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Bunge SA v Nidera BV

Group C
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Was the seller in Anticipatory Breach ?

Decision by GAFTA arbitrators


• It was established that the seller’s communication on August 9 was an
anticipatory breach

Decision by Commercial Court & Court of Appeal


• It was established that the contract did not automatically cancel on August 5
and the seller had repudiated the contract

Decision by Supreme Court


• Anticipatory breach of contract was already established
• Point of contention was the damages that should be awarded to the buyer
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Damages in anticipatory breach
• Fundamental principle of common law of damages is the
compensatory principle
• Damages are awarded so that the injured party is placed in the same
situation as if the contract had been performed
• This principle is not clear in how to award damages in case of
“anticipatory” breach

… there is every reason to be wary about


applying the ordinary rules of damages to
this special type of ‘breach’ …
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Damages in anticipatory breach
• If damages are awarded, what dates are to be taken into account for
calculating damages?
• Do we take the current price? Like the buyer has done while
calculating damages?
• Or do we look at the market price at the contracted date of delivery?
• Has the buyer tried to mitigate his losses by trying to find another
seller immediately?

The answer … is only a prima facie answer, is that


where there is an available market for the goods, the
market price is determined at the contractual date of
delivery.
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Damages in anticipatory breach

• The contract price of the wheat was $160 per metric tonne
• Buyer gets a quote of $282.5 on August 11 and claims damages to
the extent of $3,062,500 before GAFTA tier 1 arbitration tribunal
• Seller contends that buyer did not suffer any loss since the embargo
did not get lifted. The contract would have been cancelled anyway
• Arbitrator agrees with this view and does not award substantive
damages
• GAFTA Board of Appeal notes that clause 20(c) has to be followed
and awards $ 3,062,500 in damages
• Now, supreme court has to decide the damages to be awarded
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Award of Damages : Supreme Court
• The court observes that the damages clauses exist so that disputes
about the “quantum of damages” can be avoided
• It could be by capping the maximum loss, or by means of arbitrary
formula to remove the uncertainty
• This could result in damages being under or over estimated
compared to application of common law principles
• The court also goes on to observe that such contractual clauses
cannot be regarded as complete codes

… Such clauses are not necessarily to be regarded as


complete codes for the assessment of damages. A
damages clause, like any other contractual provision,
is conclusive of the matters with which it deals.
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Award of Damages : Supreme Court
• The court also goes on to observe that the sub clauses a, b & c of
clause 20 produces two effects which differ from the common law
paradigm
I. The injured party is not required to mitigate by going into
market, but has the discretion to do so
II. If the injured party has not gone into the market, the contract
price can be compared with their “actual or estimated value”
• Another observation is that clause 20 is only concerned about finding
out value of goods. It is silent about ‘events that could possibly make
it impossible for the contract to be executed’
• In this case, the seller is lucky that the embargo was never lifted, and
the execution of the contract would have never been possible
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Award of Damages : Supreme Court
• In conclusion, the supreme court observes that the seller did
repudiate the contract by thinking it had the power to do so when in
reality it did not
• The court observes that clause 20 is not sufficiently comprehensive in
covering the entire field of damages
• The buyers did nothing to mitigate their losses by going into the
market. They therefore lost nothing
• The supreme court finally awards nominal damages in the sum of
US$5
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Thank you