Price discount as per GAFTA 48 Extension Clause

• International Trade

While performing trade contracts on CIF/CFR terms, buyers usually ask sellers to issue a few sets of Bills of Lading, each covering only a part of the aggregate scope of goods purchased under the Contract. Sometimes, sellers usually split up Bills of Lading for certain reasons.

In case of extending CIF/CFR supply term by the seller (based on Extension Clause, i.e. cl. 10 of GAFTA 48), the following question arises: whether discount on goods price applies to aggregate contractual amount or to each Bill of Lading separately depending on its date of issue? For instance, when the seller and the buyer entered into Sale & Purchase Contract on 6,00 MT of wheat (delivery term on November 1-30), the buyer asked to issue two sets of Bills of Lading, on 3,000 MT each. Shipment commenced on November 25, while the seller could ship only 3,000 MT till November 30. On December 1, 2022, the seller sent to the buyer a notice on extending delivery terms in accordance with cl. 10 of GAFTA 48, while the remaining 3,000 MT were shipped on December 6.

As for discount for extending shipment period upon each Bill of Lading separately, such a discount cannot apply to the first batch of 3,000 MT, since it was shipped during contractual shipment period. As for the remaining 3,000 MT, a 1% discount would apply, e.g. in case of wheat contractual price of 250 USD per one MT the discount amount would make up 7,500 USD.

As for discount for aggregate volume of the goods, whereas the latest Bill of Lading was dated December 6, the discount amount would make up 15,000 USD.

So, which calculation will be correct in accordance with English law and GAFTA 48?

Irrespective of whether the sets of Bills of Lading are split up or not, if the contract prescribed sale & purchase of a single batch (e.g. 6,000 MT), the seller should be deemed as having fulfilled its contractual obligation in case of shipment of the full batch of goods (6,000 MT in our case). Such a provision is based, inter alia, on the Sale of Goods Act 1979, whereunder:

“Where the seller delivers less or larger amount of the goods than provided by the contract, the seller may reject the whole goods”.

With regards to the above situation, a 1% discount as per GAFTA 48 Extension Clause should apply to the whole contractual scope of the goods, irrespective of whether full or partial set of Bills of Lading had been issued during the principal delivery term under the contract.

For over 20 years, Interlegal lawyers have dealt with GAFTA and FOSFA contracts, so we know all their specifications. The best way for you is to apply to Interlegal for legal advice.

Igor Kostov

kostov@interlegal.com.ua