That decision and reasoning were unanimously affirmed on appeal to this Court. Referring to the
judgment of Mr. Justice Wright, Lord Justice Scrutton said at pp. 249 and 409:
. . . As he said, if the bill of lading had shown that the shipment was in October, the tender would have
been rejected by Finlay & Co., who would have kept in their pocket the price they paid under the contract,
and the loss by the fall in the market would properly have fallen on the Dutch firm, because of their
breach of contract in presenting an incorrect bill of lading. I agree with that view.
*26 Lord Justice Greer agreed, and said at pp. 252 and 412:
. . . I am not at present prepared to say what I would hold if the question were whether a buyer is entitled
to reject a cargo of goods where the bill of lading mentioned, say, the 5th of the month whereas in fact the
goods were loaded on the 6th; but I am clearly of opinion that a buyer would be entitled to reject the
documents under a contract of this kind which called for September goods and the bill of lading stated,
contrary to the fact, that the goods were shipped in September. That is as far as it is necessary to go in this
case . . .
. . . What has to be considered is the plaintiffs' position as regards money if the particular term of the
agreement had been performed, and they are to be put, so far as money is concerned, in that same position
by damages for breach of that term of the contract. The Judge has taken the view that the shippers
promised to state truly in the bill of lading the date of shipment, and the respondents say that if that had
been done they would have been entitled to reject the goods. By the breach of contract in sending forward
a bill of lading containing a false statement, the plaintiffs say they have been deprived of that right. I
suggested to the appellants that if their promise to tender a correctly dated bill of lading had been in a
separate contract their contention would have been unarguable. It seems to me to make no difference that
the term is in the same contract which contains the obligation to ship the sugar in September. I agree . . .
that the result of that is to give the plaintiffs in this case exactly the same damages as they would have
received if they had successfully brought an action for fraudulent misrepresentation, but there may well
be terms in a contract which, if broken, put the party complaining of the breach in the same position as if
he claimed damages for false representation . . .
He then distinguished Taylor v. Bank of Athens in the same way as Mr. Justice Wright had done on the
ground that no separate breach in relation to the bill of lading date had been raised. Lord Justice Sankey
also agreed and said at pp. 254 and 416:
. . . A c.i.f. contract is a contract for the sale of goods, but, as everyone knows, there are certain specific
documents which are part of that contract, one of them being a bill of lading, as to which there is an
implied obligation that it shall be dated accurately.
. . . No fraud is imputed to the appellants, and I assume that they are blameless in the matter; but it is
admitted that they broke one of the fundamental conditions of the contract - namely, the condition or
obligation to give an accurately dated bill of lading. As a result the respondents took the sugar, but they
did not get what the defendants had contracted to give them. They got something different - namely, an
October instead of a September shipment . . . I think the measure of damages in a case like this is the
difference between what the buyers have in fact paid to the sellers and the market price of the goods. This
is not in conflict with any of the earlier cases. In Taylor v. Bank of Athens the cause of action was
entirely different from that in the present case. Here the cause of action is for not having given what the
contract gave a right to - namely, an accurately dated bill of lading . . .
The decision in James Finlay was followed and applied by Mr. Justice Devlin (as he then was) in Kwei
Tek Chao v. British Traders and Shippers Ltd., [1954] 1 Lloyd's Rep. 16; [1954] 2 Q.B. 459. He analysed
the position by explaining (at pp. 48 and 480) that there were two rights to reject a right to reject documents, and a right to reject goods, and the two things are quite distinct.
He took the decision in James Finlay a stage further by holding that the buyers' entitlement to substantial
damages remained intact even though they had discovered the true facts - the misdating of the bill of
lading and the late shipment - before the goods had arrived, because, having paid the price, they had no
viable alternative but to deal with the goods in the best way possible in the circumstances. The buyers in
the present case strongly relied on this aspect in support of their submissions.
