The Lasting Quality Of FOB Contracts

A term that goods are to be of a satisfactory quality not only

when delivered but also for a reasonable time thereafter is implied

into FOB contracts.

In KG Bominflot Bunkergesellschaft Fur Mineralole mbh

& Co KG v Petroplus Marketing AG (2009), the

Commercial Court considered whether a term could be implied into a

FOB contract that a cargo of gasoil would be of satisfactory

quality and fit for purpose, notwithstanding a "final and

binding" clause as to quality.

The buyer contracted to purchase a cargo of Gasoil from the

seller, to be shipped FOB Antwerp onboard the "MERCINI

LADY". The specifications of the gasoil were set down

in clause 4 with quality and quantity to be determined by an

independent inspector at loadport, such determination to be

"final and binding for both

parties".

The contract also provided that delivery would be completed when

the gasoil passed the vessel's hose connection at the loadport.

The contract was governed by English law and clause 18 provided

that there were no "guarantees, warranties or

representations" as to the fitness for purpose or

suitability of the oil, other than the contractual

specifications.

Pre-shipment, the oil conformed with the specifications.

However, four days after discharge following an uneventful voyage,

the buyer alleged that the oil was off-spec. The buyer claimed

damages for breach of contract and the question of implied terms

was referred to the Commercial Court as a preliminary issue.

The buyer alleged that a term should be implied into the

contract that the gasoil would be of satisfactory quality and

reasonably fit for purpose following a normal voyage and for a

reasonable time thereafter in accordance with, respectively,

s.14(2) and 14(3) Sale of Goods Act 1979 ("SGA") and at

common law.

The sellers argued to the contrary, relying on, inter alia,

clause 18 to assert that the contract contained no implied terms as

to quality or condition.

The Court held that absent any inconsistency, a term should be

implied into a FOB contract that goods are of satisfactory quality

not only when delivered onto the vessel but also for a reasonable

time thereafter, and at common law, the goods should remain in

accordance with the contractual specification for that period. What

constituted a "reasonable time" would depend on the

circumstances of the individual contract.

The Court rejected the seller's argument that clause 18

operated, finding that the contract was subject to...