Impossibility of performance

[Srishti Singh]

Pagnan SpA vs Tradax Ocean Transportation SA
APPELLANT- Pagnan SpA
vs
RESPONDENT- Tradax Ocean Transportation SA
In the (CA)Court of Appeal
12 June 1987
Before Lord Justice Dillon Lord Justice Woolf and Lord Justice
Bingham.

Where reported:- [1987] 3 ALL E.R. 565, [1987] 2 Lloyd's Rep.342
Subject:- Sale of goods
Sec 13(3) of The Sale of goods act 1930:-
13.When condition to be treated as warranty-
3.Nothing in this section shall affect the case of
any condition or warranty fulfillment of which is excused by law by
reason of impossibility or otherwise.

Catchphrases:- Seller's duty; export licence; quota restrictions;
seller required to provide export certificate; whether absolute
obligation to use best endeavors-Non-delivery - Export of tapioca
pellets governed by export licence - Sellers unable to make delivery -
Whether absolute obligation on sellers to provide for export
certificate - Whether sellers could rely on force majeure for failure
to do so.
Legislation Cited:- Arbitration Act 1979 s. 1
Arbitration Act 1979 s. 1(7)(a)
Arbitration Act 1979 s. 1(7)(b)
HEADNOTE:-
Appeal by the buyers, Pagnan S.p.A. from the decision of Mr. Justice
Steyn ([1986] 2 Lloyd's Rep. 646) dismissing their appeal against the
arbitration award of the Board of Appeal of GAFTA made in the dispute
between the buyers and the sellers, Tradax Ocean Transportation S.A.
concerning the April and May shipments of Thailand tapioca pellets
which the sellers were unable to ship because of export restrictions
imposed by the Thai authorities.

By a contract dated Nov. 23, 1982, the sellers sold to buyers 35,000
tonnes 5 per cent. more or less at the buyer's option of Thailand
tapioca pellets at U.S. $109 per tonne f.o.b. stowed/trimmed Sriracha
for shipment February, April and May, 1983. The contract incorporated
the provisions of GAFTA 119 which provided inter alia:
19. Prohibition - In case of prohibition of export or in case of any
executive or legislative act done by or on behalf of the government of
a country of origin restriction export only such restriction shall be
deemed by both parties to apply to the contract to prevent fulfilment
and to that extent this contract or any unfulfilled portion shall be
cancelled.
The contract further provided:
Special terms and conditions herein . . . shall be treated as if
written on such Contract Form and shall prevail in so far as they may
be inconsistent with the printed clauses of such Contract Form.
Under the heading special conditions the contract provided that -
Sellers to provide for export certificate enabling buyers to obtain
import licence into EEC under tariff 07.06 with 6% import levy.
By the time the contract was made between the parties on Nov. 23,
1982, there was already, to the knowledge of both parties, a quota
system in existence restricting the export of Thailand tapioca pellets
to the EEC. By a co- operation agreement between the EEC and Thailand
which came into force in July, 1982, Thailand inter alia undertook to
limit, by a system of export certificates, its export of tapioca
pellets to the Community. An exporter had to be registered and had
first to obtain inter alia an export licence before he could obtain an
export certificate.
The first delivery under the contract duly took place. The 1982 quota
had been exceeded in December 1982 and the excess was taken out of the
first quarter for 1983. The amount to be loaded for*343 the first
quarter of 1983 was exceeded and the Thai authorities made it clear to
all exporters from Mar. 16, 1983 to the end of May, 1983 that they
were not going to allow any tapioca products at all to be loaded for
export to the EEC.
It was common ground that the buyers' nominations of vessels to lift
the April and May instalments complied with the contract. It was not
however possible for the sellers to obtain export certificates to
enable the goods to be imported into the EEC at a 6 per cent. levy.
The buyers declared the sellers in default and claimed damages. The
dispute was referred to arbitration. The first tier arbitrators found
in favour of the buyers but the Board of Appeal of GAFTA set aside
that award on appeal.
ISSUES :-
1)whether a special condition in GAFTA 119 which imposed the duty on
the sellers to provide for an export certificate was to be interpreted
as imposing on the sellers an absolute obligation or only a "best
endeavours" obligation.
2)if the obligation was absolute in character whether the special
condition "overrode" a standard form GAFTA 119 force majeure clause.

