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    Termination Case Study Presentation Group6

    Uploaded by

    KrishnanandShenai
    This case examines whether Bunge SA committed an anticipatory breach of contract by cancelling the sale of Russian grain to Nidera BV before a Russian export embargo was imposed. Bunge cited a clause in the GAFTA 49 contract that allowed cancellation in the event of restrictions. The arbitration board ruled that Nidera was entitled to $3,062,500 in damages based on the contract's default clause, even though Nidera may not have actually suffered a loss. The group analyzing the case believes the default clause should be interpreted in light of general contract principles, and damages should only be awarded if an actual loss can be proven.

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    Termination Case Study Presentation Group6

    Uploaded by

    KrishnanandShenai
    100 views10 pages
    This case examines whether Bunge SA committed an anticipatory breach of contract by cancelling the sale of Russian grain to Nidera BV before a Russian export embargo was imposed. Bunge cited a clause in the GAFTA 49 contract that allowed cancellation in the event of restrictions. The arbitration board ruled that Nidera was entitled to $3,062,500 in damages based on the contract's default clause, even though Nidera may not have actually suffered a loss. The group analyzing the case believes the default clause should be interpreted in light of general contract principles, and damages should only be awarded if an actual loss can be proven.

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    This case examines whether Bunge SA committed an anticipatory breach of contract by cancelling the sale of Russian grain to Nidera BV before a Russian export embargo was imposed. Bunge cited a clause in the GAFTA 49 contract that allowed cancellation in the event of restrictions. The arbitration board ruled that Nidera was entitled to $3,062,500 in damages based on the contract's default clause, even though Nidera may not have actually suffered a loss. The group analyzing the case believes the default clause should be interpreted in light of general contract principles, and damages should only be awarded if an actual loss can be proven.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    100 views10 pages

    Termination Case Study Presentation Group6

    Uploaded by

    KrishnanandShenai
    This case examines whether Bunge SA committed an anticipatory breach of contract by cancelling the sale of Russian grain to Nidera BV before a Russian export embargo was imposed. Bunge cited a clause in the GAFTA 49 contract that allowed cancellation in the event of restrictions. The arbitration board ruled that Nidera was entitled to $3,062,500 in damages based on the contract's default clause, even though Nidera may not have actually suffered a loss. The group analyzing the case believes the default clause should be interpreted in light of general contract principles, and damages should only be awarded if an actual loss can be proven.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 10

    IIMA SMP06

    Presented by Section A,B,C Group-6


    Sumita Sinha

    LEGAL ASPECTS OF BUSINESS Krishnanand Shenai


    Mayank Jain

    CASE STUDY: Terminations by Archana S.Bhoite


    Rahul Gupta

    Mistake, Contract terms and Gyanendra Pandey


    Saurabh Mehrotra

    Damages-Bunge SA vs Nidera BV Sunder Shankar Iyer


    Yorick P.
    Prasad
    Ankit
    Shashi

    IIMA SMP06
    ABSTRACT OF CASE
    In 2010 Russia announced an embargo on
    the export of Russian wheat. As a result,
    Bunge SA, a large agribusiness based in
    Switzerland cancelled its contract citing
    the reason with Nidera BA, a Dutch
    agribusiness for a shipment of Russia
    grain. The case examines whether Bunge
    SA committed an anticipatory breach of
    the contract by cancelling the sale of
    Russian grain to Nidera BV before the
    embargo was imposed.

    IIMA SMP06
    Case Facts (1/2)
    - Bunge sells to Nidera 25,000 metric tonnes Russian milling wheat
    f.o.b. Novorossyisk.
    - The contract incorporated GAFTA 49.
    - Delivery 23rd-30th August 2010.
    - 5th August 2010: Nidera nominated the M/V 'Royal' for shipping.
    - 5th August 2010: Russia announces Resolution 599 imposing
    "temporary prohibition" on the export of milling wheat from
    Russia between 15th August and 31st December 2010.
    - 9th August 2010: Bunge wrote to Nidera informing them of the
    export ban: "In accordance with Gafta 49, clause 13, sellers
    hereby advise buyers, and declare the contract in reference as
    cancelled.“
    Case Facts (2/2)
    - 9th August 2010: Bunge wrote to Nidera informing them of the
    export ban: "In accordance with Gafta 49, clause 13, sellers
    hereby advise buyers, and declare the contract in reference as
    cancelled.“
    - 11th August 2010: Nidera accepts Bunge’s message as
    repudiation, terminates the contract and claims US$3,062,500.
    - Damages assessed pursuant to Default clause - difference
    between the contract price and the market price on 11th August
    2010.

