PUBLISHED AWARDS SERVICE

Claimants: Buyers Date of Award 15 August 2001

Commodity: Soyabeans

Concerning Buyers’ claims for damages due to misrepresentation and defective quality regarding 3contracts each dated 13 May 1998 for a total of 40,000 metric tons Argentine Yellow Soyabeansfor shipment June 5 - 30 1998 C&F 1 Israel Port or 2 Israel Port.

The juridical seat of this arbitration is England.

1.0 THE CONTRACTS

1.1 The 3 contracts all dated 13 May 1998 are identical as to their terms and conditions, exceptfor the names of the buyers and the quantities purchased. These are as follows -

- Buyers 1, 12,000 metric tons- Buyers 2, 12,000 metric tons- Buyers 3, 16,000 metric tons

1.2 The other terms of the contracts as per Sellers' fax confirmation, relevant for this disputeare the following -

Quantity: 5% more or less at Sellers' option at contract premium.Commodity: Argentine Yellow Soybeans.Specifications: Moisture max13.0%

Oil content (on as is basis) min 18.5% per Analyst 1 certificateWith non-reciprocal bonification 1.5% for 1 % if under 18.5 %.

Damage: Basis 3% 1 : 1Heat Damage: Basis 0.5% 1 : 1Splits: Basis 20% Max 30% 1 :1FM: Basis 1% but max 2%

Quality, weight and conditions are final at load.Shipment: June 5-30, 1998

Vessel will be topped off with other grain at a diff berth,Guaratee (sic) vessel departure Argentina after top off by June 30,1998.

If more than one destination used, Israel to be the first discharge port.Premium price: ………………..USD 0.38 JulyC+F 1 Israel Port or 2 Israel Port, at Sellers' option.No demurrage no despatch at discharge.

Payment terms: Cash against faxed copy of documents or B/O 180 days promissory notesguaranteed by Bank 1 or Bank 2. Confirmed interest rate and amount by the bank will beadded to the invoice value based on above C+F price.

All other terms and conditions are as per FOSFA contract including respective arbitrationrules.

1.3 Sellers' written confirmation is more explicit and contains more details as the fax. Whererelevant for this dispute and different from the fax confirmation the terms are the following -

Specifications: Split kernels maximum 30%Damaged kernels maximum 3%Out of which heat damaged maximum 0,50%

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Foreign matters maximum 2%Oil content (on as is basis) minimum 18,5%With non-reciprocal allowance 1,5% : 1% if under 18,5%

Weight/Quality/Condition: Final at loading per first class superintendent certificate.

Shipment: Per bill(s) of lading dated between June 5-30, 1998, both datesincluded.Vessel will be topped off with other grain at a different berth.Vessel should leave Argentina after top off by June 30, 1998.

Other terms: All other terms and conditions not conflicting with the above, shall beper FOSFA 22 including its Arbitration Clause, with arbitration inLondon, of which the parties have knowledge and notice and herebyaccept.

2.0 THE FACTS

All dates refer to the year 1998, unless mentioned otherwise.

2.1 On 11 May Buyers started to ask for offers of Argentine Soyabeans FOB South AmericanPort to Israel for delivery June 15-30, to be loaded in combo on same vessel with othercargo of soybeans and/or grain to Israel.

2.2 On 12 May Sellers made an offer to Buyers for 40.000 metric tons Argentine YellowSoybeans, shipment June 5-30, premium price US$0.38 July, C&F 1 Israel Port or 2 IsraelPort with slightly different specifications as requested by Buyers and mentioning "oil contenton as is moisture per Analyst [named] certificate".

2.3 The business was confirmed by Sellers to Buyers on 13 May as shown under 1.0 above

2.4 On 27 May (the translation shows as date 7 May) Buyers 3 wrote to Sellers as follows (intranslation) -

“In view of the grave situation which the industry has encountered and according tothe forecast that this situation will also continue in June - August 1998, I would askyou to act in cooperation together with us in the following months;

(a) Notwithstanding our telephone conversation, the consignments for Augustand thereafter, inclusive, should be frozen.

(b) In coordination with my colleagues in the industry, to postpone a vessel fromArgentina - June transportation - from Buyers 3's point of view, arrival in thesecond week of June. From the point of view of the industry, apostponement of two months or a washout of the order.”

Points c) and d) of the letter are not relevant to this dispute.

2.5 On 1 June Buyers 3 wrote to Sellers as follows (in translation):

"I wish to bring to your attention that bringing forward the vessel sailing from 30June 1998 to 5 June 1998 means $ 142,000 !!!!! and this is by renting a silo in 1Israel Port and moving the majority of the merchandise to [Party A] and return to 1Israel Port.NB. The reaction from Buyers 1 and Buyers 2 is likely to be harsher."

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2.6 On 2 June Sellers advised Buyers, acknowledging Buyers' letters of 27 May and 1 June,that their efforts to sell the 40,000 metric tons of Argentine Soyabeans elsewhere, had beenunsuccessful and that no other alternatives were left than to load the beans on schedule asper contractual obligations. Sellers further advised that in order to be able to sell the goodsat a later date Sellers had decided not to complete the vessel with any other products, sothat it will be easier to divert the vessel. The letter ended by stating that if no solution couldbe found, the vessel will proceed to Israel.

On the same day Sellers advised Buyers that they had chartered the MV AA to carry thecontracted goods.

2.7 On 2 and 3 June, Buyers and Sellers exchanged letters/faxes about the cancellation of thecontracts. Further efforts were made by Buyers to dispose of the goods elsewhere but werealso unsuccessful and Buyers complained about the lack of cooperation by Sellers. Thiswas followed by another fax from Sellers stating another possibleapproach.(Correspondence dated 9 June).

2.8 On 11 June Sellers sent their declarations of shipment to Buyers in total fulfilment of thecontracts of Argentine yellow soybeans per MV AA -

- to Buyers 1 11,022 metric tons loaded in 1 Argentine Port on 5 June and 1,578metric tons loaded in 2 Argentine Port on 10 June

- to Buyers 2 same quantities, ports and loading dates.

- to Buyers 3 14,696 metric tons loaded in 1 Argentine Port on 5 June and 2,104metric tons loaded in 2 Argentine Port on 10 June.

The message further stated; "please confirm marine insurance and declare disport".

2.9 On 14 June Buyers 1 rejected the tender on the grounds that the goods were loaded priorto 15 June as had been requested by them and that they had cancelled the contract. Onthe same day Sellers asked Buyers 1 for document instructions and that in the absencethereof they would use previous instructions. Sellers also requested the pricing of the Julysoybeans futures contracts.

2.10 On 18 June Buyers sent 3 identical letters to Sellers regarding the Soyabeans on the MVAA –

"1. According to your notification above ship which is making its way fromArgentina to Israel includes a cargo of soya beans intended for … (names ofBuyers).

2. It is not clear to us why the cargo, which was not ordered by us and forwhich we have no need, is being sent for us.

3. Nevertheless, and as a gesture of good faith, we are willing to try to help youfind a solution to the problem.

4. Neither that stated in this letter nor any omission from it is such as toderogate from our arguments against you."

2.11 On the same day Sellers replied that they maintained their contractual tender, andexpressed their intention to help Buyers to solve their problems. The following days furthercorrespondence was exchanged between the parties, without coming to a solution.

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2.12 On 26th June Sellers sent the following fax to Buyers 3, regarding Argentine Soyabeans onthe MV AA

"We confirm our telephone conversation of today, June 26th at 15.30 hrs Genevatime. Since you talked to us from your car, you have authorized us to confirm themain points in writing. You have decided and advised us that:

- Buyers 3 shall honour the document presentation of the cargo on abovenamed vessel and shall provide Sellers with a payment instrument for 100pct of the invoice value of the goods.

- Sellers in exchange shall not interrupt vessel's voyage towards Israel.

- Sellers and Buyers 3 have agreed to discuss the commercial realitiessurrounding the contract and Buyers 3 obviously retains its contractual rightsto claim damages for any alleged uncontractual behaviour on Sellers' part.

We appreciate that you have been able to come to a final decision, which will helpto minimise costs and we hope this will help towards finding an overall solution forthis matter."

2.13 On 29 June, advocates on behalf of Buyers 2 and Buyers 1, also accepted to pay for thedocuments under strong protest. Some correspondence followed about the date of thepayments and the pricing of the futures.

2.14 On 6 July Sellers invoiced Buyers 2 for loss of interest due to late payment of documentsan amount of US$14,327.20, and Buyers 1 an amount of US$15,271.25.

2.15 On 28 July, advocates wrote to Sellers on behalf of Buyers that Buyers intend to apply tothe courts for their claims against Sellers as a result of damages suffered as a result ofserious acts of misrepresentation and other improper behaviour by Sellers, but that Buyerswould like to organise a meeting between the Parties in order to discuss the matters.

2.16 On 30 July Sellers replied that the validity of the contracts could not be put in question andthat they formally rejected Buyers allegations of misrepresentation and/or improperbehaviour. Sellers further stated that they were fully prepared to attend a meeting in orderto discuss the commercial issues surrounding the contracts. Sellers further pointed out thatthe contracts are governed by FOSFA terms with an implied arbitration clause, governed byEnglish law.

2.17 One of the buyers, Buyers 2, requested Superintendents 1 to send a sample of Soyabeanstaken at discharge from the MV AA for analysis on splits/broken and Foreign materials toname (same group) Analysts. The result of this analysis as shown on the certificate dated27 August shows Splits/broken 39.85% and Foreign materials 2.33%

2.18 On 3 September a meeting between the Parties took place in 3rd Israel Port. A letter fromBuyers to Sellers of the same date confirmed Sellers' consent to extend the time limits forsubmitting any claim for FOSFA arbitration until 31 December, which was confirmed bySellers.

2.19 On 23 September Sellers sent a fax to Buyers explaining that Analyst 1's inspections inArgentina are subcontracted to Superintendents 3 who are using the laboratories of Analyst2 who are both recognised by FOSFA and GAFTA. Sellers reconfirmed that sealedsamples drawn at loading are available and that if Buyers wish to have them reanalysedSellers prefer to have the reanalysis done at the named Analysts. If the results of this

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reanalysis on the quality specifications guaranteed in the contract, are significantly differentfrom those found initially at loading, Sellers were ready to reopen this issue for discussion.

Buyers advised that they agreed to have the samples reanalysed.

2.20 The shipping documents presented by Sellers to Buyers contained a certificate of qualityand condition, issued by Survey Company dated 22 June, and showing the following resultsbased on the analysis results made by a FOSFA laboratory -

Oil content: 18,7% (TALE QUALE)Foreign matters 0,78%Moisture 12,1%Damaged kernels: 0,65%Heat damages: 0,02%Split kernels: 14,2%

2.21 The results of the analysis made by the named Analyst as shown on their certificates dated16 November and based on the sealed samples drawn at loading are the following

1 Argentine Port 2 Argentine PortSplits/broken 15,18% 14,55%Foreign materials 0,92% 0,87%Heat damaged 0,00% 0,00%Total damaged 2,01% 0,65%Moisture 10,25% 10,50%Oil content 19,90% 18,95%

2.22 On 25 November Buyers jointly claimed arbitration and appointed their arbitrator. On 2December Sellers nominated their arbitrator.

3.0 CLAIMANT BUYERS' SUBMISSIONS

Misrepresentation

3.1 Buyers submit that they would never have entered into the contracts were it not formisrepresentations made to them by Sellers in the course of pre-contract negotiations.Buyers are entitled to compensation for any losses suffered through entering into thecontracts. The basic legal proposition on which Buyers rely in support of this submission isembodied in section 1(1) of the Misrepresentation Act 1967 as summarised in Benjamin asfollows -

"…Where a person has entered into a contract after a misrepresentation has beenmade to him by another party thereto and as a result thereof he has suffered loss,then, if the person making the misrepresentation would be liable to damages inrespect thereof had the misrepresentation been made fraudulently, that person shallso be liable, notwithstanding that the misrepresentation was not made fraudulentlyunless he proves that he had reasonable grounds to believe and did believe up tothe time the contract was made that the facts represented were true".

The Act provides a remedy for a buyer who is induced to make a contract by amisrepresentation which, whilst not fraudulent, is made without reasonable grounds forbelief in its truth. The particular representations on which Buyers rely in this case is thestatement made by Sellers to Buyers 1 and Buyers 2 to the effect that Buyers 3 werealready committed to a purchase of 16,000 metric tonnes of goods; and the statementmade by Sellers to Buyers 3 to the effect that Sellers has "won" the Buyers 1 and Buyers 2tenders.

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Buyers submit that the burden is on the party making the representation to demonstratethat he had reasonable belief in its truth. Accordingly, if the Tribunal is satisfied that Sellerssaid the things they are said to have said, it will be up to Sellers to prove that Sellersbelieved and had reasonable grounds for believing that they were true. It is no defence toBuyers' claim that they might have discovered the falsity of Sellers' statements byexercising reasonable care.

3.2 Buyers 1 would never have agreed to the purchase were it not for Sellers' assurance thatBuyers 3 had already bought a large quantity of beans from Sellers. So the sale to Buyers 1was thus induced by a false representation.

3.3 Buyers 2’ primary case is that the threat of a joint purchase of beans by Buyers 1 andBuyers 3 exposed them to the risk of being left alone without a co-buyer in the foreseeablefuture. The fact that Sellers statement was not made directly to Buyers 2 but through theintermediary of Buyers 1, does not matter. Buyers 2 would not have bought from Sellershad Sellers not lied about Buyers 3's commitment to the purchase.

3.4 No contract came into existence between Buyers 3 and Sellers until about 16 May when MrY of Buyers 3 returned from his trip to Chicago. Mr Y had simply told Sellers that he "might"agree to take a further 6,000 metric tons of Argentine Soyabeans provided that Sellerssucceeded in winning the Buyers 1 and Buyers 2 tenders. He did not speak to Sellers untilafter his return to Israel on 16 May, which is the earliest date on which the Buyers 3contract could possibly have come into existence.

During the conversation between Mr Y and Sellers on 16 May, Sellers once againmisrepresented the true state of affairs by telling Mr Y that Sellers had won the Buyers 1and Buyers 2 tenders in circumstances where this was in fact not the case. Buyers 3 wouldnot have agreed to a 16,000 metric ton purchase had Sellers been telling the truth.

3.5 The Tribunal is asked to find that Sellers are liable to pay Buyers damages under section2(1) of the Misrepresentation Act 1967.

