Septo Trading Inc. v Tintrade Limited – A useful reminder of how courts deal with conflicting clauses
Standard charterparty forms such as GENCON or NYPE will typically be used as the starting point for fixture negotiations. Both parties to the contract will then add bespoke clauses to fit their respective needs. Where parties have been involved in several consecutive fixtures together they may go so far as to base each recap on the previous terms, with amendments to suit any new requirements. Disputes may then arise when these new clauses conflict with the standard charterparty terms on which the contract was originally based.
While it does not create new law, the recent Court of Appeal judgment in Septo Trading Inc. v Tintrade Limited serves as a useful reminder of how English courts deal with inconsistencies between bespoke clauses and standard printed terms.
In this case, the parties entered into a contract for the sale of fuel oil. The terms of the contract were evidenced by an email recap which stated that a quality certificate issued by an independent inspector at the load port would be binding on both parties. The recap also provided that the BP 2007 General Terms and Conditions for FOB Sales (BP Terms) should apply “where not in conflict with the above”. The BP Terms state that the quality certificate will be binding on both parties for invoicing purposes, but without prejudice to the rights of either party to bring a quality claim. The quality certificate at the load port found that the cargo was in good condition. However, following discharge the cargo was found to be off-spec. Investigations concluded that the tests carried out at the load port were not representative of the fuel loaded on board. The buyer claimed over USD 3 million in damages.
The court found that there was a conflict between the bespoke recap terms and the BP Terms. To reach this conclusion the judge asked three questions in turn:
1. What was the meaning of the recap clause when considered on its own?
2. What was the effect of the standard form clause?
3. Could the two clauses be fairly and sensibly read together, or did they conflict with each other?
The court held that the two clauses could not be read together. The clause in the BP Terms did not qualify or supplement the recap clause, but instead deprived it of all of its practical effect. The court held that the recap clause should be applied, with the effect that the quality certificate issued at the load port was binding on both parties.
This is a good reminder that where there is an inconsistency and the clauses cannot be sensibly read together, special terms (whether in a recap, or as additional or ‘rider’ clauses) will prevail over clauses in the standard printed form.
Source: The Standard Club