Lloyd's Maritime and Commercial Law Quarterly
F.O.B. CONTRACTS: SUBSTITUTION OF VESSELS
Cargill U.K. Ltd. v. Continental U.K. Ltd.
1. Introduction
Under an f.o.b. contract a buyer nominates a vessel. Subsequently, he wishes to change his mind and nominate a substitute. May he do so? This question was discussed at first instance1 and in the Court of Appeal2 in Cargill U.K. Ltd. v. Continental U.K. Ltd.
As with all other matters concerning the shipment of goods on f.o.b. terms, nomination of the vessel is a matter of contract. The contract may, therefore, expressly permit substitution generally.3 If it does not, four possible approaches arise. First, the buyers may informally indicate the name of a vessel without contractually nominating it, in which case the subsequent formal nomination may stipulate a different vessel. No question of genuine substitution arises. Secondly, the contract may implicitly permit substitution. The buyers’ basic obligation is merely to inform the sellers of the name of the vessel in time for the sellers to be able to load within the contractual shipment period; there is no legal obligation to communicate a nomination prior thereto.4 It follows, therefore, that if the buyers effect a nomination before that point in time, they may, in the absence of any contractual restrictions, freely change their mind, provided always that ultimately they are not in breach of their basic obligation. Thirdly, the contract may expressly prohibit any substitution. Fourthly, substitution may be permitted, expressly or impliedly, but confined within certain time limits.
2. The facts of Cargill
Under an f.o.b. contract for the sale of barley, the buyers were required to furnish a provisional notice of eight clear days of the date of the vessel’s estimated time of arrival and presentation for loading at the port of loading. This notice also had to specify the vessel’s name and itinerary and the approximate quantity of goods to be loaded. A further, definite notice, four clear days of the date of presentation for loading, was also required. The contract was, however, silent as to the contents of this second notice. Failure to serve a timeous definite notice expressly gave the seller the right to cancel the contract.
The contract also contained the following clause concerning a notice of readiness to load: “Vessel to present Notice of Readiness latest 1600 hours on the last business day of the delivery period having complied with all the requirements of the Nomination clause above.” The last business day referred to was, on the facts, Fri
1. [1989] 1 Lloyd’s Rep. 193 (Com.Ct.).
2. [1989] 2 Lloyd’s Rep. 290 (C.A.).
3. Although it is perhaps arguable that all but the most emphatically unrestricted substitution rights are subject to implicit limitations: see section 6, infra.
4. Benjamin’s Sale of Goods (3rd edn., 1987), para. 1841; J. & J. Cunningham v. Robert A. Munro (1922) 28 Com.Cas. 42.
466