Key takeaways
CIF Contract
Delivery dates in a contract on CIF terms do not give rise to an obligation on the seller to deliver the goods at the contractual destination within those dates.
Standard industry terms and conditions
Parties can use their bespoke contract terms to amend standard terms to suit their specifications.
Contractual notices
Notices should comply with contractual requirements, otherwise they may be invalid.
FinCo International AG -v- Integra Petrochemical Europe AG [2026] EWHC 727 (Comm)
This decision confirms the usual position that the inclusion of delivery dates in a contract that is on CIF terms does not give rise to an obligation on the seller to deliver the goods at the contractual destination (sometimes known as 'complete delivery') within those dates. It is more usual for a CIF contract to place an obligation on the seller with respect to the time of loading (or tender of documents) with dates for delivery at the contractual destination treated as being indicative only.
If the parties wish to depart from this usual position, they can agree to impose an obligation to effect 'complete delivery' by a specified date or within a specified window but should do so in clear and unambiguous language.
The background facts
On 4 October 2023, FinCo International AG (FinCo) and Integra Petrochemical Europe AG (Integra) entered into a contract whereby Integra agreed to sell and FinCo agreed to buy a cargo of 10kt of methyl tertbutyl ether (MTBE). The agreed contract terms were set out in an email 'recap' that incorporated v.1.2 of the BP Oil International Limited General Terms and Conditions for Sales and Purchases of Crude Oil and Petroleum Products (BP GTCs).
The contract terms as initially agreed included 'Delivery dates: 10 - 24 November 2023' and provided for 'Delivery: DES ARA', in other words delivery ex ship Amsterdam, Rotterdam, Antwerp. On 6 October 2023, the delivery term was amended to 'Delivery: CIF ARA'.
On 5 October 2023, Integra emailed FinCo, nominating the M/T Aramon as the performing vessel under the contract. FinCo responded, indicating that it did not believe the vessel would 'fit' at the jetties at the discharge terminal that FinCo (or rather its onward customer) wished to use. Integra checked to see if a smaller vessel was available but confirmed on 9 October 2023 that it was not.
Further communications were exchanged between the parties over the period 10 – 13 October 2023 during which FinCo identified the intended discharge terminal as 'GES' (Global Energy Storage) in Amsterdam and the parties discussed whether the MTBE should be discharged from the Aramon at the GES terminal using barges or at a different terminal in Amsterdam from which it could be moved to the GES terminal by onshore pipe or other means.
The MTBE was loaded on to the Aramon at the loading port in the Persian Gulf on 24 October 2023. A bill of lading was issued with FinCo named as the notify party. The estimated date for arrival at ARA at the time of loading was around 17 November 2023.
On 22 November 2023, Integra informed FinCo that the Aramon's ETA at ARA was now 27 November 2023 (the date had slipped due to a delay during a previous stop at Barcelona).
On 25 November 2023, FinCo emailed Integra, purporting to terminate the contract on the grounds that Integra had not given a valid nomination that allowed the vessel to discharge at the discharge terminal within the discharge window of 10-24 November 2023. Integra did not accept that termination.
The Aramon arrived at ARA on 27 November 2023 and purported to tender a notice of readiness (NOR).
On 4 December 2023, Integra demanded and was paid the contract price under the standby letter of credit that had been provided to it by FinCo. FinCo maintained that the contract had been terminated and that Integra was not entitled to the price. Integra sold the MTBE to a third party in the market and, after deducting costs, paid the balance to FinCo, which was less than the contract price. FinCo sought to recover the full contract price from Integra.
The arguments
The issue for the Court was whether FinCo had been entitled to terminate the contract when it purported to do so on 25 November 2023. If it was, then the contract price had not become due, and Integra was in breach of contract. If FinCo was not entitled to terminate, then Integra became entitled to the price 3 working days after tender of NOR and the breach of contract claims failed.
FinCo relied on two alternative grounds for its right to terminate the contract:
A repudiatory breach of contract by Integra in failing to deliver the MTBE to the discharge terminal within the contractual 'delivery dates'.
A breach of contract (amounting to a renunciation or repudiation) by Integra in refusing or failing to nominate a suitable vessel for delivery after FinCo had rejected the Aramon.
Integra contended that:
When the contract delivery terms were amended from DES to CIF (i) the point of delivery changed from the discharge terminal to the point at which the MTBE entered the Aramon's tanks at the loading port or alternatively (ii) the stated 'delivery dates' became 'indicative' only. Integra therefore complied with the contract because the MTBE was delivered when loaded on 24 October 2023 or because the delivery dates were indicative only such that the fact that the vessel was not ready to discharge at the discharge terminal within the delivery dates did not involve a breach.
FinCo did not validly reject the nomination of the Aramon (or agreed or was estopped by convention from denying that the Aramon had been validly nominated) and Integra therefore complied with its contractual obligations by nominating that vessel.
The Commercial Court decision
The delivery date issue
The Court found in favour of Integra on this issue.
