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PEC v THAI MAPARN

The issue in this case was whether a valid claim had been made for an extension of the delivery period in an FOB sale contract under the extension clause of GAFTA 120. This was the first case to consider this issue. Upholding the decision of the GAFTA Board of Appeal in an appeal under section 69 of the Arbitration Act, Hamblen J emphasised that the effect of a valid claim for an extension is to vary both parties' contractual rights and obligations, so that the parties need to know with certainty whether an extension has been validly claimed and, if so, for what period. Applying this principle, he held that the "notices" relied on by the Buyers in the present case did not constitute a valid claim for an extension. In particular, an extension of the delivery period amounted to an affirmation of the contract, so that it was inconsistent of the Buyers in one and the same message both to claim an extension and to purport to reserve a right to hold the Sellers in default for failing to deliver within the original delivery period. Further, a claim for an extension which was expressed to be conditional on a response by the Sellers, which response was never given, was not a valid unconditional claim. Equally, a "notice" which left it unclear whether an extension was being claimed regardless of the Sellers' requested response was not a sufficient or valid notice.

As a result of this decision the Buyers' claim for default damages of some US $14.5 million, which had succeeded before the first tier tribunal and failed before the GAFTA Board of Appeal, was dismissed.

Accordingly the judgment provides valuable guidance on the application of the GAFTA extension clause, a widely used clause in standard FOB contract forms.

Stephen Males QC instructed by Elborne Mitchell represented the successful Sellers