Cargill International v. Bangladesh Sugar & Food Industries Esso Petroleum v. Milton Aichi v. Meek Group

“The concept that money must be paid without question, and the rights and wrongs argued about later, is a familiar one in international trade, and substantial building contracts.”1 Three recent disputes have highlighted the importance of this principle and the English courts’ willingness to treat abstract payment undertakings as the equivalent of cash. In Cargill International v. Bangladesh Sugar & Food Industries 2 the Court of Appeal upheld Morison, J.’s decision3 that, where a performance bond was issued by a seller in an international sale as security for performance of its undertakings, the buyer was entitled to demand the full amount under the bond upon default, although ultimately there would be “accounting” between the parties. The buyer would only be entitled to retain the amount of any loss suffered as a result of the seller’s breach, and must refund any balance. The case concerned an agreement to sell sugar c.&f. (c.) Chittagong. The buyer rejected the goods because of alleged late arrival and the age of the vessel. The market price of sugar had fallen and the buyer had suffered no loss as a result of the breach. It was held that the bond was a guarantee of performance, not a penalty. Symmetry prevailed: if the buyer’s loss exceeded the amount of the bond (here 10% of the c.&f. price), the buyer could sue for the balance; conversely, if the bond were called upon and the loss was less than that amount, there must be repayment of the excess. There was no authority directly in point, but the result which was reached had been assumed to be correct and was supported in authoritative discussions.4 The juridical basis relied upon by the judge was