Export ban: court construes FOSFA 201 prohibition and default clauses

This briefing from Ince & Co focuses on the case of Novasen S.A. v Alimenta S.A. [2013] EWHC 345 (Comm), where the court construed FOSFA 201 prohibition and default clauses. The parties entered into a contract for the sale of Senegalese crude groundnut oil in bulk. Before the goods were shipped, a Senegalese government prohibition on export that applied to this commodity was declared.  This stayed in force for just over two months.

The Sellers immediately notified the Buyers of the prohibition in accordance with the FOSFA 201 Prohibition clause incorporated into the sale contract, the result of which was that the shipment period was automatically extended by 30 days. At the same time however, the Sellers also purported to terminate the sale contract on the grounds of the prohibition. The Buyers declared this to be an anticipatory repudiatory breach of contract which they accepted as bringing the contract to an end and sought damages. The Sellers argued that the Buyers had suffered no loss because, pursuant to the Prohibition clause, the contract would, in any event, have come to an end without any liability on the Sellers’ part after the 30 day extension had expired. The FOSFA Board of Appeal disagreed and held that, by terminating the contract prematurely, the Sellers had deprived themselves of the right to rely on the potential automatic cancellation of the contract without any liability on their part, under the provisions of the Prohibition Clause. The Board awarded the Buyers default damages at the difference between the contract price and the market price as at the date of the termination. The Commercial Court has now allowed the Sellers’ appeal, finding that the Default clause in the contract placed a ceiling on the recoverable damages and conferred no right to recover damages if no loss had been suffered…

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