3.6 Buyers submitted statements of the following persons in evidence - Mr V - Buyers 2, Mr W -Buyers 1, Mr X- Buyers 1, Mr Y - Buyers 3, Mr Z - Buyers 3.

3.7 The normal measure of damages for misrepresentation is the value transferred less thevalue received which in sale of goods cases translates as the price paid minus the actualvalue of the goods delivered.

Consequential losses are also recoverable.

3.8 Buyers have prepared detailed calculations of the losses incurred. The starting point foreach Buyer's calculation is an estimate of the actual value of the goods delivered to them.Accordingly the claim is based on the purchase price, minus allowances as per contractterms for the specifications as found by the named Analysts and second Analysts analysis

3.9 As regards the "market loss" claims it is submitted that had Buyers not bought the AASoyabeans at the prices provided for by the contracts, they would not have bought any newraw material for a further period ranging between one and three months depending on thesize of their existing operator. Buyers claim the difference between the prices paid and thelater lower market prices. Buyers submit market prices on 11 September and 20 August inevidence.

3.10 The total damages claimed by each Buyer under this heading are -

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* Buyers 2 US$ 1,303,156.66* Buyers 1 US$ 1,150,701.00* Buyers 3 US$ 1,565,295.00

Breaches of contract - Liability and Quantum

3.11 This claim is an alternative claim. Buyers submit that they ask the Tribunal to consider thisclaim only insofar the Tribunal is not minded to find that the Sellers are liable to paydamages under section 2(1) of the Misrepresentation Act.

3.12 The contractual basis for the claims arising out of the defective quality of the beans isSellers' contract confirmation dated 13 May. As Sellers themselves rightly pointed out intheir message to Buyers 1 of June 3, "Business was concluded on May 13, 1998 basis (theSellers') offer terms…" Contrary to the position previously adopted by the Sellers incorrespondence this was not a certificate final sale. The terms set out in their offer of May12th and the subsequent confirmations on May 13 simply provide that weight quality andcondition are final at loading. Neither they or the relevant FOSFA contract make anymention of the Buyers being bound by loadport certificates in respect of any of the defectsfor which the Buyers have cause for complaint. The burden which the Buyers therefore facein making good their claim under this heading is simply to satisfy the Tribunal based on theevidence available that the goods were not in conformity with the contract as at the time ofloading.

3.13 Sellers submit that the goods supplied by Sellers were well in excess of the maximumwarranties as respects splits, foreign matter and heat damage. The goods fell foul of theprovision that goods had to be shipped in good condition and put Sellers in breach of theirstatutory implied duty to supply goods that were fit for their intended purpose (ie, crushing).Evidence in support of this submission is to be found in certificates submitted of namedAnalyst and Second Analyst and in the statements of Mr V, Mr X and Mr Y, which all pointdirectly to a failure by Sellers to deliver goods in compliance to deliver goods in compliancetherewith. It is common ground between the parties that the beans cannot possibly havedeteriorated to the extend revealed by the two certificates which means that unless theTribunal is minded not to accept any of this evidence the goods must have been defectiveat the time of loading. Sampling in the loadports in Argentina is invariably done manuallyusing casual labour and is far less reliable than automated systems of the sort used at 1Israel Port. The named Analyst certificates are of far less evidential value that the 3rd and4th Analysis certificates. It must also be noted that named Analyst have no presence inArgentina at all. Their supervision and analysis is delegated to a wholly different localinspection company.

3.14 Damages can be calculated in two stages. First there are the allowances under the contractand compensation by way of damages at large. The following table summarises thecontractual allowances to which Buyers are entitled:

Buyers 2

• Splits US$3,125,934.00 @ 10% (30% - 20%) US$312,593.40• Foreign matter US$3,125,934.00 @ 1.0% (2.0% - 1.0%) US$31,259.34• Heat damage US$3,125,934.00 @ 1.3% (1.8% - 0.5%) US$40,637.14• Total US$384,489.88

Buyers 1

• Splits US$3,123,666.00 @ 10% (30& - 20%) US$312,367.00• Foreign matter US$3,123,666.00 @ 1.0% (2.0% - 1%) US$31,237.00

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• Heat damage US$3,123,666.00 @ 1.3% (1.8% - 0.5%) US$40,608.00• Total US$384,212.00

Buyers 3

• Splits US$4,276,440.00 @ 10% (30% - 20%) US$427,644.00• Foreign matter US$4,276,440.00 @ 1.0% (2.0% - 1%) US$42,764.00• Heat damage US$4,276,440.00 @ 1.3% (1.8% - 0.5%) US$55,594.00• Total US$526,002.00

3.15 There is no express provision in FOSFA Contract No 22 or elsewhere in the contractgoverning the measure of damages recoverable in circumstances where the goods containdefects that exceed the maximum warranties. Therefore the Sales of Goods Act applieswhich stipulates the loss is prima facie the difference between the value of the goods at thetime of delivery to Buyers and the value they would have had if they had fulfilled thewarranty.

3.16 Buyers submit that the price paid under the contract (after accounting for the relevantallowances) is the best available evidence of the market value. The best and simplestmethod for calculating the actual value of the goods delivered, is by applying the system ofprice allowances provided for by the contract. The damages over and above the contractualallowances payable may also be expressed in terms of an allowance and can be calculatedin the following way –

Buyers 2

• Splits US$3,124,934.00 @ 9.85% = US$307,904.50• Foreign matter US$3,125,934.00 @ 0.33% = US$10,315.58• Total US$318,220.08

Buyers 1

• Splits US$3,123,666.00 @ 9.85% = US$307,681.00• Foreign matter US$3,123,666.00 @ 0.88% = US$10,308.00• Total US$317,989.00

Buyers 3

• Splits US$44,420.752 @ 9.85% = US$421,229.00• Foreign matter US$44,420.752 @ 0.33% = US$14,112.00• Total US$435,341.00

(Arbitrators note that the basis for the amount of Buyers 3’s claim should be US$ 4,276,440instead of US$ 44,420,752, the same as shown under 3.13. The amount of the claimcalculated is on this basis)

3.17 Buyers 2 claims consequential losses for extra storage and transportation costs amountingto US$17,857.00

3.18 Total damages and allowances claimed by Buyers for defective quality are therefore:* Buyers 2 US$720,566.96* Buyers 1 US$702,201.00* Buyers 3 US$961,343.00

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Early departure - early arrival

3.19 Buyers are entitled to damages for the vessel's early departure from the loadport and herconsequent earlier than scheduled arrival at 1 Israel Port. The contract provides that thevessel chartered to perform the contract would be "topped off with other grain at a diffberth…". This expression was clarified by Sellers during the course of the negotiations asmeaning that the vessel would sail no earlier than she would have sailed had the contractstipulated a delivery period of 15 - 30 June.

3.20 Instead the vessel completed loading on 10 June and sailed directly to Israel withouttopping off. Consequently she arrived earlier by about 21 days causing Buyers to incuradditional storage charges. Buyers are entitled to recover these storage costs as damagesfor Sellers' breach. Buyers claim hereunder are as follows -

* Buyers 2 US$20,354.36* Buyers 1 US$29,744,00* Buyers 3 US$13,836.00

Shortage

3.21 Buyers submit that this is not a case where weight is final as per certificate even though onthe terms of the contract the price is payable on the weight loaded rather than discharged.

3.22 The weights referred to in the Bills of Lading do not accurately reflect the quantities in factloaded on the vessel. The tonnage said to have been loaded in the Bills of Lading and thequantity of goods actually discharged are so disparate that it is inconceivable that theoutturn shortages can be attributed to loss on the voyage from Argentine to Israel. The onlypossible explanation is that a smaller quantity was loaded as the weighing process at 1Israel Port is very reliable.

3.23 Buyers claim an amount of US$109,595.71 for the shortage of 414.20 metric tons.

Interest and costs

3.24 Buyers request the Tribunal to award interest on the sums awarded as well as the costs(including legal costs) of this arbitration on a compound basis.

3.25 Buyers requested Sellers the disclosure of a number of documents.

4.0 RESPONDENT SELLERS' SUBMISSIONS

4.1 Sellers deny all of Buyers' claims, whether made on the basis of alleged misrepresentationor alleged defective performance. Sellers disagree fundamentally with the account given inBuyers claim submissions and witness statements of the facts leading up to the contract. Itis incorrect for Buyers to assert that Sellers ever attempted in any way to mislead themduring the negotiations leading up to the contracts.

4.2 During the period immediately leading up to the negotiation of the contracts, there was amajor shortage of soybeans in Israel. As a result of this shortage (of which Sellers were notaware at the time), Buyers committed themselves to purchasing quantities of beans inexcess of what proved to be their requirements . It was only when Buyers realised that theyhad over reached themselves that they took various (inconsistent) objections to thecontracts in an attempt to avoid their obligations to take delivery in the agreed shipmentperiod, and in effect illegitimately to pass on to Sellers their alleged losses resulting fromtheir own misjudgement of their requirements.

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4.3 The contracts were concluded on 13 May. No objection was taken to them until 27 Maywhen Buyers 3 sent a fax to Sellers requesting postponement of delivery or a washout.Between the conclusion of the contracts and this belated request for extension, Buyers 3had requested to purchase a further 8-10,000 metric tons of Soyabeans from Sellers on oraround 18th - 20th May. In the event Buyers 3 did make a further purchase of this quantityfrom 3rd Party. Buyers 3's actions in the period immediately following conclusion of thecontracts are therefore wholly at variance with their pleaded case. All of the Buyers areclaiming damages for "market loss" on the basis that they "would not have bought any newraw material for a further period ranging between one and three months." From theevidence, this is clearly incorrect in the case of Buyers 3, and Sellers invite the Tribunal toconclude that it is similarly incorrect in the case of Buyers 2 and Buyers 1.

4.4 Sellers note that Buyers assert that the "Argentine tender terms are relevant" for thecontracts. The tender terms are of course not relevant. As Buyers say themselves in theirsubmissions, the contracts were concluded on the basis of Sellers offer terms of 13 May.

4.5 Buyers' account in their submissions and witness statements of the negotiations leading upto the conclusion of the contracts is substantially inaccurate. The Tribunal is referred to thestatement of Mr A of Sellers for a true account of the negotiations. Buyers haveemphasised that they have historically worked together extremely closely, and that theycontinue to do so, as is demonstrated in bringing their claims together. Their primary caseis based on their assertion that they were each only willing to participate in the contracts onthe basis that they were all willing to so participate. In the light of these circumstances, it isinconceivable that Buyers would have agreed to participate in the contracts without firstdiscussing whether to do so among themselves.

4.6 Sellers submit that there is no substance whatsoever to Buyers' primary case based onmisrepresentation. No misrepresentations were made by Mr A. Buyers overestimated theirrequirements for Soyabeans in May/June, and committed themselves to positions whichthey later regretted. They are now attempting to pass their resulting losses on to Sellers.They are not entitled to do this.

4.7 Sellers reject Buyers' claim for early delivery. The shipment period in the contract is clear: 5to 30 June. The vessel loaded and departed on 10 June, ie within the shipment period, andBuyers have no grounds whatever for complaint. Buyers raised no objection to thecontractual shipment period until their fax of 27 May in which they requested apostponement of shipment. Sellers did their best to accommodate Buyers, but they werenot able to do so. Sellers had no obligation to do so. The Tribunal is referred to thestatement of Mr D dated 10 March 2000 for an account on the events.

4.8 When Buyers realised that they wished to delay shipment, they first put forward a requestfor such a delay since they knew that they were not entitled to demand it under thecontracts.

4.9 Buyers seek to rely on a provision in the contracts that: “Vessel will be topped off with othergrain at a diff berth, guaratee (sic) vessel departure Argentina after top off by June 301998". They say that this term meant that the vessel would sail no earlier than she wouldhave sailed had the contract stipulated a delivery period of 15 - 30 June. This is not correct.The reason why Sellers wished to top off the vessel was for purposes of economy of spaceon board. It would have been absurd for Sellers to draft the contract in such a way as toexplicitly provide for one shipment period, and then, in the next line to include anothershipment period contradicting the first. Buyers real concern was not that the vessel wouldbe too early, but, on the contrary, that it would be too late. The vessel should not only beloaded but sail by 30 June. Therefore the contracts explicitly give a guarantee that thevessel will depart Argentina by 30 June 1998.

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4.10 There are some inconsistencies between the terms of the confirmations which Sellers faxedto Buyers on 13 May and the formal contracts. These inconsistencies are nothing morethan the result of clerical errors (mistakenly applying standard South American Soyabeanterms to the contracts). Sellers refer (in common with Buyers) to the terms of the faxedconfirmations as the binding terms of the contracts, and place no reliance on the differingterms in the formal contracts. Buyers' attempt to suggest that there is something sinisterabout the errors in the formal contracts is wholly misconceived.

4.11 Buyers' claim for defective quality cannot succeed for the simple reason that this was a saleon the basis of certificate final as to quality, weight and condition at the loadports, and therelevant certificates show the goods to have been in conformity with contractualspecifications.

4.12 The sale was on the basis: "Quality, weight and conditions are final at load". Buyers assertthat this was "not a certificate final sale". They appear to be suggesting that because thecontract confirmations of 13 May, in contrast with the formal contracts supplied later, do notrefer to superintendents' certificates, Buyers are not bound by the named Analyst qualitycertificates of 22 June. These documents record that the quality specifications of the goodson loading were in conformity with those of the contracts. Buyers' argument that thesecertificates are not binding simply does not make sense. What else could "Quality, weightand conditions final at load" mean? If quality weight and condition are to be established asfinal at load, a survey must be undertaken by an independent inspection company, sincethere is no official inspection organisation in Argentina. Named Analyst is of course arespectable and well known inspection company. Indeed as far as oil content goes, namedcompany is the named inspector in the contract confirmations. The fact that theysubcontracts its services in Argentina is known to FOSFA and the trade in general, and isnot an unusual practice in the field of inspections of agricultural commodities. Their agentsin Argentina. This company is an accredited member superintendent of FOSFA and anapproved member of the GAFTA superintendents scheme. In short, the parties haveagreed to quality final at load as a term of the contracts, and this term was performed in theonly practical way possible. In addition, a further analysis of loadport samples was carriedout in November by another named Analyst at Buyers' request. This also found the goodsto be in conformity with the quality specifications in the contracts.