A later case to mention is the decision of this Court in Panchaud Freres S.A. v. Etablissements General
Grain Co., [1970] 1 Lloyd's Rep. 53. It adds nothing of direct relevance for present purposes except
possibly a statement by Lord Justice Winn at p. 61 to the effect that one should not lose sight of the fact
that the main breach in these situations must relate to the goods, and that any breach concerning the bill of
lading is only of an ancillary nature. But the reason for referring to the case is that it played an
unwarrantably large part in the history of this arbitration. The ratio of the decision was that it had to be
distinguished on its facts from James Finlay and Kwei Tek Chao because the buyers had waived their
right to claim damages. The details do not matter. The problem raised*27 by Panchaud Freres had already
been anticipated by Mr. Justice Devlin in the following passage in Kwei Tek Chao at pp. 49 and 481:
. . . It may be that if the actual date of shipment is not in conformity with the contract, and the error
appears from the documents, the buyer, by accepting the documents, not only loses his right to reject the
documents, but also his right to reject the goods, but that would be because he had waived in advance
reliance on the date of shipment.
It was this aspect which dominated the GAFTA arbitration proceedings in the present case. Neither party
was legally represented at first instance or before the Board of Appeal. That may explain why the real
issue did not emerge in relation to contract 83/703. The buyers claimed throughout that they were entitled
to damages under both contracts on the basis of the difference between the October, 1983, contract price
and the net market price realized after discharge of the goods in July, 1984, after allowing for the
additional expenses which they had incurred. The GAFTA award at first instance dismissed the buyers'
claim on the ground that . . . by their conduct in taking up shipping documents and paying for them on presentation in Bremen
without any exceptions or reserves they precluded themselves from rejecting the goods on the grounds of
late shipment or defective bills of lading . . .
and referred to Panchaud Freres in support of this conclusion. In the face of the buyers' telex of Apr. 10,
1984, this was no doubt a surprising decision. The buyers appealed to the Board of Appeal and succeeded.
However, the only issue was again the application or otherwise of the decision on waiver in Panchaud
Freres. The fact that the goods under contract 83/703 had been shipped during the contractual shipment
period appears to have played no part in the reasoning. The Board of Appeal allowed the buyers' appeals
and awarded full damages in both cases. The reasons for their award rightly relied on the buyers' telex of
Apr. 10 and concluded that there had been no waiver or estoppel. However, there was only a passing
reference to the real issue in relation to contract 83/703, the relevance of the decision in James Finlay. In
answer to the sellers' contention that they were only liable to suffer an allowance of 3 1/2 per cent. of the
price the award stated:
Sellers committed a breach of a condition of the contract in as much as the bills of lading were dated
incorrectly and therefore any question of damages being limited to contractual allowances does not arise.
In effect, therefore, the Board of Appeal assumed that no distinction fell to be drawn between the two
contracts. The fact that wrongly dated bills of lading had been presented under both of them led to the
application of the James Finlay measure of damages in relation to both. The correctness of this conclusion
in relation to contract 83/703 was only raised when the parties came to be legally represented on
application for leave to appeal to the Commercial Court.
I then turn finally to the proceedings in the Commercial Court. The sellers obtained an extension of time
for appealing from Mr. Justice Saville and leave to appeal from Mr. Justice Hobhouse, subject to giving
security covering the amount of that part of the award. Their grounds of appeal were still that the
presentation of an incorrectly dated bill of lading was not a breach of condition but merely of an
'innominate term'. But the accompanying notice of motion finally took the right point, that the goods had
been shipped during the contract period. It was resisted by a respondents' notice on behalf of the buyers
which justified the board's award of full damages on various grounds, as mentioned below. By 'full
damages' I mean the difference between the contract price and the market price on arrival, as in James
Finlay. No alternative measure of damages was put forward by the buyers, and there was no application
for remission. There was an alternative claim for the repayment of the contract price by way of
'restitution', but this was rightly abandoned before us. Such a claim, in effect for rejection, had obviously
been lost as the result of the acceptance and sale of the goods.
On Dec. 19, 1986 Mr. Justice Leggatt allowed the sellers' appeal. He reversed the award of damages in
favour of the buyers and substituted the agreed deduction of 3 1/2 per cent. of the contract price. He
granted the buyers' application for a certificate that the issue raised by the appeal was one of general
public importance. But for some reason he nevertheless refused leave to appeal. This was subsequently
granted by Lord Justice Lloyd on application to this Court.