Summary of the judgments by C.A.(DILLON,WOOLF and BINGHAM, L.J.J.) on
appeal by the buyer:-
1) The heart of this case lies in the question whether there is
inconsistency between the special condition and cl. 19 of GAFTA
119.There are three terms of the contract which are of particular
importance to the issues on this appeal. First, there is a special
condition to this effect:
Sellers to provide for export certificate enabling buyers to obtain
import licence into E.E.C. under tariff 07.06 with 6% import levy.
Secondly, the contract provided that its general conditions should be
according to GAFTA 119/125
Thirdly, the contract made provision for a possible conflict between
the terms of the printed form and special terms introduced by the
parties
In the European Community regulations were made for quota quantities
to be treated under tariff heading 07.06 with the 6 per cent. levy,
and a system was introduced for the issue of import licences against
Thai export licences.
On Sept. 30, 1982 the Thai government introduced a regulation. It
imposed a framework of which the main features were these, so far as
the relevant period is concerned. First, the year 1983 was divided
into four quarters, beginning on Jan. 1, and the annual quota was
divided, albeit somewhat unevenly, between the four quarters of the
year. Secondly, there was a requirement that exporters of Thai tapioca
should be registered. Thirdly, it was required that export licences
should be issued to registered exporters before loading of cargoes
destined for the European Community. Fourthly, provision was made for
the issue of export certificates on the submission of evidence of
loading of vessels by means of submission of a bill of lading. Only
goods covered by an export certificate would qualify for preferential
treatment within the European Community. This was the regulation in
force when the buyers and sellers made this contract.
Subsequently, the regulatory position in Thailand changed.The effect
was therefore to prevent export of Thai tapioca to the European
Community in the period March to May, 1983.
Thai authorities made it clear to all exporters, from the 16th March
1983 through April and May 1983, that they were not going to allow any
tapioca products at all to be loaded for export to the E.E.C.,
although there was no restriction on such products destined for
countries other than the E.E.C.
So the fulfilment between 29th April and 6th May 1983 for the May
portion was so prevented and that notwithstanding the contractual
obligation imposed on the Sellers "to provide for export certificate
enabling Buyers to obtain import licence into E.E.C. under tariff
07.06 with 6% import levy", the provisions of Clause 19 of GAFTA 119
nevertheless operated to cancel the Contract so far as the April and
May 1983 portions were concerned as a result of the actions of the
Thai Government.
The task of the Court plainly was to construe the special condition
fairly in the context of the contract as a whole and in its factual
setting in order to ascertain the true intention of the parties. the
clause imposed an absolute obligation on the sellers to provide for
the export certificate, save in so far as any other clause of the
contract might modify the sellers' obligation or relieve him from the
consequence of breach.This clause imposed more than an obligation to
use best endeavours or due diligence.The special condition, properly
construed, imposed an absolute obligation on the sellers to obtain an
export certificate and a similar obligation rested on them to obtain
an export licence since the possession of the latter was a pre-
condition to obtaining an export certificate.
If the sellers were unable to provide for the certificate because of
any impediment falling within the carefully defined ambit of cl. 19
they were relieved of their contractual obligations and there was no
indication that cl. 19 was not to apply to this as to all other
contractual obligations.

2)This was not a case of failing to provide for an export certificate,
but a case in which the whole process of export - the issue of the
export licence, the loading of the vessel and the issue of the export
certificate - were prohibited by governmental action.In any contract
in which there are standard terms and special terms, it is desirable
to have a provision to avoid conflict between the standard and special
terms.
Here the parties have made express provision that only applies in so
far as the printed term is inconsistent with the printed clause.
The contract did, however, contain "a standard force majeure" or
"frustration clause "; that is cl. 19. That clause comes into
operation in the circumstances which it specifies, which are inter
alia where there is a prohibition on export, a blockade or
hostilities, or in the case of any executive or legislative act done
by, or on behalf of, the Government of the country of origin; and it
provides that in those circumstances the contract shall be cancelled
to the extent that fulfilment is no longer possible.cl. 19 supplements
the special condition and deals expressly with circumstances with
which the special condition could have dealt but did not deal.Clause
19 does not cut down or detract from the benefits to the seller under
the special condition
Neither the special condition nor cl. 19 would be rejected as totally
repugant to the other, but cl. 19 would read as qualifying the special
condition so that, in the events provided for by cl. 19, the contract
or any unfulfilled portion thereof would be cancelled. If the contract
is thus cancelled, then obviously the sellers are released from their
obligations under the special conditions.

ORDER :- Appeal dismissed with costs, including costs of the
respondents' notice; application for leave to appeal to the House of
Lords refused.