4.13 Sellers deny that there was any shortage. Buyers' evidence excludes Sellers' participation,and is self-serving. In any event, Buyers are precluded from bringing this claim for the samereasons that they are precluded from bringing their quality claim. It is a term of the contractsthat weight was to be finally determined at the loadports, and the duly issued weightcertificates are in conformity with the quantities agreed under the contracts.

4.14 With regard to the liability on misrepresentation, Buyers suggest that the burden of proof ison Sellers. The emphasis on this point in Buyers' submissions is misleading. The normalrule is that the burden of proof is on the Claimant, and the situation is no different here.Buyers are unable to establish that they relied on Mr A’s alleged misrepresentation to themas to their own commitments. Sellers submit that the Tribunal cannot seriously be asked tobelieve that Buyers would not have consulted among themselves as to the truth of what MrA had said about them. It is ridiculous to suggest that they would have relied on his wordwhen they could so easily have verified what he said between themselves.

4.15 All of Buyers' submissions under the heading "Misrepresentation - quantum", are irrelevantsince their claim is fundamentally flawed as to liability. Sellers submit that it is notappropriate that they should make submissions in response to Buyers' quantumsubmissions at this time. Sellers submit that the Tribunal should first determine the questionof liability.

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4.16 Sellers consider the items requested by Buyers' for disclosure irrelevant to the issues in thisarbitration. The request therefore is oppressive, and Sellers decline to consider it.

5.0 DISCLOSURE OF FURTHER DOCUMENTS AND SELLERS’ REPLY SUBMISSIONS ASTO QUANTUM

5.1 The Parties exchanged correspondence about Buyers' request for the disclosure of furtherdocuments and on the subject of Sellers' reply submissions as to quantum of damages.This resulted in the following decision and order by the Tribunal, which was communicatedto the parties on 16 May 2000 -

"We accept that we have the power under the Arbitration Act 1996 to order discovery if weconsider that it would assist in resolving the dispute. Having reviewed all the arguments wehave come to the following decisions:-

Categories 78(A)-(B)

The Arbitrators are not persuaded that this would assist in determining this dispute. TheArbitrators are well aware of the procedures adopted by silos with regard to intakenquantities. We would point out that they are constantly mixed and aired so that whatoriginally went into a specific silo or flat store is not necessarily what eventually wastendered to the Ship from that silo/store for loading.We therefore deny the request.

Categories (C)-(F)

Again, the Arbitrators are not persuaded that to order this discovery would progress thecase any further for very similar reasons to those expressed in 78(A)- (B).

I would emphasise that the Tribunal has not decided whether the certificates are final or notat this juncture.

Turning now to the split determination of the issues, the Tribunal has already ordered thatthe issues should not be split and can see no reason why we should change our minds.We therefore refuse the request and order that Lawyers give their Reply Submissions onthe question of quantum of damages within 14 days of today's date".

5.2 The parties made further submissions as to the disclosure of documents. After carefulconsideration the Arbitrators issued the following Order to Lawyers -

"Referring to your fax dated 18th May 2000, in answer to a fax from [Lawyers] dated17 May we wish to advise you that the Arbitrators have discussed the matter andhave decided to amend their earlier decision, as laid down in the fax of [Buyers’arbitrator] dated 16th May 2000, in as far as the disclosure of documents requestedby the Buyers under Category 78(d).

We therefore ORDER Sellers to DISCLOSE Copies of any existing sampling logrelating to sampling carried out at the loadport. These documents must be sent toBuyers and the Tribunal within 14 days from the date of this Order."

On 6 June 2000 Sellers advised that they had checked with their surveyors, who had toldthem that sampling was carried out in accordance with GAFTA and FOSFA Rules, and thatthey do not have any "sampling log".

5.3 Following the Order made by the Tribunal, Sellers made Reply Submissions as to quantumand liability issues.

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5.4 Sellers submit that Buyers' submissions on liability are without merit and that their quantumsubmissions are wholly unsupported by the evidence attached. Buyers' claims fall at thefirst hurdle of causation. They have failed to show that the alleged problems with the cargowhich they complain of were (or could possibly have been) caused by the quality defects inthe loaded goods allegedly found in analysis of the samples taken from the cargo atdischarge. Sellers refer to a submitted report of [named Experts]. This report in summaryevidences that it is not plausible that the problems complained of by Buyers could havebeen caused by the alleged defects in the cargo loaded.

5.5 On the issue of defective quality Sellers say that even if Buyers were to establish liability onthe basis of the alleged misrepresentation of which they complain, they would be precludedfrom claiming damages under this head by the following provision which is a term of allthree contracts -

"Quality, weight and conditions are final at load".

This term makes the contracts sales on terms final as to quality, condition and weight asper loadport inspectors' certificates (even if those certificates are incorrect in their findings).At their very lowest they provide that definitive analysis can only be based on loadportsamples because it is only the quality, weight and condition of the cargo at load which arefinal. The samples on which the Buyers rely were taken at the port of discharge.

5.6 On the question of misrepresentation Sellers submit that the quality term relied on bySellers was entirely reasonable in all the circumstances, and was indeed a standard termused in international trade commodity transactions. In addition, it is clear that Buyers havefailed to take the steps which they could have taken to mitigate their loss (if any) under thishead.

5.7 Sellers submit that the claim for storage cost at the [named company] elevator by Buyersshould be dismissed as these charges were so incurred as the result of their own actions.As to storage of cargo for three months at destination Warehouses, Sellers note thatBuyers have claimed storage "for the unnecessary cargo for three months" Sellers do notunderstand the basis of the period of three months asserted by Buyers. Even if Buyerswere to establish that any misrepresentation had been made, there is no causative linkbetween the supposed early arrival of the vessel and the incurring of the Destination andWarehouses storage charges, and their claim in this regard should therefore fail.

5.8 Sellers have considered the voucher put forward by Buyers in support of their claim fortransport charges, but are unable to make sense of it or how it can be said to relate to thedocument summarising this head of claim giving a total of NIS263,398.88. Clearly, ifexpenses are to be recoverable they must be properly vouched.

5.9 Buyers' claim for financing costs is simply not adequately evidenced by the documentssubmitted.

5.10 Buyers' claim is not recoverable in principle. Sellers note that Buyers have not put forwardany authority in support of their assertion that they are entitled to claim for this so-called"loss". In reality it is a wholly artificial claim based on a comparison between the sale pricesunder the contracts with prices months later for notional contracts which, even if they hadexisted, would have had no connection whatever with the Contracts. Buyers' assertions aresimply unsubstantiated by evidence to be seriously considered. Buyers are not comparinglike with like. They put forward spot CIF Rotterdam prices for US origin Soyabeans incomparison with C&F Israel prices for South American origin Soyabeans for forwarddelivery. This is invalid.

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5.11 The storage costs claimed by Buyers 1 are supported by a series of invoices in Hebrewwithout translation. There is nothing on the face of any of these invoices to link them withthe beans shipped on the MV AA. Buyers fail to provide proper evidence in support of theirclaim for quantum. The same applies to the amount claimed for Transport charges.

5.12 It is Sellers' primary case that Buyers' claim for damages on the basis of breach of contractof terms as to quality and condition is absolutely barred on the basis of certificate final as toquality, condition and weight at load port. At the very least, Buyers are precluded by thecontractual terms from relying (as they purport to do) on analysis of samples taken atdischarge. In the event that Sellers are wrong on this point, Sellers submit that Buyers'claim under this head should be limited to the total amount permitted to be deducted fromthe purchase price on the basis of contractual allowances. The additional damages for"breach of warranty" should not be awarded since the contractual allowances form acomplete code agreed between the parties to cover quality/condition defects.

5.13 Regarding Buyers' claim on shortage, Sellers submit that the contracts specify "weight finalat loading". The Bills of Lading and loading documents are conclusive as to the quantityloaded. In any event there is no reason to doubt the accuracy of the weighing processes inArgentina.

5.14 Regarding Buyers’ claim for extra insurance and clearing costs on shortage, Sellers submitthat Buyers have failed to explain why these are due or to what they relate. The sale wason "weight final at loading".

6.0 CLAIMANT BUYERS' REPLY SUBMISSIONS

6.1 Buyers are disappointed by Sellers' refusal to disclose information and documents relevantto the quality and condition of the Soyabeans shipped on the MV AA. The evidence reliedon by Buyers indicates that sampling that took place at the First Argentine Port terminal inMay/June 1998 was haphazard and unreliable. The four self-employed sub-contractors whoare alleged to have undertaken the pre-shipment sampling were unlikely to have beenpresent at Argentine Port during the entire loading period.

6.2 Nowhere in any of the documents said to evidence the terms of the three contracts betweenthe parties is there any reference to loadport certificates being final and binding. Saying thatweight, quality and condition are final at loadport is not the same as saying that loadportcertificates produced by Sellers will be final and binding as to the matters covered. Buyershave submitted evidence in support thereof. Buyers also submit that the Analyst certificatesare in themselves uncontractual documents and cannot therefore be considered finalbecause they do not carry the required FOSFA International seal.

6.3 The goods supplied by Sellers were uncontractual because of the too high level of splitbeans and foreign matter. Buyers rely on the results found by subsequent Analysts, whichdiffer largely from the named Analysts results and which cannot be explained alone bydeterioration during the voyage of the vessel. The correct inference to be drawn is that thegoods were uncontractual as at the time of loading. Buyers submit further evidence aboutthe regular and efficient manner in which the discharge port samples were drawn and theunreliable nature of the sampling conducted at the load port.

6.4 Buyers refer to the FOSFA Superintendents Code of Practice. The sampling was notconducted by Superintendents 4 but by private sub-contractors who do not appear in theFOSFA list of approved superintendents. Consequently the certificates issued by namedSuperintendent company were in breach of the FOSFA’s Superintendents Code ofPractice. This does not permit sub-contracting of services to non FOSFA approvedsuperintendents. Sellers' Superintendents analysis is also in respect of loadport samples.

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Since the loadport sampling should be regarded as suspect, so should be thecorresponding Sellers' Superintendents analysis.

6.5 Buyers draw the attention of the Tribunal to what they submit is a major flaw in Sellers’case. In their submissions Sellers contend that there was a contract with Buyers 3 prior tothe contracts with Buyers 1 and Buyers 2 Buyers submit that no contract came intoexistence with Buyers 3 until after Mr Y’s return to Israel on or around 16 May. Buyers 3denies that a contract was entered in to during Mr Y’s visit to Party E in Chicago when Mr Yspoke to Mr A on the telephone on 12 May. Buyers 1 and Buyers 2 submit that they wereinduced to make their contracts due to false representations made by Sellers, ie that theyhad already sold to Buyers 3.

6.6 Buyers traditionally bought their raw materials together. Argentina was an experimentalventure for all three of them. All three were anxious to share the risks of that experiment.Buyers 1 and Buyers 2 have a long history of relying on each other in purchasing soybeanstogether. This is the only way in which they can make their imports commercially viable.

6.7 The compensation to which Buyers are entitled for the defective quality of the goods underthis heading is akin to liquidated damages - a genuine pre-estimate of the depreciation invalue caused by the goods non-compliance with the basic tolerances provided for under thecontract. Buyers are not obliged to show either a loss or causation.

6.8 Buyers submit that the suggestion made by Sellers that the contractual allowances payableunder the contract form a complete code and that no further damages can be payable toBuyers is both wrong and misleading. Sellers’ breach would have entitled to reject thegoods. In this case they were accepted subject to the right to claim damages for the Sellers’breach, which is separate from failure to satisfy the basic contractual requirements.

6.9 Buyers make further submissions as to the diminution in value claimed in this arbitration.Buyers maintain their claims and submissions made in their first submissions.

7.0 RESPONDENT SELLERS’ FURTHER SUBMISSIONS

7.1 Sellers say that Buyers’ submissions contain considerable material concerning samplesand analysis performed at the discharge port. It remains Sellers’ submission that all of thismaterial is irrelevant to this arbitration. The contracts were on a certificate final at loadbasis, and therefore any material regarding the discharge port is irrelevant andinadmissible. Even if the Tribunal would find, purely on the wording of the relevant clause inthe contracts, that the contracts were not on certificate final at loading terms, they wereclearly on quality, weight and condition final at loading. On this basis alone, any materialrelating to the discharge port cannot be relevant.

7.2 Sellers regret that Buyers have continually sought in this arbitration to suggest that Sellershave refused to disclose information, and that Sellers’ witnesses have been untruthful. Thisis simply not the case.

7.3 Sellers make submissions that Buyers’ legal submissions at Paragraphs 5 to 11 of theirSubmissions are misconceived.

7.4 With regard to the question of misrepresentation Sellers note that no further witnessstatements have been put forward by Buyers’ witnesses despite the identification by Sellersin their earlier submissions and accompanying statements of key areas omitted from thestatements of Buyers’ witnesses, in particularly that of Mr Y. Instead of putting in any furtherevidence from their witnesses, Buyers have merely made further assertions on theirsubmissions. Buyers have made lengthy and complex submissions, but in Sellers’submission the point is simple. Mr Y of Buyers 3 concluded a contract to purchase 16,000

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metric tons of Soyabeans with Mr A of Sellers on the telephone while Mr Y was in Mr E’soffice in Chicago, and Mr A was in Israel.

7.5 If, as Buyers contend, no agreement was reached between Mr A and Mr Y during thelatter’s visit to the USA, then Mr Y would on his return to Israel on 16 May have foundSellers’ fax confirmation of 13 May: a document recording a sale which had not takenplace. It is not credible that an experienced trader like Mr Y would have done anything otherthan reject a document purporting a non-existent sale.

Regarding the point of inducement, Sellers note the importance Buyers place on thecoordination between Buyers on their purchases. If Mr V was so concerned to avoid“commercial disaster” that he “specifically checked and double-checked Buyers 3’scommitment to purchase”, he would surely have done this checking and double-checkingwith Buyers 3 themselves, and not with the self-confessedly inexperienced Mr W. Buyers’submissions here are plainly of assistance to Sellers, and not to Buyers. Buyers evidence issimply not credible and bear all the hallmarks of “after thought”, in a desperate attempt toget out of a legitimately negotiated contract by any means their lawyers are able to suggest.In truth not only was there no misrepresentation, but even on the Buyers’ own case therewas simply no credible reliance or inducement.