The essence of Mr. Russell's argument in favour of the buyers was deceptively simple, although - as the
Judge had also pointed out - overlaid by a great deal of unnecessary complexity. His submissions were
designed to demonstrate the importance of correctly dated bills of lading in the context of various
aspects*28 of c.i.f. contracts and contracts for the carriage of goods by sea. No one doubts these matters
for one moment. The whole basis of the decision in James Finlay was that one of the sellers' obligations
under a c.i.f. contract is to present a correctly dated bill of lading. This obligation has the character of a
condition, in the sense that the buyer is entitled to reject a tender of documents which include an
incorrectly dated bill of lading, and thus entitled to refuse to pay for the goods. On a falling market it is
self-evident that buyers would have availed themselves of this right if they had known that the tendered
bill of lading was misdated. As Lord Justice Scrutton said in James Finlay at pp. 249 and 409, the buyers
would in that event have kept the price in their pocket. and in James Finlay and Kwei Tek Chao the
buyers accordingly recovered full damages on this basis. No more need be said by way of introduction.
One then comes to the buyers' seductive submission on these lines. Mr. Russell said that it followed that if
the buyers had known in this case that the bill of lading had been misdated they would have rejected the
documents, refused to pay the price and left the sellers to face the loss resulting from the fall in the market.
As a statement of what would have happened if the buyers had known the true facts this is obviously true.
But it does not provide the correct test in law. The issue is not what the buyers would have done if they
had known the true facts. The first question is: what would have been the buyers' rights if the sellers had
not committed the breach on which the buyers rely?
That this is the correct analysis of the issue is not only apparent from the passages cited from the
judgments in James Finlay, but also as a matter of general principle. The object of an award of damages
for breach of contract is to put the innocent party in the same position so far as money can do it as if the
contract had not been broken. So put, the answer to the present problem becomes obvious. If there had
been no breach, then the bill of lading under contract 83/703 would have been dated Feb. 6 or 10 instead
of Jan. 31. In that event the buyers would have had no right to reject it or to refuse to pay for the goods.
They would only have been entitled to the contractual allowance for shipment in February. In relation to
contract 83/701 the position would have been different. A correctly dated bill of lading would have
revealed the sellers' breach of condition in relation to the date of shipment, whereas an incorrect date
concealed this breach. On that basis, following James Finlay, the buyers were rightly awarded full
damages under contract 83/701. But the Board of Appeal was wrong in drawing no distinction in relation
to contract 83/703 and awarding full damages in both cases. The incorrectly dated bill of lading tendered
under the latter contract concealed no similar breach.
The correctness of this analysis is supported by two other general considerations.
First, as was pointed out by Mr. Justice McCardie in Taylor v. Bank of Athens, the position would of
course be entirely different if the sellers had themselves been involved in the false dating of the bill of
lading and could therefore have been sued in fraud. In that event the buyers would have recovered full
damages because the measure of damages in claims for fraud is different. In cases of fraudulent
misrepresentation the innocent party is entitled to be put in the same position as if the representation had
not been made, not as if it had been true: see Doyle v. Olby (Ironmongers) Ltd., [1969] 2 Q.B. 158 and
Saunders v. Edwards, [1987] 1 W.L.R. 1116 at p. 1121. In that event, therefore, the measure of damages
would have assumed that no bill of lading had been presented at all and placed the buyers in the same
position as if they had kept the price of the goods in their pocket. But there was no basis for any such
claim in the present case, and we also heard no argument about the possible relevance of the
Misrepresentation Act 1967. I therefore say no more about this.
