Loss mitigation under GAFTA contract: non-standard solution of an ordinary dispute

Agrarian trader applied to Interlegal for defense of its interests under commercial contract. Our law team had to settle the problem upon charging payment for goods from the Egyptian buyer.

Our Client (the seller) ant the Egyptian buyer entered into contract on the Ukrainian meal supply under the following terms and conditions:

     - delivery basis: CIFFO safe Egyptian port;
     - payment under bank collection terms;
     - English law and GAFTA 48.

Dispute was the following: a chartered vessel with cargo on board has already arrived at the Egyptian port, while the buyer faced banking problems and therefore was unable to pay for goods in full and could not forecast balance payment terms. So, the seller either (i) had to retain goods on board at the destination port until full payment by the buyer (jointly with demurrage incurred on a daily basis), or (ii) had to cancel the contract followed by goods resale to another buyer (one more cost/time-consuming procedure). In both cases the seller could incur significant expenses. Since it was a difficult task to charge costs from the Egyptian buyer, an acceptable for the buyer solution was required, in order to defend the seller’s interests and to preserve partnership between both companies.

Having studied the problem, Interlegal law team provided legal opinion, based whereon the Client preserved contractual relations, having mitigated losses incurred due to vessel idle stay. The seller and the buyer agreed to amend the contract as well as entered into trilateral agreement on goods storage at the customs warehouse at the buyer’s expense. Therefore, customs warehouse was liable for goods discharge, while storage costs were much lower than demurrage or potential losses in case of contract cancellation and goods resale. The above actions facilitated the following results:

     1) contract performance;
     2) avoidance of essential losses (such as vessel idle stay, redirection of goods etc.);
     3) full settlement for goods by the Buyer, including payment of storage costs;
     4) partnership preserved.

Interlegal associate attorney Igor Kostov and junior lawyer Larysa Karakach provided a full-scale legal support. Interlegal is always ready to provide comprehensive assistance and to find a solution of the most difficult problems.