7.6 Buyers say that they are not obliged to show a loss or causation in their relation to theirclaim for contractual allowances and refer to a particular law case. The relevant point in thiscase is that the Claimant has to show a breach of contract by the Defendant before he canrecover. In the present case Buyers in order to show such a breach will have to show thatquality defects were present in the goods loaded. Sellers submit that Buyers cannot do thisbecause the contracts provided for certificate final at load, and, even if this is not correct,Owners (sic) have not put forward any evidence that shows on the balance of probabilitiesthat the goods were loaded out of contractual specification.

7.7 Buyers have submitted that the contractual allowances do not form a complete code underthe contracts. Sellers submit that the alleged breaches of which Buyers complain aresupply of goods of quality below the contractual specifications. If the goods do not meet thespecifications this is a single breach and there is no other breach.

7.8 In their submissions Buyers appear to be suggesting that they do not need to showcausation of their alleged losses, or any attempt on their part to mitigate them, in respect oftheir claim for damages beyond the contractual allowances. Sellers do not understand this.Practical problems are distinct from, but must nonetheless, be analysed in terms of legalissues.

7.9 Notwithstanding Buyers inundation of Sellers and the Tribunal with a huge volume ofmaterial, nothing can disguise the fact that these are desperate and wholly unmeritoriousclaims. Sellers submit that Buyers’ claims should be dismissed in their entirety with costs.

8.0 CLAIMANT BUYERS’ FURTHER SUBMISSIONS

8.1 Buyers submit that Sellers are incorrect in their assertion that the material concerningsamples and analysis carried out at the discharge port is irrelevant in this arbitration. Thecontracts are not on “certificate final terms”. In any event the certificates relied on are not“contractual” because they did not conform to FOSFA requirements. They cannot thereforebe final.

8.2 The load ports sampling was not representative and therefore the Analyst 1 certificatesissued at load ports should not be relied upon. The material relating to the discharge portmust be preferred in circumstances where the reports from the load ports are nor reliable toshow the state of the cargo at loading.

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8.3 Sellers can have no objection to disclosing information and documents relating to thesampling conducted at the load ports or indeed, documents showing that the goods dulymixed at the load ports in fact did bring the cargo eventually loaded and shipped up to theArgentine International Export Standards. No such documents have been forthcoming.

8.4 As to Sellers’ point on the absence of FOSFA seals or labels on the Superintendentscertificates, Buyers would point out that they do not seek to rely on these certificates asfinal. They rely on those as evidence of the true quality of the goods at loading.

8.5 Sellers have been able to persuade Party C and their witness Mr C to produce a number ofstatements about the “supervisory” function performed by Party C for the purpose ofensuring compliance with the so called official standard. We submit that no reliance shouldbe placed on any of this evidence.

8.6 Sellers’ point regarding the efficiency of the Buyers 3 crushing plant, in relation to the mostefficient facilities in the world, is of no relevance whatsoever. The point made by Buyers 3 isthat they experienced lower crushing rates than usual in comparison of cargoes receivedbefore and after the MV AA beans.

8.7 Buyers submit, and have put in additional evidence that it is unrealistic and unbelievablethat the goods could have deteriorated to the extent they did on the basis of the analysis ofsamples taken at loading respectively at discharge.

8.8 On the point of liability concerning the misrepresentation, Sellers resubmit that Mr Y ofBuyers 3, when he spoke to Mr A of Sellers on 12 May, only told him that he wished to beincluded on the basis of 6,000 metric tons in any deal concluded, and only if Sellers hadwon the tender with Buyers 1 and Buyers 2. When Mr Y returned to Israel Sellers hadconcluded a contract with Buyers 1 and Buyers 2, but only as a consequence of his falserepresentations to those parties that Buyers 3 were already committed to a purchase.

8.9 Buyers request the Tribunal to make an award to compensate Buyers for their lossesalready set out in full in earlier submissions, and additionally seek interest to be awarded ata commercial rate, including interest post Award.

9.0 RESPONDENT SELLERS’ FUTHER SUBMISSIONS

9.1 Sellers submit that Buyers’ submissions on the sampling at loading and discharge amountto no more than assertion and rhetoric. The only reason they put forward for alleging thedischarge port samples are more representative than the loading port samples is thatsampling at the discharge port was automatic, while the sampling at the loading ports was,in common with that of very many ports around the world, performed on a manual basis.There is no logical reason why automatic sampling should be preferred purely on the basisthat it is automatic.

9.2 It is incorrect for Buyers to say that Sellers have not produced documents showing “that thegoods duly mixed at the loadport (sic) in fact did bring the cargo eventually loaded andshipped up to Argentine International Export Standards”. Letters from Party C, submitted inevidence, record that the cargo shipped on the “AA” at both loadports conformed to theofficial standards and regulations.

9.3 Sellers submit again that the discrepancies between the contract terms of the original telexconfirmation and the formal contracts arose due to simple clerical errors as explained by MrE in his statement. The key term in dispute in each of the contracts (“quality, weight andconditions are final at load”) has the effect of contracts on the basis of certificate final atloading.

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9.4 Buyers are wrong when they say there is no evidence that Party C performed a supervisoryfunction in relation to the AA cargo. Buyers have already provided the Tribunal and Buyerswith copies of Party C’s letters confirming that in each case the goods loaded on this vesselconformed to Party C’s requirements.

9.5 In their further submissions, Buyers gave a Chronology of the events leading up to theestablishment of the contracts. This is highly selective and prejudicial, and Sellers ask theTribunal to disregard it. Buyers say that this chronology repeats what is said in thestatement of Mr A. This is not correct. What Mr A says is: “I may have told him (Mr. W) thatMr. Y of Buyers 3 had indicated that Buyers 3 would take 16,000 mt if Buyers 2 and Buyers1 agreed to purchase, but I certainly did not tell him that Buyers 3 had unconditionallycommitted themselves to a purchase, and he did not ask me whether they had. …We (i.e.Mr A and Mr W) reached an agreement… during the course of this conversation … I thenspoke again to Mr Y and confirmed the deal.”. In other words, Buyers have misrepresentedMr A’s account of what was said to Mr W on the crucial point.

9.6 In conclusion Sellers submit that this is a case in which Buyers made a bad bargain atarm’s length and they are now trying to avoid its consequences. In all the circumstances,Sellers respectfully request the Tribunal to dismiss Buyers’ claims in their entirety, andAward Sellers indemnity legal costs.

10.0 CLAIMANT BUYERS’ FINAL REPLY SUBMISSIONS

10.1 Buyers oppose Sellers’ request that they be awarded indemnity costs. The Tribunal istherefore asked to disregard Sellers’ request. The grounds upon which an award ofindemnity costs may be made by the arbitrators are limited typically to cases where aclaimant’s conduct of the proceedings was unreasonable, disgraceful or “deserving ofmoral condemnation”. Clearly this is not the case here.

10.2 Sellers make the point that the absence of a human element in automatic sampling makesit more likely that defects will go unmissed. With respect, this is a bad point. Sellers areconfusing sampling with analysis. Samples are more likely to be representative if they aredrawn automatically at regular intervals. It is at the stage of analysis that defects will bedetected.

10.3 Regarding documents, Buyers have already highlighted the inherent unreliability of PartyC’s statements on the basis that there is no evidence that Party C in fact performed the“supervisory” function in relation to the cargo loaded on the MV AA to ensure itscompliance with the official standard. Buyers note that Party C’s letters are dated 30October 2000 and 13 November 2000, in relation to a cargo loaded in June 1998.

10.4 Buyers do not accept that the discrepancies between the telex confirmation and the formalcontract can be taken to be “simple clerical errors” as Sellers suggest. They areamendments that in Buyers’ submission ware made in bad faith to try to avoid theinevitable claims out of the poor quality of the goods shipped.

10.5 In summary, the Tribunal is asked to find in support of Buyers’ claim in relation to thedefective quality of the goods supplied by Sellers on the basis of the following -

a. The Analysis certificates are not conclusive of the goods’ conformity with thecontractual specifications.

b. The Analysis certificates issued at the loadports are not reliable evidence of thequality of the goods shipped. The discharge port evidence should be preferred.

c. Sellers supplied goods which were uncontractual as from the time of shipment.

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10.6 On the issue of misrepresentation Buyers comment in respect of Sellers’ criticism regardingMr Y is indeed an experienced trader. He is not however familiar with the niceties ofEnglish contract law and Buyers 3’s rights. He placed a great deal of trust in Mr A andSellers over many years. There was no reason for him to disbelieve that Mr A had won theBuyers 2/Buyers 1 tenders in good faith.

10.7 In conclusion Buyers disagree with Sellers’ contention that by bringing this claim. Buyersare simply trying to avoid the consequences of a bad bargain. That is not the case. Theallegation is itself objectionable since it implies that the Buyers and their claims aredisingenuous. In fact, a good trading relationship has existed between Buyers and Sellersfor many years. Why would the Buyers jeopardise such a relationship if they did not have agood cause? The allegation made by Sellers makes no sense. It is Buyers’ case that thegoods supplied by the Sellers were uncontractual and/or that Buyers were induced to enterthe contracts on the basis of Mr A’s misrepresentations.

10.8 Buyers request that the Tribunal make an award to compensate Buyers for their losses.The damages claimed by Buyers have been set out in earlier submissions. Buyersadditionally seek compound interest on the amount awarded – including interest postaward. Buyers request that the Tribunal award Buyers the costs of this Arbitration, includinglegal costs.

11.0 REASONS

The case presents a number of discrete issues and our award will cover each oneseparately.

Misrepresentation

11.1 Buyers' case in summary under this heading, is that Buyers 3 did not enter into a contracton 13 May and did not agree to purchase until the return to Israel of Mr Y on 16 May.

11.3 Therefore Buyers 1 consider that they would not have entered into their contracts withoutSellers’ assurance that Buyers 3 had bought, and, as far as Buyers 2 is concerned, theywere induced to buy because they had been informed that both Buyers 3 and Buyers 1 hadagreed to buy. The contracts for Buyers 1 and Buyers 2 were dated 13 May, consequentlyif Buyers 3 had not bought until 16 May it follows that they were induced to buy under falsepretences.

11.4 Equally Buyers 3 only accepted their purchase on 16 May on the basis that Buyers 1 andBuyers 2 had already bought.

11.5 Sellers' answer to this was that the contract with Buyers 3 was entered into on 13 Maywhilst Mr Y was visiting the Sellers offices in Chicago.

It must be remembered that on 11 May both Buyers 1 and Buyers 2 asked for tenders forArgentine Soyabeans and it was as a result of these tenders that Mr A telephoned Mr Y inChicago on 11 May.

As a result of this conversation an offer was made to all three buyers on 12 May.

On the same day Mr A again spoke to Mr Y in Chicago, who asked to be included in anydeal made with Buyers 2 and Buyers 1.

On 13 May Mr A then had two telephone conversations with Mr W of Buyers 1, during thecourse of which the sales of 12,000 metric tons each to Buyers 1 and Buyers 2 were

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finalised. Mr A then spoke to Mr Y in Chicago and confirmed the contract with Buyers 3 for16,000 metric tons.

Mr A's version of these events was not contradicted by any of Buyers' witnesses.

11.6 We consider that when Mr Y returned to Israel from his trip to Chicago on 16 May and hadseen the confirmation of purchase on 13 May for 16,000 metric tonnes, then he would havestrongly objected to this situation if the version set out in 11.4 above was not correct, ie hehad not agreed to enter into a contract on 13 May. As it was, none of the Buyers protestedregarding these contracts. This we find very strange in view of the admitted close contactmaintained between the three Buyers. Buyers' first comments regarding these contractswere not made until 27 May (2.4 above) and were limited to asking for a deferment orwashout. In fact, the first time this question of misrepresentation was raised was by theIsraeli Lawyers on 28 July 1998.

11.7 If Buyers 3 did not require that quantity of Soyabeans, as was later alleged, then we find itvery strange that subsequently to returning to Israel they entered into a further contract with3rd Party for some 8,925 metric tons.

11.8 WE THEREFORE FIND no misrepresentation proven regarding the entering into of thesecontracts and dismiss Buyers' claim accordingly.

Market Loss

11.9 Buyers submit that if they had not been induced to enter the Contracts they would not havepurchased any further Soyabeans for a period of three months, at which point the price waslower than that of the contract price. Consequently, because of the allegedmisrepresentation, Buyers claim this market loss.

11.10 We do not accept this head of claim insofar that we have found that there was nomisrepresentation as to the entering of the contracts, and even more to the point,subsequently to entering into these contracts to which this arbitration refers, certainlyBuyers 3 made a further purchase after the date of this contract by buying 8,925 metrictons of Soyabeans from 3rd Party.

11.13 As we have accepted that there was no misrepresentation in the entering into of thesecontracts, any market risk of entering into these contracts was for the account of Buyers.

11.14 WE THEREFORE FIND that Buyers' claim for market loss FAILS.

The Contracts

11.15 Buyers allege that Sellers tried to change the terms of the contract when they renderedofficial copies on 19 June.

11.16 We have examined the evidence and FIND that on Buyers' receipt of the confirmations of13 May these set out the terms that were agreed between the parties and therefore theseconfirmations prevail.

11.17 No objections were made by any of the Buyers in respect of the confirmations of 13 May,and WE THEREFORE FIND that those confirmations set out the terms agreed between theparties and that the official contracts sent subsequently did not reflect the terms that hadbeen agreed.

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Early arrival

11.18 Buyers submit that the vessel arrived early, contrary to assurances that they had received,which caused them considerable damages for storage.

11.19 On examining the faxed confirmations of 13 May, which we have found above to be thevalid contracts, WE FIND that the shipment position was 5 - 30 June and that the guaranteewas that the vessel would sail by 30 June. There is no provision in the contract, other thanthe first date of the shipment period of 5 June, which the seller had to comply with.

11.20 WE FURTHER FIND that the contract stipulates -

"guarantee vessel's departure after top off by June 30 1998"

which does not mean, as Buyers have interpreted it, that the vessel would not sail beforethe 30. It is abundantly clear to us that when Buyers were informed that the vessel maypossibly top off at another port they clearly required that if the vessel did so it wouldcertainly leave by 30 June. We are supported in our view because the contract furtherrequires that the in the event that there was more than one destination Israel was to be thefirst discharge port.

Furthermore Buyers submitted that the background to these purchases was that a previousvessel had been delayed and therefore it is abundantly clear that Buyers wanted as early ashipment as possible and not a later one.

