FOB Sellers liable to Buyers for shortage and overshipment.



London Arbitration 23/16 is an interesting award on the obligation of fob sellers in delivering the correct quantity of goods to the vessel/s nominated by the buyers. The sellers concluded three fob sales for a total of 12,000 mt straight steel bars of different qualities and specifications, which were subject to two shipments. There was a shortage on the first shipment, and an excess discharged on the second shipment which included bundles of 10 mm bars with white painted ends that should not have formed part of the cargo for that vessel.

The buyers successfully claimed damages from the sellers for (a) the compensation paid to receivers for the shortage and (b) compensation paid to shipowners in respect of delays to the discharge of the vessel, detention of the vessel following discharge, shifting expenses and a fine, consequent upon the over-shipment. The type of loss – expenses on shifting at orders of port authority consequent on discharge of excess cargo – was reasonably foreseeable.

The tribunal held that sellers’ were in breach of their obligation to place the correct quantity and quality of cargo on board the vessels nominated by the buyers, and this obligation was not limited to delivering the steel to the forwarding agent. Clause 4 of the contract specifically stated that this was an fob contract and its meaning was not affected by the fact that there was no specific requirement for the buyers to nominate a vessel.

The tribunal rejected the sellers’ argument that the chain of causation had been broken by the failure of the masters of the two vessels to issue accurate bills of lading. The bills of lading did not identify the different bar sizes loaded but simply stated the total number of bundles and the total weight of the cargo under the heading “Shipper’s description of goods”, and stated “shipped in apparent good order and condition … weight, measure, quality, quantity, condition, contents and value unknown”. It was fanciful to suggest that the master of the first vessel should have been aware that there was a shortage of 70 bundles out of 2793 bundles, or that the master of the second vessel should have been aware that he was loading a quantity of 10 mm bars with white markings which should not have formed part of that shipment.


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