Singapore Commodities Lawyers

International Trade Practices

 

As commodities lawyers in Singapore, we often advise our clients on disputes arising from the international sale of goods. We have advised on transactions arising from various types of commodities including coal, iron ore, nickel as well as liquid cargoes like gasoil and chemical products. Our international trade practice ranges from advising clients on disputes arising from the formation and validity of contracts, force majeure, demurrage claims, documentary credit as well as quality disputes.

For instance, when trading in physical cargoes, force majeure is often invoked by the party who is unable to perform.  With our in-depth knowledge of the industry, we are well placed to provide timely and practical advice to our clients whenever force majeure is invoked.

We are well versed with the commercial and practical issues of international trade and are able to devise sound strategies to deal with such issues

Formation and Validity of Contract

When trading in physical cargoes like coal, iron ore and gasoil, it is very usual for traders to send bids or offers to their counterparties setting out only the main terms, and for negotiations to be carried out on those main terms only. Often, the main terms are agreed first before the formal contract document containing the rest of the terms is exchanged and signed by the parties.  As commodities lawyers, we are often faced with cases where parties may have agreed on some of the terms but not the others, or when the main terms are agreed but the contract is eventually not signed, and we are asked to advice on whether the contract has been formed, or whether there are any issues affecting the validity of the contract.

One such case is the Singapore Court of Appeal decision in China Coal Solution (Singapore) Pte Ltd v. Avra Commodities Pte Ltd [2020] 2 SLR 984 where we acted for the successful appellant in that case.

Although the main terms were agreed by the parties, the contract was not signed by the appellant.  We successfully argued before the Court of Appeal that the contract was legally binding as there was a clause in the contract stating that the contract was not effective until it was signed by both parties.

Force Majeure

Force majeure is a term that every trader would have encountered in the course of his trades. In the coal trade for example, supplies may be disrupted whenever there is severe flooding in Kalimantan causing the mines to flood, or when the roads leading to the port were damaged.

However, not every instance when the supplies are disrupted will constitute a force majeure event as very much depends on the words used in the force majeure clause.  Further, the disruption of supplies from one mine may not render performance by the supplier impossible as the supplier may potentially obtain supplies from other sources, albeit at a higher cost.

As commodities lawyers, we advise on issues on force majeure on a very regular basis and are able to provide timely and practical advice to our clients. 

Demurrage Claims

Demurrage claims are very common between shipowners and charterers.  These claims are equally common between buyers and sellers as the laytime and demurrage clauses in the charterparties are replicated in the sale and purchase agreements as a way to allocate risks arising from delays in loading or discharging.

While the principles on laytime and demurrage is largely identical whether it is contained in a charterparty or a sale and purchase agreement, it is often the case that the laytime and demurrage clause in the charterparty and the sale and purchase agreement do not mirror each other.  In an FOB sale contract, it is common to see clauses excluding force majeure events from laytime calculations.  The occurrence of an event might fall within the ambit of the force majeure clause in the sale and purchase agreement but that same event may not necessarily be excluded in the charterparty.

We have advised clients on demurrage claims in connection with their charterparties as well as sale and purchase agreements and have handled numerous arbitrations seated in Singapore. London and Hong Kong on demurrage claims.

Documentary Credit

Documentary credits are said to be the lifeline of international trade, and is the most common method of payment used in international trade.  As commodities lawyers, a significant portion of our practice includes advising our clients on issues arising from the use of documentary credits, in particular, credits governed by the UCP600.  Often, we have to advise our clients on what constitutes a workable letter of credit when there is a dispute on the terms of the credit to be provided.

The documents to be presented usually include shipping documents.  Our knowledge of shipping law and practice, coupled with our in-depth knowledge of commodities trading, enables us to provide comprehensive advice to our clients in all aspects of their trades.

The type of work we have done includes seeking injunctive relief from the Court to prevent payment on the documentary credit where fraud or unconscionability was alleged, and claims against the issuing bank for wrongfully rejecting the documents presented.

In instances when the documentary credits failed, we have advised clients on obtaining payment outside of the documentary credit.  We have also advised on cases where multiple fraudulent shipping documents were generated and presented to different banks under different documentary credits.

Quality Disputes

Another common problem faced by commodities traders is when the specifications of the commodity received is below the specifications stated in the contract.  Ordinarily the starting point would be to consider the terms of the contract to ascertain whether it provides for the load or discharge port survey results to be final and binding on the parties.  A very common problem faced by the buyer is when the load port survey results are said to be final and binding but the quality at the discharge port is different from that stated in the load port survey results.

As Singapore commodities lawyers, we work closely with experts and surveyors to ascertain the probable cause of the problem and to determine whether the problem was caused by contamination during shipment, or some other causes.

In an arbitration we handled involving a cargo of phenol, the buyers alleged that the cargo received was of a different specification from that as shown in the load port survey report.  We managed to prove that the problem was caused by contamination in the ship’s tanks during voyage and successfully obtained a final award in favour of the sellers.

Here are some of the frequently asked questions from our clients.

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Ordinarily there is no requirement for both parties to sign on a formal contract document for a contract to be legally binding.  A contract may be legally binding if both parties reached an agreement on all the essential terms.  There are however cases where it can be shown that the parties do not intend the contract to be legally binding until a formal document is prepared and signed, for example, if the agreement is expressed to be “subject to contract”.  For such cases, the contract needs to be signed by both parties in order for it to be legally binding.

The usual chain of events is that the terms of the sale and purchase agreement are agreed first before parties proceed to discuss the format of the letter of credit.  If parties agreed to insert a different latest shipment date in the letter of credit, ordinarily this would be regarded as an agreement to vary the terms of the sale and purchase agreement, and the term in the letter of credit will prevail.

Laycan is short for laytime and cancellation.  In a FOB sale contract, if the vessel chartered by the buyer fails to arrive at the load port within the laycan, the seller has the option to cancel the contract.  Delivery period on the other hand is the period by which the seller must deliver the cargo to the buyer.  If the laycan is from 1 to 10 January, and the delivery period is the month of January, it means the buyer’s vessel must arrive before 10 January, while the seller must ensure that the cargo is loaded within the month of January.

A “weather working day” is a day when the weather would have permitted loading or discharging if loading or discharging operations were carried out.  Even if the vessel is merely waiting at the anchorage and not performing any loading or discharging operations, period of bad weather may be excluded from the laytime calculations.  “Weather permitting” however means that only the times that loading or discharging was actually prevented due to the weather ought to be excluded from the laytime calculation.

No.  Back-dating a bill of lading is regarded as fraud and may be relied upon as a ground to injunct the issuing bank from making payment under the letter of credit.  Any letters of indemnity given to the shipowner to indemnify the shipowner from liability for back-dating the bill of lading would also be regarded as void.

Assuming that the Sale of Goods Act (Cap 393) applies, the damages would be the losses flowing naturally from the failure to deliver.  Where there is an available market for the goods in question, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered or (if no time was fixed) at the time of the refusal to deliver.

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