    The quantum claimed: US$3,062,500


    Clause 20: GAFTA Default Clause.. included
    “In default of fulfilment of contract by either party, the following
    provisions shall apply:
    (a) The party other than the defaulter shall, at their discretion have
    the right, after serving notice on the defaulter, to sell or purchase, as
    the case may be, against the defaulter, and such sale or purchase shall
    establish the default price.
    (b) If either party be dissatisfied with such default price or if the right
    at (a) is not exercised and damages cannot be mutually agreed, then
    the assessment of damages shall be settled by arbitration.
    (c) The damages payable shall be based on, but not limited to, the
    difference between the contract price and either the default price
    established under (a) above or the actual or estimated value of the
    goods on the date of default established under (b) above...".
    At the arbitration...
    a. The Default Clause applied to anticipatory repudiation;
    b. that Nidera had not bought against Bunge pursuant to sub-clause
    (a);
    c. that the date of default for the purpose of sub-clause (c) was 11
    August 2010; and
    d. that the difference between the contract and the market price at
    that date was US$3,062,500.
    In Dispute – Assessment of Damages
    Bunge’s position: To award damages, there must be (1) a decision
    that loss has been suffered by reason of the default and (2) an
    assessment of the amount of that loss.

    Nidera’s position: Because the Default Clause applied, they were


    entitled to damages whether or not they would actually have
    suffered the loss for which they claimed based on the formula in the
    clause.
    Continue...
    Bunge was in anticipatory breach by sending their cancellation notice on 9
    August 2010. The possibility existed at the date of the cancellation that the
    embargo might have been lifted in time to permit shipment. However, the
    contract would have been cancelled in any event and this had no value. That
    is: Nidera suffered no loss and were not entitled to any damages.

    The GAFTA Appeal Board accepted that the contract would have been
    cancelled in any event.....but that Nidera was entitled under sub-clause
    (c) of the Default Clause to a damages award of US$3,062,500, reflecting
    the difference between the contract price and the market price on the
    agreed date of default. In the Appeal Board’s view, such an award was
    required by clause 20(c) of GAFTA 49. "…A very large number of default
    cases come before GAFTA arbitrators and GAFTA Appeal Boards. The
    GAFTA Default Clause is a clause with which everyone in the trade is fully
    familiar”
    Group’s Thoughts and Conclusion..
    ● Legislative embargo - an official ban on trade or other commercial activity with a
    particular country.
    ● This case is in Bunge side
    ● 9th Aug 2010 - email too was sent
    ● As per the clause seller is right to win the case as it was drafted in the GCC
    Agreement
    ● Anticipatory breach was accepted by the buyer and hence relieving his from all
    forward claims of damages
    ● Seller asked to restate the offer if the embargo is lifted however buyer declined
    the seller's offer
    ● Contracts are formed voluntarily and parties are free to set their own terms in
    the contracts over and above GCC
    ● Contract terms must comply to the default principles set by the court... , buyer
    must choose an alternate source and claim the difference in terms of damages
    as per principles of damages
    ● Point 51 - damages of non-delivery point 2 & 3 applies
    ● Decision to announce termination of a Contract is a very serious & sensitive
    matter and will have major implications
    Continue...
    ● GCC has elaborate terms intended to enforce or oust the general
    principles of contract law
    ● Result will be GCC will interact & interface with contract terms to provide
    binding directions
    ● A term in a contract cannot be expected to be a comprehensive code
    ● Question 1 -As per question 1st by court - in case of anticipatory breach
    in practice the buyer will contract from another source to mitigate the
    losses.This will be the basis for award of damages
    ● Question 2- As per Question 2, award of substantial damages who has
    not suffered
    ● GAFTA'S BOARD - Took differential pricing / MT and then multiplies it
    with total tonnage ... USD 3062500 USD diff between contract and
    market price
    ● Court concluded- the buyers did nothing in terms of the consequence of
    the termination since they didn't go in the market to replace the goods
    ● At last, irrespective of the terms in the General Conditions of Contract the
    general principle will interact and interface with the contract terms to
    provide the binding directs

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