South Caribbean Trading Limited (SCT) entered into a contract with Trafigura Beheer BV (Trafigura) under which SCT agreed to sell to Trafigura 484,000 US barrels plus or minus 5% of fuel oil.
SCT had also agreed to sell 350,000 US barrels of wet fuel oil blendstock to Trafigura, which SCT had further agreed to repurchase from Trafigura together with 134,000 US barrels of cutter stock.
The issue was whether under the agreement to deliver 484,000 US barrels SCT was obliged to deliver to Trafigura fuel oil exclusively derived from the quantity of 350,000 wet fuel oil blendstock and 134,000 US barrels of cutter purchased from Trafigura.
SCT informed Trafigura that they intended to deliver fuel oil not exclusively derived from the wet fuel oil blendstock and cutter stock purchased from Trafigura but that they intended to buy in from another source. SCT maintained that they were entitled to treat the agreement to deliver 484,000 US barrels as insulated from other agreements to sell and re-purchase of wet fuel oil blendstock and to purchase cutter from Trafigura.
The contract contained no express terms as to the required origin of the components used to produce the fuel oil to be delivered under the contract. Trafigura refused to accept delivery of the barrels and SCT claimed for breach of contract.
In the absence of an express provision in the contract defining by reference to its origin the fuel oil SCT had to deliver to Trafigura, the court was required to look at whether such a provision could be derived from the other express terms of the contract or from business efficacy under the “officious bystander” approach.
The court looked to the other express terms of the contract to sell to Trafigura 484,000 US barrels and held that SCT could not deliver bought-in fuel to Trafigura that did not exclusively consist of components supplied by Trafigura under the other agreement. SCT would require Trafigura’s consent to introduce any other components.
*Full case details
South Caribbean Trading Limited vs Trafigura Beheer BV 22 November 2004, Queens Bench Division, Commercial Court, Judgement of Mr Justice Colman
Contact Fenwick Elliott on 020 7421 1986 or NGould@fenwickelliott.co.uk
The court’s willingness to imply a term by looking at other distinct express terms of the contract is a reminder that in the absence of an express term in a contract, the court will be influenced by other contractual provisions and the context in which the contract was written when deciding what the parties actually intended. This common sense approach to contractual interpretation suggests that terms might be implied into contracts more readily than in former times.