In Westbrook Resources Ltd v Globe Metallurgical Inc[2009] the seller, Westbrook Resources Ltd, entered into a contract for the sale to the buyer, Globe Metallurgical Inc, of 30,000 tonnes of manganese ore. The first shipment was to be made by 28 January 2005, with subsequent shipments thereafter. The ore to be sold had been stored in the open for many years and contained material of various sizes, including small material known as fines. The contract required the ore to be screened so that only material above a certain size was provided. The buyer refused to take delivery of any of the ore and the seller brought proceedings seeking damages for breach of contract. The buyer contended that it was entitled to treat the contract as discharged, for three reasons:
- the seller had demonstrated an unwillingness to deliver goods that conformed to the contract;
- the seller had failed to load the first instalment by the required date; and
- the seller had disabled itself from performing the contract as it had sold ore to other buyers, leaving insufficient ore remaining to fulfil its obligations.
At first instance Westbrook was a complete success for the seller and this has been affirmed by the Court of Appeal. In reality the dispute appears to have been triggered by a fall in the market price of the goods being sold, with the buyer then seeking to extricate itself from a bad bargain. Westbrook itself does not raise any new principles but is a good example of the issues that may arise in disputes in a falling market for the sale of goods.
Time of shipping
The contract provided as follows:
‘Delivered: CIF Barge bottom Belfre Ohio, by latest 30 April 2005.
Shipment: first barge to load before 28 January 2005 with barges to follow no sooner than every seven days and no more than one month between barges until contract is complete.’
Time of shipment is usually of the essence in a contract of this kind. The Court of Appeal was therefore prepared to accept that it was a condition of the contract that the first shipment would be loaded by 28 January 2005. Breach of the condition would therefore have been a repudiatory breach of contract permitting the buyer to treat the contract as at an end and to seek damages.
However, a party faced with a repudiatory breach must elect either to treat the contract as at an end, or to affirm the contract and treat it as continuing. That decision need not be immediate, unless there is a need for urgency, but the innocent party should not be dilatory. The innocent party is given time to assess the position and reach a decision, although the length of time that is given will depend on the facts of the case. It is sometimes difficult to assess what is and is not reasonable.
Here, both the first instance judge and the Court of Appeal held that the buyer had waived its right to require shipment of the first parcel by 28 January 2005. In January 2005 the weather at the loading port had been very cold, with snow and ice rendering it impossible to screen the wet ore effectively. Representatives of both the buyer and seller were at the loading port: the buyer was not operationally inconvenienced by the seller’s inability to load and was content to await an improvement in the weather. As the Court at first instance found, the seller’s representatives acquiesced in the decision not to load.
As the weather improved, the seller began to screen and load the material, and sought information from the buyer about its shipping requirements. That, as the Court noted, was contractually unnecessary but commercially routine. None of the seller’s telephone calls or messages were answered. The judge at first instance found that the:
‘[buyer] embarked on a deliberate policy of not communicating with the [seller], and in particular of not responding to the [seller’s] repeated queries as to their, [the buyer’s], intentions and requirements so far as concerned performance of the… contract.’
Despite this, the seller continued to screen and load, and indeed representatives of the buyer appear to have periodically inspected the work that was being done. At first instance the buyers argued that the material loaded failed to comply with specification and that it was therefore entitled to terminate the contract as the seller was unwilling to deliver goods that conformed to the contract. These arguments failed, the judge finding that the goods that had been supplied complied with specification.
The trial judge held that the buyer, by conduct, had waived any right to reject the shipment on the grounds that it had not been loaded by 28 January 2005. That was challenged in the Court of Appeal, mainly on procedural grounds that the waiver point had been raised late.
The appeal was rejected. Moore-Bick LJ stated that it is well established that if a party to the contract that is entitled to receive performance by a stipulated date represents to the other that it is willing to accept performance out of time and the other relies on that representation, it cannot insist on performance by the date originally stipulated. If the representation is made before the time for performance has come, the waiver will operate as an equitable estoppel. If made after the time for performance is past it may also take effect as an election to affirm the contract.
Here, the judge’s factual findings supported the conclusion that both before and after the time for performance the buyer has clearly and unequivocally represented to the seller that it would not treat the contract as discharged by reason of late loading of the first shipment, but would instead accept delivery over an unspecified period in the future. In reliance on that assurance, the seller had continued screening and had loaded the first barge.
It is noteworthy that the buyer also sought to rely on a standard contractual clause that provided that no variation to the contract was to be effective unless made in writing. The extended delivery date for the first shipment was a variation. That argument was dismissed: the Court of Appeal stated there is no reason why the contract, including the clause requiring variations to be in writing, could not have been varied orally.
That left the question of whether all instalments had to be shipped by 30 April 2005. All parties were aware of the capacity of the barges used for transporting ore. It was in fact recognised by both buyer and seller from the outset that if the first shipment was not loaded until 28 January 2005, the full contractual quantity could not be delivered until mid-June, despite the wording of the contract. It was apparent that the late screening and loading of the first shipment would push back the date for completion of the contract. The Court held that the parties had plainly not conducted themselves on the basis that delivery of the entire quantity by 30 April 2005 was of the essence of the contract. On this basis, the Court rejected the argument that the whole of the contracted quantity of ore had to be shipped by 30 April 2007. The buyer could not rely on the dates for delivery set out in the contract.
Another issue was whether the seller was indeed able to perform the contract by delivering the required volume of ore. The material had been stored in the open for many years in unsegregated piles and indeed much of the ore was below the water level of lakes created by weather conditions. Further, the seller had sold and delivered ore from the site to third parties.
This gave rise to two difficult questions:
- how much material remained on site to satisfy the contract with the buyer; and
- what proportion of it met the contractual requirements?
There was disputed factual and expert evidence on this issue, and even questions whether some of that evidence had been served late and was inadmissible. The trial judge decided that sufficient compliant material existed for the seller to perform the contract and this decision was upheld by the Court of Appeal.
comment
As is often the position in cases of this nature, a significant amount of factual evidence was heard about the manner in which the contract was performed and, in addition, the quantity and quality of the material that remained. However, Wall LJ provided a short supporting judgment that went to the heart of the case in stating that:
‘This strikes me, as a non-specialist in the field, as a very simple case. The [buyer]… made a clear bargain for the purchase of manganese ore. At a later stage, notably when the price of the product fell, it repented of its bargain, and sought to extract itself from it.’
By James Maton, partner, Edwards Angell Palmer & Dodge UK LLP. E-mail: jmaton@eapdlaw.com.
At-a-glance guide
- Failure to deliver goods, if time is of the essence, would be a breach of contract usually permitting the buyer to treat the contract as at an end.
- An innocent buyer faced with such a breach of contract can instead elect to affirm the contract and treat it as continuing.
- If the buyer represents that it is willing to accept performance out of time and the seller relies on that representation, the buyer cannot insist on performance by the original date.
- If the representation is prior to breach, it will operate as an equitable estoppel.
- If the representation is made after breach it may also take effect as an election to affirm the contract.
- Such representations or affirmations can be made by conduct.
