Taking Notice Of 'Notice Clauses' In International Trade Contracts - The Importance Of Getting it Right

The recent case of PEC Ltd v Thai Maparn Trading Co Ltd [2011] EWHC 3306 (Comm) considered the effectiveness of notices presented with the intention of extending the delivery period under an FOB contract.

This client alert highlights the importance of paying close attention to the notice clause incorporated into your contract and taking steps to ensure that a valid notice is given.

We also advise of a recent change to the FOSFA Arbitration Rules which means that claims can only be renewed by notice once.

PEC v Thai Maparn Facts

The Claimant Buyers purchased 22,000 m.t. Thai Rice from the Sellers on an FOB basis, for shipment "during April - 07 May 2008, with min 10 working days pre-advice of vessel arrival". The contract incorporated GAFTA 120, clause 7, which permitted the buyer to claim an extension of the delivery period by an additional 21 days, by giving notice not later than the next business day following the last day of the delivery period. The Buyers did not present a vessel during the contractual delivery period, which expired on 7 May. On 8 May, the Buyers sent the following message to the Sellers:

"As a gesture of goodwill, without prejudice to our rights, we are ready to extend the delivery period by 21 days... The last date of shipment was 7 May 2008 and if we do not receive any reply regarding the cargo readiness for loading from your side within 2 days, we put you in default of the contract."

This message was followed by a further message to the Sellers, sent by the Buyers' solicitors, which stated:

"You have contracted to ship April - 07 May 2008 22000 m.t. of rice... to our clients the Buyers... Despite your clear indication that you are not going to perform your obligation under the Contract and therefore you are in breach of the Contract, our client hereby gives you Notice under Clause 7 of GAFTA Form No 119 that they require the delivery period to be extended by an additional period of 30 days. In view of the fact that you have not yet completed full shipment of rice under our client's earlier purchase contract No TMT SGT 070108 dated 7 January 2008, we are writing this letter to invite you to confirm to us within 7 days that you do intend to perform the aforesaid contract. We must give you further notice that if you fail to respond to this letter within 7 days our client will take it that it is not your intention to ship the contracted rice cargo under the aforesaid contract. In that event we will hold you in breach...