Seller Under FOB Contract Liable for Economic Duress and Tort of Intimidation

Kolmar Group AG v Traxpo Enterprises Pvt Ltd [2010] EWHC 113 (Comm)

Background to dispute

The dispute in this case arose out of a contract for the sale and purchase of methanol, with shipment to be FOB Kandla within September 2007. Payment was to be at sight against an irrevocable documentary letter of credit ("L/C") payable against presentation of specified documents.

The buyer intended to sell the methanol to a large and important customer in the U.S., which was experiencing production problems and needed methanol cargoes urgently. However, at the time that the seller made the contract, it did not have access to sufficient cargo at the same or a lesser price with which to be able to supply the buyer at the contract price. After the contract was made, the market price of methanol increased dramatically. The seller, therefore, placed the buyer in a position whereby it had to agree to pay a higher price for some of the parcels of methanol, resulting in a considerable increase in the average price of the total cargo. Alternatively, the buyer would be obliged to take less than the agreed quantity of cargo and be faced with a huge claim for deadfreight for the shortfall.

The original L/C had been opened on 12 September but subsequently amended a number of times inter alia to reflect new shipment dates, to provide for partial shipments and to incorporate amended payment terms in respect of some of the parcels of cargo. The final amendments were made on 5 October following a "take it or leave it" proposal from the seller that compelled the buyer to agree to a price revision that would result in the average price for the total cargo increasing by about US$100 per m.t. as compared to the original contract price. In its related correspondence with the seller regarding these final amendments, the buyer stated that it "had no other alternative but to accept". Nonetheless and notwithstanding the buyer's concessions to the seller, the original shipment date was much delayed and by mid-October, the vessel had loaded only a part of the methanol that the seller had been obliged to provide under the contract.

As the vessel was due to arrive at the discharge port around 15 November, the buyer decided to go ahead with a purchase from a third party importer of methanol at Kandla to replace the shortfall arising from the seller's failure to supply the contract quantity. It accepted the documents provided by the seller for the cargo it had actually supplied and...