Legal Aspects of Trading and Shipping

1. Is C entitled to reject the cargo and refuse to load and if so on what grounds?

Contractual documents are binding to the parties involved and are also to termination if one party is not contented with the terms and conditions of the contract. Also if either of the party finds out that some of the information provided by the other party to do not concede to the utmost good faith, the party is at liberty to cancel the contract. This is only acceptable if the cancellation is material enough and it is done within reasonable time besides it being effect on the due course of the contract. C is therefore entitled to reject and cancel the contract and also refuse to load on the following grounds. The contract that C entered into was to be provided quality products under certain specifications.

Unfortunately one of the specifications was not present and C who in this case is the buyer realizes the defect and enquires from the seller (B). Lack of H2S in naphtha is the specification which is absent and when the refinery company (A) is asked to guarantee on the absence of the specification the company denies and the buyer enters into an agreement that the buy will take the product on quality assurance, meaning that if the product does not meet the required standards and specifications then the buyer is entitled to bring it back. Basing the argument on this aspect entitles the buyer to reject the commodity since according to the agreement with the seller; the buyer took the commodity on product / quality assurance as specified by the refinery company.

However, the refinery company is not binding on this contract since from the beginning; the company disagreed guaranteeing the assurance on the H2S content.  C is also entitled to reject the cargo considering that the products that were offered to him were faulty. C might claim payment of damages for the wasted time but this might not be granted to him on the following grounds. After carefully reading the terms and conditions C went on and entered into the contract even after realizing that the product lacked some specifications. It might therefore be assumed that the plaintiff (C) assumed the risks involved and entered into the contract. Also the party was negligent and that was why he blindly entered into the contract. However, the buyer is entitled to also reject the offer considering that the clause presented by the refinery was misleading and to make it worse the refinery company refuses to guarantee the H2S content.

Another reason which might compel C to reject the cargo is due to the fact that the ETR was not adhered to. The estimated time of arrival was from 2-5 December but this was not adhered to as the vessel appeared on 6^th December and this was outside the laycan. Considering that the ETR was breached which was again against the nomination clauses would also slightly contribute towards the buyer rejecting the cargo. In addition to that, the buyer could also reject the offer on the ground that, the cargo did not conform to the required standards and could therefore be hazardous to life.

2. Was B obliged to take delivery of the product from A and does he have any obligation at all to load the product under the contract with C?

Assuming that the Company is an oil trading Company they work on a basis of FOB terms, minimizing on the costs and maximizing on the sales. Depending on its specific or particular use, FOB may refer to Freight On Board. The term will specify which party that is obliged to pay up for the shipment costs which may include the loading and the transportation costs. Also the term will include the responsibility for the goods until they reach destination since one may be held liable for any loss or damages to the goods. The seller is therefore obliged to deliver the goods when they have passed the ships rail. In relation to the above explanation B being the seller is obliged to deliver the product from A in the sense that they work back to back save in respect of the price and also due to the fact that the Turkish is the one which has initiated the contract between A and B. B has also an obligation to load the product under the contact between them two, considering that B is the seller while C is the seller. According to the Freight on Board terms the seller is obliged to offer the loading and the transportation costs until the goods reaches to the buyers' destination.

3. Who is liable for the time the vessel was waiting at the port. (You can assume 72 running hours lay time under the charter and 36 hours lay time in the sale contract to load. You can also assume that lay time commenced 6 hours after NOR.)

A cesser clause is a type of provision that is found in most of the charter parties and this provides that the liability of the charterers ceases to operate immediately the cargo has been shipped. In our case, the cargo had not yet been shipped and therefore charterers will significantly be liable for the delay of the vessel at the port of loading. Charters will have a liability on the dead - freight and demurrage and this comprises also the damages for detaining the vessel at the port. However the liabilities also depend on the contract that was initiated between the cessers' clause and the provisions on the lay time.

The provisions on the lay time were very clear as they stated that, adequate information ought to be provided before the arrival of vessel, and if the nomination vessel is not followed the commencement of the lay time will start during the loading. Considering this clause, "A"   is responsible under the second clause and this was the first 72 hours during the charter. 'B"  could also be held liable for the 36 hours lay time in  the sale to contract and this is endorsed by the fact that, the FOB  offers both loading and transportation cost and therefore any delays caused by the buyers negligence as it was in this case could be liable to the party involved. As it was stated in the nomination clause, when the nomination is not adhered to lay time commences during loading but in this case no loading took place and therefore the clause was not binding to "A".

4. Is there any difference between C's legal position vis-a-vis B and B's position vis-a-vis ?

There exists a legal position between C and B considering that B was the buyer while C was the seller. This is endorsed by the fact that the contract was between the buyer and the seller which is also verified by the shipping documents for instance, the FOB, which provides the responsibilities of a seller towards a buyer. C having entered into contract with B binds him and is answerable to any issue which has been stipulated in the shipping documents. C is therefore entitled to sue B but cannot sue A since no contractual documents binds them. Their also subsists a contractual document between "B" and "A" in the sense that B and A did not require any shipping documents. There is therefore a great difference between the two parties since the later does not have any legal effects since they were no legal documents to show any business relationship or business transactions.

5.  What would you advise B to do?          

Considering that B has no legal position against "A" would mean that he has to undergo a total loss but this is all because of his negligence in making contracts. I would therefore advice "B" to sue "A" on the ground that "A" mischievously drove him to enter to enter into a contract that was not valid since the products were not good for consumption. "A" in his right frame of mind was aware that the goods  it offered were harmful but went on producing and that was the reason why he could not accept the guarantee since the products were not to standard. I would also advice 'B" to legally sign in contractual documents that will define his or her position within the trading affairs. I would also advice "B" not to accept total payment of damages to "C" since after the third party knew the product lacked some specifications he signed in the contract meaning that he knew the risk involved but he went signing in the contract. On the fact he was also negligent means he or she ought to also contribute towards minimizing the loss suffered.