11.21 As the Bill of Lading date was 10 June this complied with the shipment term of the contractand therefore Buyers' claim fails.

Quality

11.22 Buyers have submitted that because of the results of samples taken at discharge, clearlythe goods were not in conformity to the terms of the contract at the loadport and thereforethe analysis results of samples taken at discharge should prevail over those taken atloading.

11.23 Sellers argued that the contracts stated "quality weight and conditions are final at load" andtherefore, having evidenced in the form of a certificate setting out the quality parameters,that is final under the terms of the contract.

11.24 Buyers countered this by pointing out that the sampling measures at loading were by handand these cannot be anywhere near as accurate as those at discharge, which were takenautomatically.

Whilst the levels of foreign matter and heat damage results do show a small difference, thelevel of splits on the loading certificate at 14.2% is vastly different to that shown atdischarge of 39.85%. This is quite dramatic and cannot be accounted for by the voyageand handling provisions.

11.25 Buyers also asserted that the Superintendents used to obtain the quality certificates weresub-contracted, which is completely disallowed by FOSFA International regulations, towhich Sellers pointed out that the Superintendents Company which drew the samples, is afull member of the FOSFA International Superintendents Scheme and therefore doescomply with the terms of the FOSFA contract.

11.26 Buyers also submitted that the Analyst’s Certificates were uncontractual because they didnot contain a FOSFA seal as required under the terms and conditions of the FOSFA

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contract form. Whilst we accept that the Analyst’s Certificates did not contain a FOSFAseal, nevertheless Analysts are an approved analyst member of FOSFA for Soyabeans andthat furthermore Buyers took up and paid for the documents without protest.

Whilst we accept that Buyers could have rejected the documents with the absence of theFOSFA International seal, we consider that this was a matter that could easily have beenrectified if the matter had been raised at the time. By taking up and paying for documentswithout protest Buyers have waived their right to argue that the Certificate wasuncontractual.

11.27 Whilst the disparity between the loading analysis and the final analysis taken at dischargeis totally divergent, nevertheless we consider that the terms of the contract prevail and thatis that the quality is final at the loadport and whilst Buyers have challenged the result byinference on the basis of discharge samples, no evidence has been presented to show thatat time and place of loading these certificates do not demonstrate what was actually loadedon board the vessel.

11.28 Buyers have submitted that Argentina was an experimental venture for all of them and thatwhen they started to process the beans they experienced lower crushing rates than usual.We presume therefore from the Submissions that "usual" are US beans as opposed toSouth American.

It is within the Tribunal's knowledge and experience that when moving from crushing USbeans to South American beans, considerable adjustments have to be made to thecrushing process to obtain the optimum yield. It is therefore possible that Buyers, due totheir inexperience, did not make these necessary adjustments.

We also find noteworthy that despite the level of splits ascertained according to theDischarge Analysis, nearly 40%, this was not noticed until after crushing had begun, but ifthe goods had contained such a high level of splits this would have been absolutely obviouson delivery of the goods to the various crushing plants.

11.29 We do not accept the criticism that sampling by hand is inherently not representative asopposed to mechanically sampled goods. Hand sampling is a recognised technique usedthroughout the world and is clearly set out in FOSFA International standard contractualmethods for the taking of samples and as such is therefore an acceptable method forascertaining a result.

11.30 WE THEREFORE FIND that the shipment was made in accordance with the terms andconditions of the contracts, as evidenced by the certificates issued at time and place ofloading, and the analytical results shown on these certificates complied with the terms andconditions of the contract. Buyers' claim therefore FAILS.

Weights

11.31 Equally the same provisions apply to the shortage of weight at discharge. The contractualprovision was that the weight was to be final at load and evidence was presented of theweight actually loaded. We consider that a shortage of less than 1% is not unusual forSoyabeans in the normal course of events. WE THEREFORE FIND Buyers' claim for lossin weight FAILS.

12.0 AWARD

12.1 WE AWARD that Buyers claims FAIL.

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12.2 Both parties have claimed their legal costs and Sellers further claim costs on an indemnitybasis in this case. Having considered the Submissions WE AWARD that Buyers shall paySellers' legal costs, to be taxed if not agreed. We refuse Sellers' claim for costs on anindemnity basis.

12.3 WE FURTHER AWARD that the fees, costs and expenses of this Arbitration shall be forBuyers’ account. If Sellers shall have paid any or all such costs in the first instance, theyshall be entitled to immediate reimbursement.

THIS AWARD WAS APPEALED BY BUYERS

THE BOARD’S APPEAL AWARD IS SET OUT BELOW

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PUBLISHED AWARDS SERVICE

Appellants: Buyers Date of Award 22 April 2002

Commodity: Soyabeans

We, the Board, have met to hear the appeal against Award of Arbitration dated 15 August 2001presented by Mr V of Buyers 2 by agreement and on behalf of all three Appellant Buyers.

1.0 INTRODUCTION

1.1 This is one of those not infrequent cases where Buyers find that the analyses and reportson the condition and quality of the goods issued at load vary significantly from the resultsand analyses carried out at, or, in this case, after, discharge.

1.2 In consequence, where, as in the present case, the discrepancies between the results andanalyses at load are markedly different from those ascertained at discharge, a dispute willarise as to which results are true and binding under the contract. Sellers invariably rely onthe superior results at load in order to justify the payment or retention of the full contractprice. Buyers, relying on inferior results at discharge, attempt to justify price reduction,allowances and, when the matter gets to arbitration, the award of damages.

1.3 It is this last situation with which we are concerned in the present reference and essentiallyour task will be to ascertain whether in the light of the evidence and under the provisions ofthe contract and the underlying law the results of analyses and inspections carried out atload or after discharge should be determinant of the issues between the parties.

1.4 The argument turns essentially around the provision in the contracts reading “Quality,weight and conditions (sic) are final at load” and much erudite legal argument is brought tobear on the meaning of this phrase within contracts based on the FOSFA Contract No 22and against the factual and commercial background to these transactions.

2.0 THE CONTRACTS

2.1 There are three Appellant Buyers and three separate contracts. The contracts, however,are all dated 13 May 1998 and are identical except as to quantity. Thus -

- Buyers 1 : 12,000 metric tons- Buyers 2 : 12,000 metric tons- Buyers 3 : 16,000 metric tons

2.2 The other terms of the contracts as per Sellers’ fax confirmation of 13 May 1998 are thefollowing -

(Tolerance): 5% more or less at Sellers’ option at contract premium.Commodity: Argentine Yellow Soybeans.Specifications: Moisture max 13.0%

Oil content (on as is basis) min 18.5% per Analyst 1 certificateWith non-reciprocal bonification 1.5% for 1% if under 18.5%.

Damages: Basis 3% 1 : 1Heat Damage: Basis 0.5% 1 : 1Splits: Basis 20% Max 30% 1 : 1

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FM: Basis 1% but max 2%Quality, weight and conditions are final at load.Shipment: June 5-30, 1998

Vessel will be topped off with other grain at a diff berth.Guaratee (sic) vessel departure Argentina after top off by June 30,1998.

If more than one destination used, Israel to be the first discharge port.Premium price: USD 0.38 JulyC&F Israel Port 1 or Israel Port 2, at Sellers’ option.No demurrage no despatch at discharge.

Payment terms: Cash against faxed copy of documents or B/O 180 days promissory notesguaranteed by Bank 1 or Bank 2. Confirmed interest rate and amount by the bank will beadded to the invoice value based on above C&F price.

All other terms and conditions are as per FOSFA contract including respective arbitrationrules.

2.3 Sellers’ written confirmation, sent much later to Buyers on 21 June 1998, is more explicitand contains more details than the fax. Where relevant to this dispute and different from thefax confirmation the terms are the following:

Specifications:Split kernels maximum 30%Damaged kernels maximum 3%Out of which heat damaged maximum 0.50%Foreign matters maximum 2%Oil content (on as is basis) minimum 18.5%With non-reciprocal allowance 1.5%: 1% if under 18.5%

Weight/Quality/Condition: Final at loading per first class superintendent certificate.

Shipment: Per bill(s) of lading dated between June 5th-30th, 1998, both datesincluded.Vessel will be topped off with other grain at a different berth.Vessel should leave Argentina after top off by June 30th, 1998.

Other terms: All other terms and conditions not conflicting with the above shall beper FOSFA 22 including its Arbitration Clause, with arbitration inLondon, of which the parties have knowledge and notice and herebyaccept.

2.4 Both at First Tier and in this Appeal, Sellers conceded that the original fax set out the termsas agreed between the Parties.

2.5 However, there is no dispute between the Parties as to FOSFA Contract No 22 being theunderlying contract. It follows, moreover, from the explicit incorporation of the FOSFAArbitration Rules that the seat of the Arbitration is England and both English substantive aswell as procedural law, including but not limited to the Arbitration Act 1996, govern thisreference.

3.0 THE FACTS

3.1 All dates refer to the year 1998, unless otherwise stated.

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3.2 On 11 May, Buyers started to ask for offers of Argentine Soyabeans FOB Argentina toIsrael for delivery 15 – 30 June, to be loaded in combo on same vessel with other cargo ofsoybeans and/or grain to Israel.

3.3 On 12 May, Sellers made an offer to Buyers for 40,000 metric tons Argentine YellowSoyabeans, shipment 5 – 30 June, premium price US$0.38 July, C&F Israel Port 1 or IsraelPort 2 with slightly different specifications as requested by Buyers and mentioning “oilcontent on as is moisture per [named Analyst] certificate”.

3.4 The business was confirmed by Sellers to Buyers on 13 May as shown under 2.0 above.

3.5 On 27 May (the translation shows as date 7 May) Buyers 3 wrote to Sellers as follows (intranslation):

“In view of the grave situation which the industry has encountered and according tothe forecast that this situation will also continue in June – August 1998, I would askyou to act in cooperation together with us in the following months:

(a) Notwithstanding our telephone conversation, the consignments for August andthereafter, inclusive, should be frozen.

(b) In coordination with my colleagues in the industry, to postpone a vessel fromArgentina – June transportation – from [Buyers 3’s] point of view, arrival in thesecond week of June. From the point of view of the industry, a postponement oftwo months or a washout of the order.”

3.6 On 1 June, Buyers 3 wrote to Sellers as follows (in translation):

“I wish to bring to your attention that bringing forward the vessel sailing from30th June 1998 to 5th June 1998 means $ 142,000 !!!!! and this is by renting a silo in[Israel Port 1] and moving the majority of the merchandise to [Party A] and return to[Israel Port 1]. NB. The reaction from [Buyers 1] and [Buyers 2]is likely to beharsher.”

3.7 On 2 June, Sellers advised Buyers, acknowledging Buyers’ letters of 27 May and 1 June,that their efforts to sell the 40,000 metric tons of Argentine Soyabeans elsewhere had beenunsuccessful and that no other alternatives were left than to load the beans on schedule asper contractual obligations. Sellers further advised that in order to be able to sell the goodsat a later date Sellers had decided not to complete the vessel with any other products, sothat it will be easier to divert the vessel. The letter ended by stating that if no solution couldbe found, the vessel will proceed to Israel.

On the same day, Sellers advised Buyers that they had chartered the MV AA to carry thecontracted goods.

3.8 On 2 and 3 June, Buyers and Sellers exchanged letters/faxes about the cancellation of thecontracts. Further efforts were made by Buyers to dispose of the goods elsewhere but werealso unsuccessful and Buyers complained about the lack of cooperation by Sellers. Thisexchange was followed by a further fax from Sellers dated 9 June suggesting anotherpossible approach.

3.9 On 11 June, Sellers sent their declarations of shipment to Buyers in total fulfilment of thecontracts of Argentine Yellow Soyabeans per MV AA:

- to Buyers 1: 11,022 metric tons loaded in 1 Argentine Port on 5 June and 1,578 metrictons loaded in 2 Argentine Port on 10 June;

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- to Buyers 2: same quantities, ports and loading dates;

- to Buyers 3: 14,696 metric tons loaded in 1 Argentine Port on 5 June and 2,104 metrictons loaded in 2 Argentine Port on 10 June.

The message further stated: “please confirm marine insurance and declare disport”.

3.10 On 14 June, Buyers 1 rejected the tender on the grounds that the goods were loaded priorto rather than after 15 June as had been requested by them and that they had cancelledthe contract. On the same day, Sellers asked Buyers 1 for documentary instructions andadvised that in their absence they would follow previous instructions. Sellers also requestedthe pricing of the July soybeans futures contracts.

3.11 On 18 June, Buyers sent 3 identical letters to Sellers regarding the Soyabeans on theMV AA:

“1. According to your notification above ship which is making its way fromArgentina to Israel includes a cargo of soya beans intended for … (names ofBuyers).

2. It is not clear to us why the cargo, which was not ordered by us and forwhich we have no need, is being sent for us.

3. Nevertheless, and as a gesture of good faith, we are willing to try to help youfind a solution to the problem.

4. Neither that stated in this letter nor any omission from it is such as toderogate from our arguments against you.”

3.12 On the same day, Sellers replied that they maintained their contractual tender, andexpressed their intention to help Buyers to solve their problems. In the following days,further correspondence was exchanged between the parties, without any solution beingreached.

3.13 On 21 June, Sellers sent Buyers written contract confirmation inter alia specifying“Weight/Quality/Conditions: Final at loading as per first class superintendent certificate”.Buyers made no comment at the time in relation to this wording.

3.14 On 26 June, Sellers sent the following fax to Buyers 3 regarding Argentine Soyabeans onthe MV AA:

“We confirm our telephone conversation of today, June 26th at 15.30 hrs Geneva time.Since you talked to us from your car, you have authorized us to confirm the main pointsin writing. You have decided and advised us that:

- [Buyers 3] shall honour the document presentation of the cargo on above-namedvessel and shall provide Sellers with a payment instrument for 100 pct of the invoicevalue of the goods.

- Sellers in exchange shall not interrupt vessel’s voyage towards Israel.

- Sellers and Buyers 3 have agreed to discuss the commercial realities surroundingthe contract and Buyers 3 obviously retains its contractual rights to claim damagesfor any alleged uncontractual behaviour on Sellers’ part.

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We appreciate that you have been able to come to a final decision, which will help tominimise costs and we hope this will help towards finding an overall solution for thismatter.”

3.15 On 29 June, advocates on behalf of Buyers 2 and Buyers 1, also accepted to pay for thedocuments under strong protest. Some correspondence followed about the date of thepayments and the pricing of the futures.

