The use of final and binding determination clauses in international trade contracts

In trade contracts, where the specification of the product is important, buyers and sellers will often agree that the quality will be determined by an independent expert. Furthermore, in order to circumvent future argument and the questioning of the independent expert’s findings and in order to provide finality, they will most often provide in their contracts that the independent expert’s determination ‘shall be final and binding for both parties save fraud or manifest error’ . This phrase is very widely used, particularly in the trade of oil products, and yet there is still no real definition of what is a manifest error or what type of error will be sufficient for one party to challenge the independent expert’s finding successfully. The intention behind such a clause is obvious and it is easy, when negotiating a contract, to agree to its use in the contract and to place the responsibility for determining the quality of the product in the hands of one of the several experienced surveying companies, such as SGS or Saybolt. However, when things go wrong, there are plenty of people who will attempt to overturn such a ‘final and binding’ determination by one means or another.