The second aspect which one must bear in mind is that the buyers' apparent misfortune is no different in
principle from other situations where an 'innocent' party may be unaware in time that the other party has
committed a breach of condition. When he subsequently discovers this he may be compelled to treat it as
no more than a breach of warranty. The damages recoverable for a breach of warranty may well turn out
to be greatly different from what would have been the 'innocent' party's position if he had known of the
breach of condition in time to be able to rescind the contract. In financial terms the difference is between
compensation for a breach of contract and putting the innocent party in the same position as if he had
never entered into the contract at all. Taylor v. Bank of Athens provides a good illustration in a similar
context. Unfortunately for the buyers, no reliance was placed on the breach involved in the tender of a
wrongly dated bill of lading, as subsequently in James Finlay. The shipment had been made out of time
on a falling market, and if the buyers had been aware of this they would, of course, have refused to pay
against*29 the documents. But the sellers were equally innocent, and by the time the truth came out the
buyers were left only with the measure of damages under s. 53(2). But no loss connected with the fall in
the market flowed from the fact that the shipment was a few days late; nor any other loss. So the buyers
were left with nominal damages only. Strictly, as both Counsel agreed,if Mr. Justice Leggatt had not
ordered the repayment of 3 1/2 per cent. of the price as damages, his order should have included an award
of nominal damages.
For the sake of completeness I must refer to three more cases and summarise my views about the
applicable principles. First, The Kastellon, [1978] 2 Lloyd's Rep. 203. The facts were similar to James
Finlay; the bill of lading had been misdated on a falling market and shipment had taken place a few days
out of time, without any material effect on the time of arrival of the cargo or its value. But the sellers
sought to rely on a contractual exception of force majeure to excuse the slight delay in shipment. Mr.
Justice Donaldson (as he then was) held that the exception did not excuse the breach and upheld the
arbitration award for full damages in favour of the buyers, but with regret, since their claim was based on
a mere technicality. However, it does not appear to have occurred to anyone that the buyers would have
had a claim for substantial damages on the ground of the misdated bill of lading alone, even if the
shipment period had been effectively extended by the force majeure exception. The submissions and
judgment were therefore wholly in line with the foregoing conclusions.
The other two cases are factually less relevant, but it is necessary to refer to passages in the judgments. In
Kleinjan & Holst N.V. Rotterdam v. Bremer Handelsgesellschaft, M.B.H. Hamburg, [1972] 2 Lloyd's
Rep. 11 the buyers objected to a notice of appropriation which named a ship different from the one on
which the goods had in fact been loaded. They paid against presentation of documents, but only under a
reserve of their rights. So they were only entitled to damages for breach of warranty under s. 53(2). On
the special facts of the case these were assessed by Mr. Justice Cooke as . . . the difference between the contract price of the goods and the market price of similar goods at the
time when the documents were tendered . . .
and on its facts the outcome of the case is not open to challenge. But he also said the following in general
terms at p. 22:
In my view, the decision Finlay's case lays down a general rule as to the measure of damages in cases
where the sellers have broken a condition of the contract by failing to tender proper documents and the
buyers, not having rescinded, are entitled to recover damages for the breach. The reasons why the buyers
have not rescinded are immaterial. Whether they have been misled or have elected not to rescind with full
knowledge of the facts the position is the same, namely, that if they had rescinded, they would not have
had to pay a price (viz. the contract price) in excess of the market price of the goods at the time of the
breach. As was pointed out by Mr. Justice Saville in Vargas Pena Apezteguia Y Cia. SAIC v. Peter
Cremer G.M.B.H, [1987] 1 Lloyd's Rep. 394, that statement is too wide. The decision in James Finlay is
not to be treated as laying down any general rule that a breach in relation to the documents presented
under a c.i.f. contract automatically gives rise to damages based on the difference between contract and
market prices. The true position can, in my view, be summarised as follows, apart from actions based on
misrepresentation:
1. The presentation of the documents by sellers under a c.i.f. contract implies a guarantee or warranty - or
whatever term one chooses to use - in the nature of a condition that the contents of the documents are true
in all material respects. In relation to the dates of bills of lading this is an express obligation under clause
6 of GAFTA 100. But the judgments in James Finlay show that the same result follows by implication
from the mere act of tendering the documents under the contract.
