Conflict of laws—Contract of sale—Place of delivery of goods

House of Lords
Lord Bingham, Lord Rodger, Lord Brown, Lord Mance and Lord Neuberger
20 February 2008

Where a seller under a contract on FOB terms retains no interest in the goods upon shipment, delivery is made at the place of shipment, under Art 5(1)(b) of Council Regulation (EC) 44/2001 (the judgments regulation).
Richard Lord QC (instructed by Thomas Eggar, Crawley) for the buyers.
Michael Bools (instructed by Kimbells LLP, Milton Keynes) for the sellers.

In April 2004, the buyers, a company domiciled in Cyprus, agreed to purchase a consignment of cider from the sellers, a Scottish company. The contract was subject to English law. The contract of sale was on terms “CFR Limassol”. Shipment was required to be made by the seller at one of two ports of shipment contractually specified by the buyers. The shipping line and Liverpool shipping agents, with whom the sellers were to arrange for carriage to Cyprus, were specified by the buyers. The price was to be FOB, with the actual freight rate to be added in the final invoices, once it had been ascertained.

The bills of lading were made out to the buyers as consignee, non-negotiable, and to be forwarded to the buyers “immediately after shipment”. Payment was to be within 90 days of shipment. In the event, the cider was loaded into containers in England and shipped at Liverpool for Limassol in Cyprus. The buyers refused to pay and the sellers brought proceedings in England.

The issue arose as to the appropriate jurisdiction. It was common ground that, in terms of the judgments regulation, Art 5(1)(b) the English courts did not have jurisdiction unless, according to English law, the cider was “delivered” in England, in particular on shipment at Liverpool. The buyers alleged that the term “CFR Limassol” amounted to delivery in Limassol. The judge held that jurisdiction for the sellers’ claim lay in England, as did the Court of Appeal. The buyers appealed.
 

LORD MANCE:

Article 5(1) of the judgments regulation provided, so far as material: “(b)...unless otherwise agreed, the place of performance of the obligation in question shall be: - in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered...”

The buyers’ primary case was that Limassol was the contractually agreed place of delivery under the sale contract. The buyers would not in practice be able to inspect the goods until after their arrival in Cyprus and, further, the contract referred to payment up to 90 days after arrival.

His lordship held that none of those submissions had any force. The invoices merely confirmed that the transport arranged went no further than the discharge port of Limassol. That the buyers would not in practice inspect until after arrival in Cyprus added nothing. It was commonplace in international sales. The agreement for payment only 90 days after arrival was no more than a relaxed payment regime with no significance in relation to the place of delivery.

In the alternative, the buyers submitted that the contract was on terms providing for delivery CFR Limassol and that delivery should be regarded as occurring, at the earliest, when the shipping documents were forwarded to and/or received by the buyers.His lordship held that the contract was, in fact, to all intents and purposes an FOB contract.
Contract differences

There were three general differences between FOB and C&F contracts:
(i)  First, an FOB contract specified a port or a range of ports for shipment of the goods. A C&F contract specified a port or ports to which the goods were consigned.

(ii)  Second, an FOB contract required shipment (whether by or on behalf of the seller or the buyer) of the goods at the port (or a port within the range) so specified, ie the seller could not buy afloat. In contrast, under a C&F contract responsibility for shipment rested on the seller, and that could be fulfilled by the seller either shipping goods or acquiring goods already afloat after shipment, and moreover shipment could be at any port (unless the contract otherwise provided).

(iii)  Third, and as a result, a C&F contract involved (subject to any special terms) an all-in quote by the seller, who carried the risk of any increase (and had the benefit of any reduction) in the cost of carriage. In contrast, under an FOB contract, the buyer carried the risk (and had the benefit) of any such fluctuation.

So viewed, it was clear that the present contract was in all essential respects an FOB contract.

The sellers had no commercial interest in the goods after shipment. The bills of lading were to be and were: (i) made out to the buyer as consignee; and (ii) non-negotiable, and were to be forwarded to the buyer “immediately after shipment”. Risk and property therefore both passed on shipment.
In those circumstances, delivery of possession of the goods as well as property and risk in respect of them had taken place upon shipment. It followed that delivery of the goods took place upon shipment in every sense that could conceivably be relevant under the judgments regulation, Art 5(1)(b) and that the appeal should be dismissed on that basis alone.

It therefore became unnecessary to consider what the position might have been after the passing of property and risk on shipment if the sellers had not only made a special contract with the carriers but had also, for some reason, retained symbolic possession of the goods through the bills of lading until they were forwarded to and/or received by the buyers. His lordship considered that in those circumstances, the place of shipment would remain the place of delivery.

The appeal would therefore be dismissed.
Lord Brown and Lord Neuberger delivered concurring judgments. Lord Bingham and Lord Rodger delivered concurring judgments but did not express a view on the hypothetical situation where the sellers retained symbolic possession of the goods after shipment through the bills of lading.