An action for the unpaid price

An action for the unpaid price: when do the terms of payment clauses affect the right of an unpaid seller to recover the purchase price? 

Trans Trade RK SA -v- State Food and Grain Corporation of Ukraine [2025] EWHC 1803 (Comm)

The Commercial Court has overturned three GAFTA Appeal Awards and provided confirmation of the correct interpretation of s.49(2) of the Sale of Goods Act 1979 (the Act).

The background facts

Under three contracts dated May and June 2021, State Food and Grain Corporation of Ukraine (Sellers) agreed to sell and Trans Trade RK SA (Buyers) agreed to buy various quantities of corn on FOB Chornomorsk, Ukraine terms for delivery between May and August 2021 (the Contracts). The Buyers paid the price for the cargo loaded onto two vessels but failed to pay for cargo loaded onto two further vessels. 

Sellers brought actions in GAFTA arbitration for the price of the unpaid goods and Buyers sought to defend those actions on the grounds that (i) the Contracts were frustrated and (ii) the Sellers were not entitled to maintain a claim for the price not paid (both defences failed in GAFTA arbitration). Buyers appealed the awards to the Commercial Court under s.69 of the Arbitration Act 1996. 

The pertinent clause in all three Contracts was:

"6.1 100% of the value of the part of the Goods delivered to fulfilment … shall be paid by the Buyer via bank transfer on CAD (cash against documents) basis, in full accordance with a commercial invoice from the Seller and by the 1st September 2021 (inclusively) against scan-copies of cargo documents mentioned in Clause 6.2 of the Contract”

Clause 6.2 then set out the documents which Sellers were required to present for payment which, crucially, included bills of lading. 

The question of law for the Court to decide was whether a FOB seller was entitled to maintain an action for the price under s.49(2) where (i) payment is by CAD, (ii) property has not passed, (iii) the goods have been delivered on board the vessel but the price has not been paid and (iv) the original cargo documents have not been provided to the buyer. Furthermore, what is meant by the term “a day certain” in s.49(2)? 

S.49(2) of the Act

In order to bring an action for the unpaid price of goods under s.49(2) of the Act, the price must be payable on “a day certain irrespective of delivery”, property in the goods cannot have passed and the goods cannot have been appropriated to the contract. 

The Buyers’ case on appeal was that because shipping documents were required in order for payment to become due, payment was not “irrespective of delivery” such that an action for the price could not be maintained. Furthermore, despite the fact that Clause 6.1 included a specific date by which payment had to be made, the fact that an action was required of the Sellers (providing the listed documents) meant that the payment date was not “a day certain”. 

The Sellers’ case on appeal was that the wording of the payment clause meant that the payment was due on “a day certain irrespective of delivery”. 

The Commercial Court decision

“Irrespective of Delivery”

The Court allowed the appeal and dismissed the Sellers’ claims for an action for the price. 

The Court held that under a FOB contract which required payment against shipping documents, the price was not payable “irrespective of delivery”. In order to fall within s.49(2), the contract must provide for payment which is not conditional upon the prior or simultaneous performance of the seller’s delivery obligation. In other words, delivery occurs under a FOB contract when the goods are shipped and the traditional point of risk and title passing is when the goods pass over the ship’s rail. If shipment, and therefore, delivery necessarily must occur before payment is due, then payment is not “irrespective of delivery”. 

Under these Contracts which provided for cash against documents and where the documents required included bills of lading, the price is not payable “irrespective of delivery”. A bill of lading cannot be issued until the goods are shipped and thereby delivered under a FOB contract. Therefore, the obligation to make payment was not “irrespective of delivery” and, consequently, s.49(2) could not assist the Sellers in an action for the price. 

The Court held that under a contract for the sale of goods, a price is payment “irrespective of delivery” within the meaning of s.49(2) only where performance by the seller of its obligation to deliver the goods is not a condition precedent or concurrent obligation to the buyer’s obligation to pay the purchase price. 

Therefore, under the terms of the Contracts, it was a requirement for the goods to have been shipped (and thereby delivered) in order for the payment price to become due. As such, payment of the price was not “irrespective of delivery” and so the Sellers’ claims under s.49(2) of the Act failed. 

“A Day Certain” 

Finally, the Court held on the basis of past authority that “a day certain” meant that the date for payment had to be specified in (or ascertainable from) the contract and it did not depend on any future or contingent event. As a result, because the payment clause in the Contracts required Sellers to present shipping documents in order for the price to become payable, the deadline for payment was not “a day certain” such that s.49(2) did not assist Sellers. 

Comment

This decision confirms the position under s.49(2) in relation to the meaning of “a day certain irrespective of delivery”. 

There is, however, a statutory black hole between s.49(1) and s.49(2) which those buying and selling goods ought to watch out for. 

S.49(1) applies where the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract. In those circumstances, a seller can maintain an action for the price against the buyer. 

Therefore, in a situation where the obligation to pay for the goods is conditional upon prior or simultaneous delivery occurring and/or delivery has occurred, but the contract provides that property does not pass until payment, s.49(1) cannot apply because property has not passed and s.49(2) cannot apply because payment is not “irrespective of delivery”.

In that scenario, a seller’s recourse is a claim in damages against the buyer. It is important for parties to understand when their recourse is a claim in damages and when it is an action for the price, as the requirements to succeed with each type of claim are different. A claim in damages will require proving (i) breach of contract, (ii) causation, (iii) loss and (iv) mitigation, whereas an action for the price only requires a seller to prove the elements of s.49 and imposes on a seller no duty to mitigate.