2. If the contents of the documents are untrue in any material respect, then the buyers can reject them and
refuse to pay the price. No doubt, as the Judge in the present case mentioned in passing, although the
point had not been argued, it may then be open to the sellers to make a second correct tender if they can.
But in practice this will not often be possible.
3. Ignoring all questions of waiver, which must depend upon the circumstances, if the buyers pay against
documents which are untrue in any material respect, then the next question is whether they would have
been entitled to reject the documents if their contents had been correct. If they could have done so,
because there would then still have been some other material breach of condition of the contract, as in
James Finlay, Kwei Tek Chao and The Kastellon in relation to the date of shipment, then - but only then will the buyers be entitled to the full measure of damages, i.e generally the*30 difference between the
contract and market prices. The reason is that in that event this would be . . . the estimated loss directly and naturally resulting, in the ordinary course of events . . .
from the sellers' breach in presenting documents which contained untrue material statements. On that
basis s. 53(2) of the Sale of Goods Act would lead to this result. But not if the incorrect document did not
conceal any breach on the part of the sellers.
However, there remains one additional aspect. The only discussion of these problems of which Counsel
were aware is to be found in pars. 1763 to 1771 of Benjamin's Sale of Goods, 3rd ed. (1987), which I
found of great assistance. The instant situation is considered in par. 1770 under the heading 'Defects in the
documents alone'. This discusses situations . . . where the goods were in all respects in accordance with the contract but the seller tendered, for
example, a certificate of insurance when he should have tendered a policy, or where the goods were in
fact shipped within the shipment period but the bill of lading was not 'genuine', e.g. because it bore a false
date of shipment.
The text proceeds, in line with the views expressed above:
If the buyer accepts documents in such a case (even in ignorance of his right to reject them) he should
have no right to substantial damages; such damages cannot be awarded . . . to compensate the buyer for
loss of his right to reject the goods, for in the situation now under discussion he never had any such
right . . .
I agree. However, it does not necessarily follow that in such a situation the buyers will never be able to
recover substantial damages for the sellers' breach in presenting documents whose contents were incorrect
in some material respect. For instance, a falsely dated bill of lading becomes effectively unmerchantable,
in the sense of being non-negotiable (or, more accurately, non- transferable) once its true date is known.
Its presentation by the sellers was a breach of contract even if the goods were in fact shipped during the
contractual shipment period, as in the present case. In such circumstances it may well be possible for the
buyers to show that they suffered loss as the result of this breach. Thus, they may have found themselves
'locked in' on a falling market by holding a non-transferable bill of lading, when they might otherwise
have been able to sell the goods afloat, albeit already at substantially less than their original contract price.
Alternatively, they might be able to show that if the bill of lading had been correctly dated they could
have used it to fulfil a previously concluded sub-sale covered by a notice of appropriation with which
they were now unable to comply.
These are no more than illustrations of possible situations in which buyers might be able to put forward
claims for substantial damages even in cases like the present. But they are not material to this appeal.
Both Counsel were in agreement that the opening words of cl. 27 of GAFTA 100, 'In default of fulfilment
of contract . . .', were not apt to cover a breach which related solely to the documents, as in the present
case. Mr. Russell suggested the possibility of a remission to the Board of Appeal of GAFTA to consider
the alternative measure of damages mentioned above, after the Court had raised it in the course of the
appeal. But remission at this stage would be out of the question. Damages on some alternative basis on
these lines would require findings of fact which were never investigated in the arbitration. and the
respondents' notice, resisting the sellers' appeal to the Commercial Court, went no further than to justify
the award of full damages on the lines of James Finlay, without suggesting any alternative or applying for
remission.
I only mention these matters for the sake of completeness, without implying that it would have made any
difference if arguments on these lines had also been submitted to Mr. Justice Leggatt below. The
authorities are clearly against any remission to arbitral tribunals for the purpose of ventilating points
which could and should have been investigated and considered in the arbitration if they have any
substance. I feel sure that Mr. Justice Leggatt would have refused to remit for a second bite at the cherry
even if he had been asked to do so. In any event, at the present stage remission is obviously out of the
question.