3.16 On 6 July, Sellers invoiced Buyers 2for loss of interest due to late payment of documentsan amount of US$14,327.20 and Buyers 1 an amount off US$15,271.25.

3.16 On 28 July, advocates, wrote to Sellers on behalf of Buyers that Buyers intended to applyto the courts for their claims against Sellers as a result of damages suffered by reason ofserious acts of misrepresentation and other improper behaviour by Sellers, but that Buyerswould like to organise a meeting between the Parties in order to discuss matters.

3.17 On 30 July, Sellers replied that the validity of the contracts could not be put in question andthat they formally rejected Buyers’ allegations of misrepresentation and/or improperbehaviour. Sellers further stated that they were fully prepared to attend a meeting in orderto discuss the commercial issues surrounding the contracts. Sellers further pointed out thatthe contracts were governed by FOSFA terms including an arbitration clause, governed byEnglish law.

3.18 One of the Buyers, Buyers 2, requested Superintendents 4 (an Superintendent company) tosend a sample of Soyabeans taken at discharge from the MV AA for analysis onsplits/broken and Foreign materials to named Analyst in Rouen. The result of this analysisas shown on the certificate dated 27 August shows Splits/broken 39.85% and Foreignmaterials 2.33%

3.19 On 3 September, a meeting between the Parties took place in 3rd Israel Port. A letter fromBuyers to Sellers of the same date confirmed Sellers' consent to extend the time limits forsubmitting any claim for FOSFA arbitration until 31 December, which was confirmed bySellers.

3.20 On 23 September, Sellers sent a fax to Buyers explaining that Analyst 1's Inspections inArgentina are subcontracted to Superintendents 3 who use the laboratories of Analyst 2Argentino SA, both of which companies are recognised by FOSFA and GAFTA. Sellersre-confirmed that sealed samples drawn at loading were available and that if Buyers wishedto have them re-analysed Sellers would prefer to have the re-analysis done at the namedAnalyst laboratory in Rouen. If the results of this re-analysis on the quality specificationsguaranteed in the contract were significantly different from those found initially at loading,Sellers were ready to re-open this issue for discussion.

3.21 Buyers advised that they agreed to have the samples re-analysed.

3.22 The shipping documents presented by Sellers to Buyers contained a certificate of qualityand condition, issued by Survey company dated 22 June and showing the following results,based on the analysis results made by a FOSFA laboratory:

Oil content: 18.70% (TALE QUALE)Foreign matters: 0.78%Moisture: 12.10%Damaged kernels: 0.65%Heat damages: 0.02%Split kernels: 14.20%

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3.23 The results of the analysis made by the named laboratory as shown on their certificatesdated 16 November and based on the sealed samples drawn at loading are the following:

1 Argentine Port 2 Argentine PortSplits/broken 15.18% 14.55%Foreign materials 0.92% 0.87%Heat damaged 0.00% 0.00%Total damaged 2.01% 0.65%Moisture 10.25% 10.50%Oil content 19.90% 18.95%

3.24 On 25 November, Buyers jointly claimed arbitration and appointed their Arbitrator. On2 December, Sellers nominated their Arbitrator.

3.25 Buyers’ arguments at first tier were in large part based on an alleged misrepresentation bySellers during the pre-contract negotiations, which, they said, entitled them to damagesbasis Section 2 (1) of the Misrepresentation Act 1967. Only in the event that this argumentshould not be accepted by the Tribunal did they put forward a further argument based onSellers’ alleged failure to have provided goods which, to the extent that they exceeded thecontractual minima and maxima, were both uncontractual and inconsistent with the relevantstatutory requirements of the Sales of Goods Act. Two further subsidiary arguments werealso put forward:

a. for damages allegedly caused by vessels’ premature departure from Argentina andarrival at 1st Israel Port,

and

b. for shortage basis allegedly inaccurate Bill of Lading weights as compared with theweights ascertained at discharge.

3.26 The arguments and evidence (partly in the form of a number of witness statements) putforward at first instance concerned very largely the issue of misrepresentation.

3.27 In their award, the First Tier Tribunal rejected the argument on misrepresentation as well asthe subsidiary arguments on “non-contractual goods”, “shortage” and “premature arrival” ofthe vessel.

3.28 In their “outline of reasons for appeal”, Appellant Buyers did not challenge the findings andconclusions of the First Tier Arbitrators in relation to the “misrepresentation” issue, the“shortage” issue or the “premature arrival” issue. In consequence, their Appeal wasconcerned exclusively with the question of whether the goods shipped were contractualand, if not, what measure of damages would be appropriate to compensate Buyers forSellers’ alleged breach or breaches.

4.0 BUYERS’ SUBMISSIONS

4.1 The contract terms as agreed by the Parties were those in the 13 May 1998 Confirmations,not Sellers’ so called “official contracts” received on or about 21 June 1998.

4.2 There is no dispute that the provisions in Sellers’ version of the Contracts differ from thosein the 13 May 1998 Confirmations and Buyers’ tender documents. In the first tier arbitrationSellers sought to explain away these inconsistencies as “clerical errors” and “mistakenlyapplying South American Soyabean terms to the contracts”. The Tribunal at First Tier foundthat these so called “official contracts” sent by Sellers did not reflect the terms which theParties had agreed.

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4.3 However, the Tribunal did not draw any adverse conclusions as to why Sellers attemptedunilaterally to change the contract terms after shipment of the beans. The Tribunal also leftopen the question as to the effect of these attempted changes. The fact is that it appearsthat Sellers were looking to fit “contractual” specifications to the poor quality goods whichthey had in fact already shipped by that date. The Board is invited therefore to draw its owninferences, bearing in mind that all of the terms that Sellers tried to change would affect aclaim for quality adversely.

4.4 In this regard and since Sellers are likely to say again that the differences are due toclerical errors, Buyers refer to another document, dated 4 June 1998, a message fromSellers to a separate entity setting out the requested analysis results for this cargo. Thespecification requested is the same as the specification in the so-called official contracts.Are Sellers seriously willing to try to persuade the Board that this document was also aclerical error? Surely not.

4.5 None of the contracts contained a “certificate final” provision. Therefore the AnalysisCertificates cannot be considered “final”.

4.6 At First Tier, Sellers persisted in an incorrect argument that the Analysis Certificates werefinal and binding.

4.7 The fact is that this was not what was agreed and that these sales were not what areknown in the trade as “certificate final” sales. Nowhere in the Parties’ contracts do Buyersagree to be bound by the loadport certificates provided by Sellers. Instead, the partiessimply agreed “quality weight condition final at load”. Buyers emphasise that this is not thesame as saying that the Analysis Certificates will be final and binding.

4.8 Sellers will undoubtedly try to persuade the Board otherwise. They will say that the wordingused in the 13 May 1998 Confirmations must mean the same as “quality weight conditionfinal at loading as per first class superintendents’ certificates”.

4.9 However those are not words used in the Contract Confirmation and it would be wrong toeffectively re-write the contracts at this late stage so as to help Sellers achieve theirobjective – namely to avoid Buyers’ claims. In this regard, do not forget the contracts sentto Buyers by Sellers on 21 June 1998. The words used in those documents clearly wereintended to make the Analysis Certificates final. Those documents stated –“Weight/Quality/Condition: Final at loading per first class superintendents certificate(s)”.But those are not the words used in the Contract Confirmations.

4.10 So what interpretation should the Board of Appeal then give to words used in Sellers’confirmations? What do the words “QUALITY, WEIGHT AND CONDITIONS FINAL ATLOAD” mean?

4.11 The answer is to be found in the FOSFA form incorporated into the contracts – namelyFOSFA Contract No 22. FOSFA Contract No 22 is what is known in the trade as an “arrival”form. This simply means that the quality and condition of the goods is required to bedetermined at the discharge port – not loading. Hence Clauses 2 and 18 of FOSFAContract No 22. The effect of the words used in the Confirmations is to alter that positionby making the place of shipment or loading the point at which the goods’ compliance withthe contract condition and other terms is to be determined. The words “final at loading” inthe fax Confirmations of 13 May 1998 do nothing more than that.

4.12 It is not open to the Board in Buyers’ respectful submission to read or imply any words intothe contracts that make the Analysis Certificates final and thereby exclude Buyers’evidence from the quality dispute. Unfortunately, the Board will need to consider somelegal cases at this stage.

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4.13 English law imposes clear restrictions on how one must interpret clauses that try to imposefinality on the parties to sale contracts. Those restrictions oblige you to interpret such“finality” clauses (or to give them their legal name, “conclusive evidence clauses”) verystrictly and against the party trying to rely upon the clause. In this case the Board musttherefore interpret the relevant words against Sellers and in favour of Buyers.

4.14 To begin with, consider the Court of Appeal decision in Lindsay v European Grain Ltd. Thisis a case decided by the Court of Appeal. It stands as authority for the fact that a clause ina contract which attempts to exclude evidence must be strictly interpreted and applied.This authority is supported in the extract from a legal textbook called “Bridge on theInternational Sale of Goods”. This extract confirms that a clause which appears to restrictthe use of evidence about matters affecting the goods’ quality should be interpreted strictly.

4.15 The Board is bound by the Court of Appeal decision in Lindsay v European Grain Ltd. Thatcase says that a clause in a contract which has the effect of limiting or excluding evidencemust be strictly interpreted; no further wording can therefore be implied or read into the”quality final” clauses in this case. To do so is contrary to the Court of Appeal decision andtherefore contrary to English law.

4.16 Another court decision which will assist is that of the “Bow Cedar”. The decision in the“Bow Cedar” case also supports the principle of strict interpretation referred to. That caseconcerned a contractual quality clause which provided for “weight and quality final atloading as per certificates of independent surveyors..”. The contract was a FOB sale of500 metric tons of crude groundnut oil which turned out to be 50% groundnut oil and 50%Soyabean oil. In considering the wording of the quality clause, the English Court gave thewords a strict interpretation. The Court therefore decided that the certificate of weight andquality whilst final in respect of the weight and quality of the commodity, was not final withregard to the description of the commodity. So the buyers were not therefore bound by thecertificate except on those matters specifically stated in the quality clause. So the clauseapplied to quality but could not be read as extending to description. This is a good exampleof the Courts taking a strict approach to interpreting such clauses. It is the approach thatBuyers submit the Board too, should be taking. The Board’s finding therefore should bethat the words: “quality, weight and conditions final at loading” do not make the AnalysisCertificates final.

4.17 Probably Sellers will refer to other authorities such as the Toepfer v Continental Grain case.Buyers submit that that case has no relevance to the present dispute for several reasonsbut will be dealt with in reply.

4.18 To summarise, Buyers’ case is that at the time of shipment, the goods were well in excessof the contractual warranties for (i) foreign matters, (ii) splits and (iii) heat damage. Buyers’evidence that this is the case is in the Certificates issued by the Laboratory andSuperintendents dated 28 August 1998 as well as in the evidence of Mr V, Mr Y, Mr D andMr X. All of that evidence now needs to be examined to decide the quality dispute.

4.19 Buyers would add that just because the contract states “quality/condition final at load” doesnot mean to say that their statements or the analysis results obtained from Laboratory 1and Superintendents 2 does not provide good evidence of the state and quality of thebeans at loading. It does not mean that preference should be given to evidence from theloadport. Buyers know that the goods could not have deteriorated to just under 40% splitsduring transit. This means that if the Board accept Buyers’ evidence as being reliable, itspeaks as to the quality and condition of the goods at loading and that the Board are free tofind that the MV AA beans were uncontractual at shipment.

4.20 The results of the analysis on loading (the Analyst 1 Certificates) are very different from theresults of the tests carried out after discharge (Superintendents 2 dated 28 August 1998).

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There is no explanation other than that the goods loaded were not in fact as certified in theAnalyst 1 Certificates.

4.21 Sellers have agreed, and the first tier Tribunal acknowledged, that there was a significantdisparity between the analyses found at loading and discharge. This could not beexplained by deterioration of the beans during the voyage. Nor, according to the First TierArbitrators, could the handling procedure justify the different results.

4.22 However, whilst it recognised that the disparity was “totally divergent” (at Paragraph 11.5.6of the Arbitrators’ Award), the Tribunal failed to explain or resolve the conflicting resultsfound at loading and discharge. Nor did it properly explain why one set of results should bepreferred over the other. How can one analysis find only 14.2 % level of splits and thesecond testing of the same beans on discharge find the actual level of splits to be 39.85%?This did not occur during the voyage or during handling at Israel Port 1. Yet the second lotof testing was only carried out 6 weeks or so after the first test. Aside from the fact thatSellers have admitted (and the Tribunal at first tier agreed) that the beans could not havedeteriorated during transit or handling, Buyers also rely on Dr G conclusion that:

“mechanical forces and rough handling in particular can significantly increase thepercentage level of splits in a soya bean cargo. However, the discharge terminal atIsrael Port 1 appears to be a conventional modern facility... it is not a realisticpossibility that between loading and discharge, the splits could have increased tosuch a level from the purported average level of 14% ..”

4.23 If one accepts that the sampling at discharge was reliable, then what explanation is there,apart from the fact that the Analyst 1 Certificate must be incorrect?

4.24 Buyers rely on the results found by the Superintendents 2. The results of the 2nd analysisdated 28 August 1998 are to be preferred over the Analysis Certificates.

4.25 Buyers submission is that the sampling conducted at the 1 Argentine Port terminal duringthe loading of the MV AA is unreliable. The statement of Mr D in this respect and inaddition, Mr E’s statement, Mr F’s statement and the report of Dr G on the condition of thecargo on loading (are all relevant). Buyers suggest that the Tribunal at first tier wronglydisregarded these statements and Dr G’s evidence as to the true condition of the beans onloading and failed to take this evidence into account in deciding whether the Analyst 1Certificates were in fact an accurate record of the goods actually loaded.

4.26 Dr G report in particular confirms that the sampling conducted at the discharge port, andtested by Analysts would have been inherently more reliable than the sampling done at theloadport. In it he states “I consider that the automatic sampling at the discharge port is likelyto have been the more reliable in terms of providing final samples relatively close toreflecting the average quality of the entire shipment.”

4.27 As Mr F confirms in his Statement dated 8 August 2000, an average representative samplefrom each and every bulk shipment unloaded at the facility in Israel Port 1 is produced bymixing, halving, quartering and re-quartering the samples taken automatically every30 minutes. This was the process used in relation to 80% of the MV AA cargo. This isroutine sampling done under Health Ministry regulations. It was not at the request byBuyers, so already the chance of Buyers sampling process being biased orunrepresentative is eliminated.

