DUNAVANT ENTERPRISES INC V OLYMPIA SPINNING & WEAVING MILLS LTD

[2011] EWHC 2028 (Comm), Queen's Bench Division, Commercial Court, Mr Justice Burton, 29 July 2011

Contract - Sale of goods - Bales of cotton - Invoicing back clauses - Clauses by which the parties invoice goods at the market price following termination of the sale contract - Effect of force majeure clause - International Cotton Association Bylaws and Rules

The invoicing back clauses whose interpretation was at issue had been incorporated into a contract between the claimant as seller and the defendant as buyer for the export for sale of raw cotton dated 30 July 2007. The contract provided for delivery by the claimant to the defendant of cargoes of bales of cotton, the first shipment to be in August 2009 with payment by way of letter of credit opened at least 15 days prior to the first day of the contract shipment month. The defendants in early 2009 experienced difficulties in opening letters of credit, and the contract was closed out and the issue of compensation was referred to arbitration. The panel determined that the invoicing-back rules of the International Cotton Association (ICA) resulted in a payment by the seller being due to the buyer of US$456,352.20 plus interest and costs. The sum was reduced on appeal. On appeal, the seller also presented a new argument to the effect that there was no liability when the seller failed to deliver because it was prevented by "force majeures [sic], riots, strikes, floods, fire, storm, earthquake, tornado, act of God, delays of carriers, governmental embargoes, or other causes beyond our control". This was the subject of the present appeal to the Commercial Court.