The State Trading Corporation of India Ltd. v. Transcontinental Affiliates Ltd. (formerly M. Golodetz Ltd.) (The Sara D) - Court of Appeal (Kerr, Lloyd & Butler-Sloss L.JJ.) - 8 June 1989

Contract for sale of goods - Whether obligation to provide countertrade performance bond guarantee is a condition of the contract

The dispute arose out of a contract for the sale by Golodetz to STC of 12,600 tonnes of South Korean sugar in December 1985 C & F to an Indian port at a price of $201.95 per tonne. Payment was to be made by an irrevocable letter of credit to be opened within 7 days from the conclusion of the contract. The sellers were to give a performance bond guarantee (PBG) in certain agreed terms and were to instruct their bank to open that immediately upon the conclusion of the business. But the contract also provided that the letter of credit to be opened by the buyers was to be operative irrespective of whether the PBG had been notified to the opening bank. This performance bond was referred to as “the sugar PBG”.