4.28 By contrast, the samples taken at the loadport were, as Dr G puts it, “performed manuallyby some unknown regime by casual labour”. They were also done for the benefit of Sellers.Buyers again highlight that Sellers have failed to provide any documentary evidenceregarding the exact sampling procedure used at the loadport and the frequency of

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sampling. Where is the Inspection Log referred to in Buyers’ tender? The sampling was noteven done by FOSFA accredited superintendents, as required by FOSFA in the FOSFAScheme for Superintendents. There is a very clear rule against sub-contracting in theFOSFA Code of Practice for Superintendents.

4.29 The Superintendents fax dated 26 April 1999 provides a list of the people who are said bySellers to have conducted sampling at loading (Messrs H, I, J and K). All of theseindividuals are accepted as being independent sub-contractors. Buyers know from Mr D’sstatement that all four of the inspectors named are “independent” sub-contractors. It iscommon ground that only Mr H resides near 1 Argentine Port. How, therefore, is it possiblethat the other three individuals named in the list could have conducted thorough samplingand observed the FOSFA sampling rules? It is inherently unlikely that they did. This isArgentina we are talking about. Not the USA.

4.30 Buyers would repeat the point: that Sellers (and the First Tier Tribunal) have acknowledgedthat the discrepancy between the Analyst 1 Certificate results and those of the Laboratory 1and Superintendents 2 dated 28 August 1998 cannot be explained by any deterioration ofthe goods in transit or during handling. The question for the Board is, therefore, what is theeffect of an analysis certificate which is clearly not a true reflection of the actual condition ofthe goods?

4.31 Buyers say that the Analyst 1 Certificate must be disregarded on two grounds:

a. Firstly, the contract does not provide for certificates final at loading and thereforeBuyers are not bound by the certificates;

b. Secondly, the certificates clearly do not show the true condition of the goods actuallyloaded. There is no explanation for the poor quality of the goods on discharge whichmust mean that the sampling on which the Analyst 1 Certificates was based is notrepresentative of the cargo as a whole.

4.32 Furthermore, the Analyst 1 Certificates themselves are not contractual documents.

a. Firstly, they do not comply with the requirement under Clause 18 of FOSFA ContractNo 22 in that they do not bear the FOSFA International official seal. Without such aseal, the Certificates are uncontractual.

b. Secondly, the sampling was conducted by private sub-contractors of Analyst 1’s ownsub-contractors, Superintendents 3 SA. Superintendents 3’ sub-contractors are thefour individuals referred to in these submissions above. None of those individuals areFOSFA accredited. This is clearly in breach of the FOSFA Superintendents Code ofPractice (which does not permit sub-contracting services to non FOSFA approvedsuperintendents).

c. Thirdly, there is no satisfactory proof that any sampling was done, since the SamplingInspection Log that Buyers requested in their tender and which Sellers were thereforeaware of before the contracts were made, appears to have vanished.

4.33 On these grounds, Buyers would ask that the Board find that the Analyst 1 Certificatesissued at the loadports are neither contractual nor reliable evidence of the quality of thegoods shipped. Buyers suggest that the testing done by Superintendents and theCertificate issued on 28 August 1998, based on the more consistent method of sampling atthe discharge port should be preferred as evidence of the true condition of the goods onshipment.

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4.34 It is appropriate to deal with another of the first tier Tribunal’s incorrect findings at thisjuncture. The Tribunal at First Tier were wrong to find that Buyers in any way waived theirright to challenge the Analyst 1 Certificates (Paragraph 11.5.5 of the Award). Buyers hadno grounds for doubting the truth of the Analyst 1 Certificates until it was clear (after thegoods’ arrival) that the physical quality and condition of the goods delivered was not thatcertificated on loading. Nor can it be said (which the tribunal did at Paragraph 11.5.5 oftheir Award) that Buyers “took up and paid for the documents without protest”. Theevidence before the Board clearly demonstrates that Buyers only paid for the cargo undervery strong protest. Anyway, the argument which is one introduced by the Tribunal simplydoes not work. Just because one accepts and pays for documents (even if no protest ismade), does not mean to say one loses the right to complain about the goods and claimallowances or damages (extract from Benjamin on Sale of Goods at 19-134).

4.35 Intriguingly, the first tier Tribunal seems to suggest that it is Buyers’ fault that theyexperienced lower crushing rates during their processing of the beans. The Tribunalconcluded that this was due to “Buyers’ inexperience”. However, the Tribunal’s findingsabout Buyers’ crushing rates of Argentine beans are purely circumstantial and franklynonsense. No evidence was put before the Tribunal on this point and Buyers dispute theTribunal’s reasoning. It is somewhat unusual for a tribunal to express a view on matters thatwere not argued at first tier with supporting evidence.

4.36 Furthermore, the Tribunal’s reasoning completely disregarded Buyers’ evidence regardingthe cargo delivered to them by another party on board MV BB. That cargo was also acargo of Argentine beans. Buyers clearly said in their statements that they had noproblems with the BB which arrived shortly before the MV AA cargo. That cargo wascrushed without any problems as stated in the Statement of Mr V and Mr Y.

4.37 Furthermore, as regards the high level of splits in the beans, Buyers have shown in theStatements of Mr V and Mr Y when and where the extent of the splits was first noticed. Theevidence does not suggest, as the Tribunal wrongly concluded, that the high level of splitswas only noticed when the crushing process was underway.

4.38 Buyers summarise for the benefit of the Board the main points of each of the Statementssubmitted in evidence as they affects the case, and also what the certificates stated.

a. Mr V’s Statement

i. Quality problems were evident on stowage for onward haulage (loading 36rather than 40 metric tons).

ii. Crushing process was slow, blocked due to high content of loose hulls andforeign matter.

iii. High acidity affecting the quality of the beans; reduction in oil yield andlosses in refining.

b. Mr Y’s Statement

i. Problems with beans – complains from haulage company regarding weightof beans.

ii. Angle of repose of beans less steep than usual. High level of hulls about thelower part of each mound = high level of split beans.

iii. Slower crushing rate than usual – increased cost of processing; decreasedoutput.

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c. Dr G’s Reports dated 10 August 2000 and 16 January 2001-

i. Increased levels of foreign matter/loose hulls in soyabean cargoesdecreases the bulk density. In other words high levels of splits increase thestowage factor of the beans. This is consistent with the evidence of Mr Vand Mr Y’s about the haulage contractors’ complaints.

ii. Discharge port sampling was inherently more reliable than that at loadport.

iii. Not realistic that splits increased to level of discharge on voyage / due tohandling.

iv. No evidence to suggest any extreme rough handling which could explain thehigh level (40%) of splits.

v. 40% splits and detached loose hulls resulted in decrease in packingefficiency and decrease in bulk density.

vi. Extra hulls also leads to bulk densities further (proportionately) reduced.

vii. Additions of organic foreign matter also leads to reductions in bulk density.

viii. Irrelevant that automatic sampling at discharge unsupervised – supervisiondefeats purpose of automation.

ix. No evidence as to precise regime of manual sampling at loadports.

d. Mr D’s Statement

i. Evidence as to sampling procedure at loadport: random manual sampling;depends on thoroughness of each inspector.

ii. Sampling conducted at intake to silos is totally random and unreliable andbased on a quick visual inspection.

iii. Problems with beans being allowed to enter the 1st Argentine Port terminalsilos even where they did not conform to the so-called official Argentinestandards imposing basic and maximum tolerances for split beans.

e. Mr L’s Statement

i. Sampling of AA cargo at discharge port.

ii. Sample every 300 metric tons – 110 samples were taken from 33,241 metrictons of MV AA beans tested.

iii. Sampling procedure at discharge port: automatic pelican sampling sweepingdevice.

f. Superintendents Certificate dated 28 August 1998 – Analysis of sample ondischarge from MV AA – splits 39.85%; 2.23%.

g. Laboratory 1 Certificate – Analysis Certificate for cargoes of both MV AA and MVBB – ‘AA’ beans – FM 3.8%; Splits 43.80%; Heat Damage 1.80%.

Submissions on Quantum

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4.39 There was no decision by the First Tier Arbitrators on the quantum question. If the Boardfinds that the goods delivered by Sellers did not comply with the Contracts, Buyers invitethe Board to consider the compensation to which Buyers are entitled for the defectivequality and condition of the goods. Buyers are entitled to a) allowances provided under theContracts as well as b) compensation by way of damages at large.

4.40 Buyers’ claims for damages, as allowances, are as follows -

Buyers 2Splits US$3,125,934.00 @ 10% (30%-20): US$312,593.40Foreign matter US$3,125,934.00 @ 1.0% (2.0%-1.0%): US$31,259.34Heat damage US$3,125,934.00 @ 1.3% (1.8%-0.5%): US$40,637.14

Total US$384,489.88

Buyers 1Splits US$3,123,666.00 @ 10% (30%-20%):US$312,367.00Foreign Matter US$3,123,666.00 @ 1.0 (2.0%-1-0%):US$31,237.00Heat Damage US$3,123,666.00 @ 1.3% (1.8–0.5%):US$40,608.00

Total US$384,212.00

Buyers 3Splits US$4,276,440.00 @ 10% (30%-20%):US$427,644.00Foreign Matter US$4,276,440.00 @ 1.0% (2.0%-1%):US$42,764.00Head damage US$4,276,440.00 @ 1.3% (1.8%-0.5%):US$55,594.00

Total US$526,002.00

4.41 As regards compensation to Buyers by way of damages, there is nothing in FOSFAContract No 22 or elsewhere in the contract which sets out the measure of damagesrecoverable where the defects in the goods exceed the maximum warranties in thecontract. To the extent that the goods fail to comply with these maximum warranties,“damages” are payable.

4.42 In this case, Buyers would have had the right to reject the goods due to the fact that thespecifications of the goods exceeded the maximum level of splits / foreign matterguaranteed under the contract. Instead, Buyers accepted the goods subject to their right toclaim damages for Sellers’ breach of contract. Sellers’ breach goes beyond the beans’failure to satisfy the basic contractual requirements and damages are therefore payable.

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4.43 Neither the Contracts nor FOSFA Contract No 22 include any provision setting out themeasure of damages recoverable where the goods contain defects which exceed themaximum warranties. Such damages are therefore calculated in accordance with Section53(3) of the Sale of Goods Act 1979. This provides that:“ …

(2) the measure of damages for breach of warranty is the estimated loss directlyand naturally resulting, in the ordinary course of events, from the breach ofwarranty.

(3) In the case of breach of warranty of quality such loss is prima facie thedifference between the value of the goods at the time of the delivery to thebuyer and the value they would have had if they had fulfilled the warranty…”

4.44 Further guidance on this may also be found in the extract from Benjamin on Sale of Goodsat 17-049, which confirms that the price paid is usually favoured by the courts for thispurpose where there is no other evidence.

4.45 Buyers’ loss should therefore be calculated on the difference between the actual value ofthe goods at the time of delivery and the value which the goods would have had if they hadcomplied with the contract (the market value). The aim is to put the innocent party (in thiscase Buyers) in the position they would have been in if the warranty had been satisfied.

4.46 Buyers invite the Board to find that the price paid under the contract is the best evidence ofthe market value. Buyers are not talking here about market value at discharge but marketvalue at the time of loading. This is because that is the time at which the contract statesthat quality and condition should be assessed. The actual value of the goods delivered isbest calculated by applying the system of price allowances which the contract provides for,(Benjamin on Sale of Goods at 17-049/17-050).

4.47 On that basis, Buyers are entitled to the following by way of compensation under the Saleof Goods Act and over the above the contractual allowances.

Buyers 2Splits US$3,125,934.00 @ 9.85% (39.85-30.00): US$307,904.50Foreign matter US$3,125,934.00 @ 0.33% (2.33-2.00): US$10,315.58

TOTAL US$318,220.08Buyers 1Splits US$3,123,666.00 @ 9.85% US$307,681.00Foreign matter US$3,123,666.00 @ 0.33% US$10,308.00

TOTAL US$317,989.00Buyers 3Splits US$4,276,440.00 @ 9.85% US$421,229.00Foreign matter US$4,276,440.00 @ 0.33% US$14,112.00

TOTAL US$435,341.00

4.48 Buyers 2’s claim for consequential losses is withdrawn.

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4.49 Therefore, in summary the damages claimed by Buyers for defective quality are as follows:

Buyers 2 US$702,709.96Buyers 1 US$702,201.00Buyers 3 US$961,343.00

4.50 Buyers do not pursue their claims for shortage or early delivery in this Appeal.

4.51 Buyers ask the Board to make an Award of allowances and damages as set out above.

4.52 Buyers also ask the Board to award interest on the amounts it awards at the appropriatecommercial rate.

4.53 Buyers do not claim legal costs, but do claim representative costs, the costs of the first tierAward and the costs of the Appeal Award. There is no need in a commercial dispute of thisnature for the Board to award legal costs to either party. Frankly, the lawyers have donenothing but complicate what should have been a straightforward dispute. There should beno legal costs award by the Board either for this Appeal or the first tier Arbitration.

5.0 SELLERS’ SUBMISSIONS

5.1 Sellers produced written Submissions at the appeal which had been prepared inanticipation of Buyers’ expected arguments. To the extent that Buyers at the appealdropped their consequential loss claims (storage, transport, extra-storage due to earlyarrival, shortage, extra insurance and clearance costs on shortage) those parts of Sellers’Submissions dealing with these points became redundant and were excised from theirwritten submissions.

5.2 Contrariwise, in Sellers’ written submissions, Buyers’ arguments for allowances based onClause 2 (b) of FOSFA Contract No 22 were only dealt with peripherally in Sellers’ writtensubmissions, although claims for allowances based on Clause 2 (b) of FOSFA 22 formed akey part of Buyers’ overall claim for monetary compensation. However, while the argumentfor allowances basis on Clause 2 (b) was not dealt with specifically and separately inSellers’ submissions, it was encompassed in Sellers’ overall arguments for rejecting anyliability towards Buyers whether for allowances or damages.

5.3 Thus, Seller’s principal argument was that the incorporation of the words “Quality, weightand conditions are final at load” in the typewritten contract meant that only samples takenand analysed at load were relevant to the determination of weight, quality and condition ofthe goods. By necessary implication, any provisions in the standard printedFOSFA Contract No 22 form providing for the ascertainment of quality, weight or conditionat discharge were rendered inoperative. And this naturally went to the provisions of Clause2 (b) relative to any allowances that might be due, ascertained basis results at discharge.