The Court dismissed Integra’s argument based on the change of point of delivery. Although the change of delivery terms to CIF would make for an 'intellectually neat' argument that delivery would take place when the product had been placed on board the vessel at the loading terminal (pursuant to s.8 Part 2 of the BP GTCs on delivery under CIF/CFR contracts), the Court found this was inconsistent with the factual background of the dispute and therefore lacked commercial sense. In this scenario, the contract’s delivery dates referred to the vessel’s arrival at the discharge terminal.
However, the Court accepted the alternative argument as to indicative dates.
The effect of the amendment of the delivery terms from DES to CIF meant that s.11 of Part 2 (CIF/CFR contracts) of the BP GTCs applied. S.11 sets out provisions in connection with laydays and discharge dates in a CIF/CFR contract.
Pursuant to s.11.2, the range of dates provided by Integra to FinCo within which the vessel was to arrive at the discharge terminal amounted to an 'Indicative Discharge Date'. Pursuant to s.11.3, the Indicative Discharge Date was indicative only, and Integra assumed no responsibility for the delivery of the product at the discharge terminal.
The terms of s.11 were sufficiently clear and directly applicable to events in this scenario. Further, this interpretation of s.11 was consistent with the way in which CIF contracts usually operated, subject to agreement to the contrary. While parties to a CIF contract could agree to impose an obligation to effect complete delivery by a specified date or within a specified window, there was nothing in the 'Special Provisions' (additional transaction-specific terms) to indicate that the parties did not intend the normal consequences of CIF delivery terms to apply.
Therefore, Integra’s obligation was to ensure that the performing vessel tendered NOR at the loading terminal at a time consistent with arrival at the discharge terminal within the Indicative Discharge Date, given a reasonable assessment of the customary loading and voyage time.
If the performing vessel was the Aramon, Integra complied with that obligation when that vessel tendered NOR at the loading terminal in the Persian Gulf prior to loading on 24 October 2023, at which time the ETA at ARA was 17 November 2023. The fact that the Aramon did not tender NOR at Amsterdam until after midnight on 24 November 2023 was not, therefore, a breach of contract and FinCo's purported termination was not justified on that ground.
The nomination issue
S.14 of the BP GTCs set out terms in relation to nomination of a vessel. S.14.6 addressed 'Rejection of nominations and Vessel.' It provided in relevant terms as follows:
'14.6.1 The Buyer shall give notice accepting or rejecting any Vessel nominated by the Seller within 1 Business Day of receipt of the Seller's nomination.
14.6.2 Notwithstanding anything to the contrary express or implied elsewhere, the Buyer shall have the right (which right may only be exercised prior to the passing of property hereunder) to refuse, on any reasonable grounds, to accept any Vessel named pursuant to Section 14.2 including any Vessel referred to in Section 14.2.1(g). The Buyer shall not be liable for any loss or damage, direct or indirect, which the Seller may suffer as a result of the Buyer exercising such right…'
The Court held that s.14.6.2 did not create a right to reject (or refuse to accept) a vessel that was separate from and additional to the right to reject provided for by s.14.6.1. S.14.6.2 set out the Buyer's right to reject, including the requirement for reasonableness, with s.14.6.1 setting out how that right was to be exercised.
On this interpretation, the position as to acceptance or rejection of the vessel based on the information known to the Buyer at the time of nomination was settled promptly and clearly. This was important because parties acting in a fast-moving market needed to know clearly and quickly where they stood.
There was no sensible reason for the parties to have intended to create overlapping rights to reject or refuse to accept the vessel. The Buyer was required to accept or reject the vessel within 1 Business Day of nomination based on the information that it had at the time (and on the grounds set out in s.14.6.2); if the vessel was accepted and something new emerged thereafter that provided a reasonable basis for rejection, the vessel could be rejected pursuant to s.14.6.3.
Consequently, FinCo was obliged to give notice accepting or rejecting a vessel nominated by Integra within 1 Business Day of receipt of the nomination and, in the absence of notice rejecting a vessel, it was to be taken as having been accepted.
Looking at the facts and the parties’ exchanges of correspondence, the Court concluded that FinCo had not validly rejected the nomination of the Aramon. Among other considerations, instant messaging could not constitute valid notice of rejection pursuant to s.14.6.1 of the BP GTCs because s.70(4) provided that notice could not be given by instant messaging.
In any event, the messages relied on by FinCo did not amount to a valid rejection because no such rejection was communicated unequivocally. And any subsequent purported unequivocal rejection came too late and the right to reject had lapsed. Additionally, the Court would have found that FinCo was estopped from asserting that Integra had breached its obligation to nominate a vessel under the contract because the parties had proceeded on the basis that Integra could perform the contract by delivering the MTBE to Amsterdam on the Aramon and arranging discharge at Amsterdam into barges that would be nominated later.
In conclusion, FinCo was not entitled to terminate the contract and its claims failed.
Comment
The BP GTCs are amongst the most commonly used general terms and conditions in the international oil and gas trading industry. Parties using them should consider carefully their additional bespoke terms if they wish to amend the standard terms to suit their specifications. In case of inconsistency, the bespoke terms, or Special Provisions, will prevail.