For these reasons I agree with the conclusion of Mr. Justice Leggatt and would dismiss this appeal. I only
add that before writing this judgment I had the great advantage of seeing the judgment of Lord Justice
Nicholls in draft and entirely agree with his analysis.
Lord Justice NICHOLLS:
The sole question raised by this appeal concerns the measure of damages payable by the sellers in respect
of their admitted breach of contract. In breach of cl. 6 of the GAFTA 100 form of contract, which was the
form used by the parties, the bill of lading tendered to the buyers and accepted by them did not state
correctly the date when the*31 goods were actually on board. The bill of lading stated the date of
shipment in the Philippines as Jan 31, 1984. In fact the goods were not shipped until either Feb. 6 or 10,
1984. Shipment on those dates, and this is the feature of crucial importance in this case, was within the
extended shipment period, expiring on Feb. 29, 1984, which had been agreed between the parties (subject
to certain allowances).
Other salient facts include the following. The relevant contract, dated Oct. 7, 1983 and numbered 83/703,
was for the sale of 500 tonnes of Philippine copra expeller cake at the price of U.S.$199.50 per tonne.
Payment of 98 per cent. of the full price was made by the buyers in April, 1984, on presentation of the bill
of lading and other shipping documents. The m.v. Manila arrived in Rotterdam on July 8, 1984, and the
goods were sold by the buyers one week later, at the greatly reduced price of U.S.$113 per tonne.
Although the sole question on this appeal concerns damages, it is necessary to note at once, because this
is at the heart of the arguments advanced on behalf of the buyers, that a right to damages is not the only
remedy which a buyer has in respect of a misdated bill of lading. Before us it was common ground that
the buyers in the present case were entitled to reject the bill of lading when it was tendered. They were
entitled to reject the bill of lading because it misstated the date of shipment. They were entitled to reject
the bill for this reason, even though the goods had been shipped within the shipment period. If the buyers
had exercised that right then, unless the sellers had been able to re-tender another, correct bill of lading,
that would have been the end of the matter: the buyers would have kept the price, and they would not
have suffered the loss they did by reason of the fall in the market.
That remedy, of rejection of the shipping documents when tendered, was one of the remedies available in
respect of the sellers' breach of cl. 6. In the event the buyers were unable to have recourse to that remedy,
because they did not know of the inaccuracy in the bill of lading when it was tendered. So, perforce, the
buyers' remedy in respect of the sellers' breach of cl. 6 was confined to a right to recover damages.
It is at this point, as it seems to me, that some confusion has crept into the buyers' case. It is trite law that
the basic, general principle applicable in awarding damages for breach of contract is that the innocent
party is to be placed, so far as money can do this, in the same position as he would have been in if the
contract had been performed. If in the circumstances the breach caused no financial loss, only nominal
damages are recoverable by the innocent party. This, on principle, will be so even if the breach in respect
of which damages are being claimed is a breach of a condition which would have enabled the innocent
party to reject the documents or goods altogether, had he known of the existence of the breach before, by
accepting the documents or goods, it became too late for him to exercise the remedy of rejection. In such
a case the remedy of rejection may afford an innocent party a much more valuable form of relief. But
when that remedy ceases to be available, and the innocent party is confined to his remedy in damages, he
is not entitled to assess his damages by reference to what his financial position would have been if the
primary remedy of rejection had been exercised by him. For better or worse, his claim, as a claim for
damages, is then confined to making good the loss sustained by him by reason of the breach of the
contract. Quantifying that loss requires, in general, a comparison to be made between the innocent party's
actual financial position and what his financial position would have been had the contract been duly
performed.
This accords with the approach adopted in s. 53(1) and (2) of the Sale of Goods Act, 1979:
(1) Where there is a breach of warranty by the seller, or where the buyer elects (or is compelled) to treat
any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only
of such a breach of warranty entitled to reject the goods; but he may (a) set up against the seller the breach of warranty in diminution or extinction of the price or,
(b) maintain an action against the seller for damages for the breach of warranty.
(2) The measure of damages for breach of warranty is the estimated loss directly and naturally resulting,
in the ordinary course of events, from the breach of warranty.
There is no suggestion in that section that the measure of the damages recoverable for breach of warranty
in a case where there has been a breach of condition which the buyer has been compelled to treat as a
warranty is any different from the measure of the damages recoverable in any other case of breach of
warranty.
I do not think that the existence of the disparity in the efficacy of the two remedies, rejection and damages,
in a case where the breach causes little or no financial loss to a buyer, casts doubt on the correctness of
this analysis of the measure of the damages recoverable for such a*32 breach. The disparity arises from
the availability of the right of rejection in such a case, namely, even where the breach of condition has
caused little or no financial damage to the innocent party. If there is an anomaly here, it lies in the
availability of the remedy of rejection in such a case, not in the measure of damages applicable in such a
case.
With those principles regarding damages in mind, it is to be observed that, in the present case, if cl. 6 had
been duly performed by the sellers, the buyers would have had no right to reject the shipping documents
when tendered.This is in marked contrast with the position in James Finlay & Co. Ltd. v. M.V. Kwik Hoo
Tong Handel Maatschappij, (1928) 31 Ll.L.Rep. 220; [1928] 2 K.B. 604; (1928) 32 Ll.L.Rep. 245; [1929]
1 K.B. 400, where if the bill of lading had stated the date of shipment correctly, the buyers would have
been entitled to refuse to accept the shipping documents. Likewise in Kwei Tek Chao v. British Traders
and Shippers Ltd., [1954] 1 Lloyd's Rep. 16; [1954] 2 Q.B. 459. To the extent that the general rule
enunciated in Kleinjan & Holst N.V. Rotterdam v. Bremer Handelsgesellschaft G.M.B.H. Hamburg,
[1972] 2 Lloyd's Rep. 11 at p. 22 is inconsistent with this approach, I agree with the observations made on
that case by Mr. Justice Saville in Vargas Pena Apezteguia Y Cia. SAIC v. Peter Cremer G.M.B.H.,
[1987] 1 Lloyd's Rep. 394 at p. 399.
As I see it, this is the short and complete answer to the buyers' contention that damages in respect of the
tender of the misdated bill of lading are to be assessed on the footing that the buyers were thereby
wrongfully deprived of a right to reject the documents and the goods. They did not lose that right by
reason of the breach. Had there been no breach of cl. 6 the buyers would have had no right to reject the
bill of lading or the goods. What the buyers lost, in the event, was the opportunity to exercise one of the
remedies (rejection) afforded by the law in respect of the breach. They lost the opportunity to exercise
that remedy, not because of the breach of cl. 6, but because they did not know of the existence of the
breach at the time. But, as I have sought to indicate, having lost the opportunity to exercise the remedy of
rejection in respect of the breach, thenceforth the buyers' remedy in respect of the breach was confined to
recovering the actual financial loss, if any, suffered by them by reason of the breach.
Mr. Russell presented the buyers' case in several further ways which were superficially different but
essentially the same. They all founder on the same point. In particular, it was submitted, first, that since
the tender of the bill of lading was a bad tender, the comparison to be made is between the financial
position of the buyers (a) having accepted the bad tender and (b) having rejected the bad tender. I cannot
accept this formulation. The comparison is between the financial position of the buyers in the events
which happened (viz. having accepted the bad tender) and what their financial position would have been
if the bill of lading had stated accurately the date of shipment (viz. having accepted a good tender).
If that comparison is made, the extent of the loss of the buyers was that, unknown to themselves, they had
been given an unmerchantable bill of lading. As to that, I do not doubt that there may be cases where a
buyer suffers loss by payment of the price against a bill of lading which was unmerchantable because it
mis-stated the date of shipment even though the actual date of shipment was within the contract period.
Such a buyer might, by reason of the unmerchantability of the bill, be unable to sell the goods, or
complete a prior sale of the goods, whilst the goods were still afloat. In such a case the buyers' prima facie
measure of damages would be the difference between the market value of the goods when he ought to
have been able to deal with them (viz. when the bill of lading was tendered and accepted) and the market
value of the goods when he became able to deal with them (viz. when the goods were delivered). In the
present case the impact of cl. 27 would also have to be considered with regard to any claim for loss of
profit on sub-sales. I do not pursue these points, however, because no claim under any of these heads was
advanced in this case before such a claim emerged, as an alternative claim, in the course of the argument
of this appeal. Neither before the arbitrators nor before the Judge did the buyers claim that pending the
arrival of the cargo in Rotterdam and its delivery to the buyers they had suffered loss by reason only of
the bill of lading being unmerchantable because of the inaccuracy in it. What was claimed was the
difference between the price paid by the buyers on tender of shipping documents in April (plus additional
shipping costs also paid by the buyers) less the proceeds of sale of the goods when sold by the buyers
shortly after delivery in July. This being so, it is too late for the buyers now to take this new point, which
would have required the production of evidence before the arbitrators. Nor would it be right for there to
be a remission to the arbitrators to hear further evidence on this point which was always available to the
buyers.
*33 Putting aside, therefore, any claim for damages based solely on the unmerchantability of the bill, if
the proper comparison is made, between the buyers' financial position in the events which happened and
what their financial position would have been if the bill of lading had stated the actual date of shipment,
the answer is plain: the buyers suffered no financial loss. They paid the contract price and they received
goods which conformed to the contract in all respects, including as to date of shipment. Hence they are
entitled to no damages (save only that, having paid 98 per cent. of the price, with no deduction of the
agreed allowances for a shipment made in February, the buyers are entitled to damages to the extent of
the overpayment).
I turn to the alternative ways in which the buyers' case was framed. The buyers submitted, secondly, that
the sellers' tender of this bill of lading was not only bad, it was misleading. There was nothing in the bill
to suggest to the buyers that the date of shipment was wrong. The purchase price was wrongfully elicited
from the buyers. I accept that the bill was misleading, but I do not see how this advances the buyers' case
as a claim for damages for breach of contract. That the bill was misleading does not alter the measure of
damages payable in respect of the breach, which remains the same: tendering an inaccurate bill of lading.
I add that there is no claim in this case based on fraud or negligent misrepresentation.
Thirdly, the buyers submitted that, in addition to the express obligation in cl. 6, there was an implied
warranty that the bill of lading as tendered would be correctly dated. Reliance was placed on Mr. Justice
Wright's observation in the James Finlay case (1928) 31 Ll.L.Rep. 220 at p. 225; [1928] 2 K.B. 604 at
611-612:
In my judgment it is an implied condition of the contract that the bill of lading so to be tendered shall be a
true and accurate document and correctly state the date of shipment . . . the buyer is, I think, entitled to
rely on the accuracy of the bill of lading date, and to regard the seller as impliedly guaranteeing its
accuracy, unless there are express terms in the contract to the contrary.
I doubt whether it can be right to imply any such warranty as contended by the buyers in this case where
there is already an express obligation in the terms of cl. 6. Nor do I think that in the passage I have quoted
Mr. Justice Wright is to be taken as saying that, in addition to an implied condition, there is also an
implied warranty to much the same effect. But, in any event, this argument does not get the buyers any
further forward. Even if such a warranty were to be implied in the present case, the measure of damages
in respect of the breach of that implied warranty would still involve making the same comparison
between the buyers' financial position if the bill of lading had been as warranted (viz. that the date of
shipment stated therein, Jan. 31, was the actual date of shipment) and the buyers' financial position in the
events that happened (viz. the buyers having received and paid for goods which conformed to the contract
in all respects).
I too would dismiss this appeal.
Lord Justice CROOM-JOHNSON:I have read in draft both the judgments of Lord Justice Kerr and Lord
Justice Nicholls and I agree with them.
[Order: Appeal dismissed with costs, liberty to apply to a Commercial Judge in relation to figures, if
necessary. Leave to appeal to the House of Lords refused.]
(c) Lloyds of London Press Limited
[1988] 2 Lloyd's Rep. 21
END OF DOCUMENT
Copr. (c) West 2001 No Claim to Orig. Govt. Works