5.4 Sellers thus took the view that no compensation of any kind, whether in the form ofallowances or damages, could be due basis sampling and analysis of the cargo atdischarge where, as here, the contract provided for weight, quality and condition to be finalat load.

5.5 Point 6 of Sellers’ written submissions neatly summarises their position as follows -

“It is Sellers’ submission that there is a very short answer to Buyers’ remainingclaims, and that is that each of the three contracts was made on certificate final atload. The goods were sampled by FOSFA-approved superintendents duringloading, and analysed by a FOSFA-approved laboratory (Analyst 1) shortlythereafter, and found to be within the contractual specification. Shortly thereafter,

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further sealed load port samples were analysed by 2nd Analyst, and again found tobe within the contractual specification. This should be the end of Buyers’ claim.”

5.6 To the extent that Buyers’ claims are based on two analyses of samples drawn at dischargeby non-FOSFA accredited superintendents effected some time after discharge, such claimsare totally lacking in any contractual validity. Moreover, Buyers made no attempt to inviteSellers to participate in or be present at these non-contractual samplings.

5.7 The background to Buyers’ claims is that Buyers had bought Soyabeans in excess of theirrequirements. It was only when Buyers realised that they had over-reached themselves thatthey began to take various (inconsistent) objections to the contracts in an attempt to avoidtheir obligations to take delivery in the agreed shipment period and in effect illegitimately topass on their (alleged) losses resulting from their own mis-judgement of their requirements.

5.8 The contracts containing the provision “final at loading” were concluded on 13 May 1998and no objection was taken to them by Buyers at the time or, indeed, until 27 May 1998when Buyers 3 sent Sellers a fax requesting postponement of delivery or a washout.

5.9 With respect to Buyers’ arguments that the wording of the original confirmation in as far asit did not specifically provide that weight, quality and condition should be final at load as perfirst class superintendents’ certificates, permitted Buyers to adduce evidence fromdischarge port sampling and analysis, Sellers maintained that the best and, indeed, theonly valid evidence of the weight, quality and condition of the goods at load, wasnonetheless that set out in the Analyst 1 Certificates based on sampling and analysescarried out at load. Accordingly, the evidence such as it was – and Sellers had a number ofimportant criticisms to make of the evidence obtained at discharge – of the results ofdischarge sampling and result of analyses thereon was not admissible as evidence of theweight, quality and condition of the goods in a contract providing for loading analysis final.

5.10 In support of this contention, Sellers pointed to the fact that the cases relied on by Buyers inarguing for the admissibility of discharge port evidence – Lindsay v European Grain and the“Bow Cedar” – might be distinguished from the facts of the present case which was muchcloser to the exposé of the law on contractual “final at load” provisions set out in theToepfer v Continental Grain decision.

5.11 Sellers further insisted on the fact that even if the case-law relied upon by Buyers wereinterpreted to permit the adduction of evidence obtained at discharge, this evidence failedto prove “on a balance of probabilities” that the goods were uncontractual on shipment.

5.12 More particularly, Sellers argued that the fact that out of a total 40,000 metric tons no lessthan 8,325 metric tons discharged at the Terminal were not sampled at all so that theresults of analyses at discharge, unlike those at load, were effected on less than 80% of thecargo. Further, the analyses were effected some considerable time after the discharge ofthe cargo on samples taken by non-FOSFA accredited superintendents. Finally, Sellerswere not invited to attend either the sampling at discharge or the analysis of the samplesdischarged. The combination of all these factors rendered the results obtained at dischargeentirely unconvincing as to the quality and condition of the whole cargo at load and for thisreason, in addition to that of the natural construction of the contract calling for thedetermination of the condition and quality of the cargo at load by FOSFA-accreditedsuperintendents and analysts, Buyers were incapable of proving “on a balance ofprobabilities” that the goods were not contractual at load.

5.13 Sellers also prayed in aid of their arguments in favour of the determination of the Arbitratorsat first instance the evidence from Party C at the load port and, in particular, the witnessstatement of Mr C to the effect that Party C overview the export of cargoes of ArgentineSoyabeans and would not allow Soyabeans with the characteristics allegedly found by

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Buyers at discharge to be exported from Argentina. This signed statement they comparedwith the unsigned counter-statement of Mr D and invited the Board to prefer a signed to anunsigned statement as evidence of the Argentine system for controlling the quality ofexported Soyabeans.

5.14 They further drew the Board’s attention to the admitted failure of Buyers to arrange forinspection at discharge and rejected Buyers’ assertions that the sampling carried out atdischarge by automatic sampler was likely to provide an inherently more accurate resultthan that carried out manually at load.

5.15 In conclusion, Sellers requested the Board to dismiss Buyers’ appeal in its entirety and toaward Sellers’ indemnity legal costs together with the costs of the appeal and the costs ofSellers’ representative.

6.0 THE WITNESSES

6.1 Buyers presented as witnesses Mr V and Mr E. Both witnesses confirmed the veracity oftheir statements dated 30 November 1999 and undated respectively.

6.2 To the extent that these statements concerned the question of “misrepresentation” theywere not relevant to the issues before the Board. However, both statements dealt with thefurther question and subject matter of this appeal, namely, that of the quality and conditionof the goods as ascertained after discharge.

6.3 Mr V and Mr Y added a few further details to their earlier written statements regarding thediscovery of the problem and the measures taken by the Buyers in consequence, butnothing which changed the essential import of these earlier statements.

6.4 In cross-examination, Mr M asked Mr Y what origin beans Buyers had bought in the past.Answer: “US beans”.

6.5 Mr M then asked Mr Y a number of questions relating to the supervision of discharge ofBuyers’ cargoes and the actions taken after discovery of the problem:

Q: Is it usual for Buyers in Israel not to appoint an inspection company to supervisecargoes bought for import?

A: Yes.

Q: If a superintendent had been present to oversee the discharge of the AA, would hehave seen that there was a problem with the beans?

A: Yes.

Q: What happens when there is no superintendent to oversee the discharge and thecargo is damaged?

A: If there is serious damage, the elevator people will notice the damaged cargo andalert the Buyers. We have had hundreds of ships discharge without any problem.

Q: 40% splits could be visually detected in the holds. You could have asked the Sellersto send someone to check. Did you?

A: No. We had very good relations with Sellers Israeli representative, Mrs A and eachtime we had had a problem in the past it had been resolved so we did not consider it

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appropriate to send a letter. We did, however, advise Mr A by telephone of theproblem.

Q: Did you mix the “splits” with the beans discharged from the “BB”?

A: No. We kept the “splits” from the AA stored separately.

6.6 Mr M then cross-examined Mr V:

Q: Did you keep the beans from the AA stored separately from those of the BB?

A: Yes.

Q: When the AA cargo was brought into your facility, was it cleaned/screened beforegoing into the storage bin?

A: No.

Q: Is it not the whole point of the crushing process to split the beans so as to extractthe oil? If so, what is the problem with beans that are already split?

A: You want the beans whole prior to the crushing process. Split beans entering thecrushing process will result in problems of acidity.

Q: Are you relying on the statement in the Laboratory 1 report relating to acidity?

A: No. Laboratory 1 report was only indicative. We rely on the 2nd Laboratory report.

6.7 Sellers presented as witness Mrs A.

Mr M questioned her concerning her role in the transaction and the efforts she had madewith a view to assisting Buyers to find an alternative buyer or to postpone the shipmentperiod.

Mr A said that she had agreed the terms of the contract and had tried to help Buyers find asolution to their problem. Unfortunately, Party E had no storage facilities of its own in Israelso could not take delivery itself. Accordingly, we found a buyer in Turkey for 10-13,000metric tons. Unfortunately, the owners of the AA wanted US$100,000.00 to divert to aTurkish port. This was too much for Buyers so we offered to contribute US$1.00 per metricton to the costs of diverting the vessel. This was still not acceptable to Buyers who askedus to see if owners would be prepared to divert to a European port. In the event, Buyersproposed Rotterdam and this proposal was put to vessel owners. Their reply was again thatsuch diversion would cost US$100,000.00. Accordingly, this solution was not retained.

6.8 Mr V then cross-examined Mrs A:

Q: When did you first hear about the quality problem?

A: In early September.

Q: But already on 28 July our lawyers had written to Mr M in Geneva complaining of thequality.

A: That may be so but I was only involved with the matter in September.

Q: You know the Israeli market well?

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A: Yes.

Q: Then, knowing that there is stiff competition between the various importers, do youthink that a proposal to ship 10,000 metric tons out of the total 40,000 metric tons toTurkey at an extra US$100,000.00 and for the balance of the cargo to be shipped ona vessel carrying goods for my competitors constitutes a realistic commercialproposal to resolve the problem?

A: It was a suggestion which showed that we were trying to help you out.

Q: When I suggested our customer in Europe view it would be easier, closer andcheaper to divert to Rotterdam, what was your offer?

A: It would cost the same US$100,000.00 because regardless of the distance or thecost, the owner was seeking to take advantage.

Q: Were in you Israel Port 1 when the AA arrived?

A: No.

Q: Do you have any idea how the sampling is done at Israel Port 1?

A: Yes. They take samples for health purposes. As soon as a vessel arrives, andbefore it starts to discharge, they send a small boat to take samples from the top ofthe hold.

Q: Are not samples taken automatically?

A: They can be.

Q: Mr L, in his statement, has stated what the sampling procedure is. Do you contestMr L’s statement?

A: We have seen how samples are taken at named berth. They do have an automaticsampler but it is not utilised.

6.9 Mr M then asked Mrs A whether she had ever made any statement to the effect that Mr Lwas lying. Mrs A replied that she had never made any such statement but that what shehad said in relation to the sampling was simply what she understood to be the normalpractice.

7.0 DISCUSSION AND FINDINGS

7.1 It is clear from the facts that long before any problems with the cargo were discovered,Buyers wished to extricate themselves from the contracts. It is, moreover, a fact that aftertheir (and their sellers’) efforts to arrange for alternative buyers had failed and they hadbeen obliged to take delivery of the cargo, they brought an action by way of arbitrationproceedings at first instance designed to obtain compensation for the losses which theyclaimed they had suffered by reason of having had to pay for and take delivery of the cargo.

7.2 It is to be noted that the primary argument advanced at first instance had nothing to do withany alleged defects in the quality of the cargo. It was put forward on the entirely differentbasis that the contract had been entered into because of a misrepresentation allegedlymade by Sellers inducing Buyers to enter into a contract into which they would neverotherwise have ventured. Only subsidiarily did they argue that they were entitled todamages by reason of alleged quality deficiencies.

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7.3 Both the primary argument based on misrepresentation and the subsidiary argument basedon alleged quality deficiencies were dismissed by the First Tier Tribunal.

7.4 Before this Board the primary argument based on misrepresentation (and a number ofancillary heads of claim) has been dropped, leaving only the subsidiary argument onalleged quality deficiency.

7.5 Buyers argue that the goods were of non-contractual quality and that to the extent thatFOSFA Contract No 22 as the underlying contract form provides for the awarding ofallowances, they should be granted such allowances to the extent of such deviations fromthe contractual specifications. Where such deviations exceeded the contract maxima andminima they should be awarded damages in accordance with the general principle ofEnglish law on damages and, more particularly, in accordance with S 53 (3) of the Sale ofGoods Act 1999.

7.6 In advancing their claim wholly on evidence based on sampling and analysis carried out atdischarge, Buyers do not ignore the provision of the manuscripted contract reading:“Quality, weight and conditions are final at load”. However, they argue that this provision isnot the same as a “Certificate Final” provision which would debar them from contesting thevalidity of the results of certification duly carried out at load and would exclude thepossibility of recourse to “other evidence” such as that which might be obtained atdischarge.

7.7 And it is on this key point of interpretation that the case essentially turns. Thus Sellersreject Buyers’ interpretation and argue that even though the contract does not specificallyuse the words “Certificate Final at load” that is what it means. In support of this argumentthey point to the fact that the goods were certified as being contractual at load by FOSFArecognised superintendents and analysts and that these certificates were paid for togetherwith the other shipping documents. What else, they ask, can the “load final” provision of thecontract mean other than that a recognised FOSFA superintendent/analyst’s certificate willbe determinant?

7.8 Having given a great deal of thought to this vexed question of interpretation, we agree thatit would be possible to make the argument that because no specific reference is made inthe relevant phrase to the finality of an appropriate Certificate issued on the basis ofsampling and analysis of the cargo at load, therefore, such a Certificate is not intended tobe final as between the parties and, in consequence, it is legitimate for the Buyers toadduce evidence obtained at discharge in support of their contentions. However, such anargument fails to take into account the context within which commercial transactions of thisnature are carried out. Commercial men do not dot all the “i’s” and cross all the “t’s” whenputting their agreements into writing and this was undoubtedly the case here. Thus themere fact that the Contract did not specifically state that Certificates of Weight, Quality andCondition issued at load by FOSFA recognised superintendents/analysts would bedeterminant of the Weight, Quality and Condition of the goods at load does not mean thatthis was not the intention of the Parties in agreeing the “Load Final” provisions of theContract. Indeed, taking all the surrounding circumstances into account, WE FIND ANDHOLD that in omitting the words “Certificate Final” at load from the provision “Weight,quality and condition final at load” in the fax confirmation the parties did not intend to allowfor the possibility of evidence obtained at discharge to prevail over that of the loadcertificates. We are supported in this conclusion by the fact that when Sellers sent anexpanded written confirmation (to a large extent an exercise in dotting some of the “i’s”andcrossing some of the “t’s”) Buyers did not protest that the inclusion of the Certificate Finalprovision altered the basis on which the contract had been concluded. Indeed, they madeno protest at all in relation to this particular addition to the original text. WE FURTHERFIND that Superintendents 3, the Superintendents used to obtain the Quality Certificates

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are full members of the FOSFA International Superintendence Scheme and thereforecomply with the terms of the FOSFA Contract form.

7.9 It follows from these findings that the Certificates issued at load, are determinative of thequality of the goods at load and that, in consequence, Buyers’ claims based as they are onevidence obtained at discharge must FAIL, AND WE DO SO FIND AND HOLD.

7.10 However, even if our interpretation of this phrase should prove to be wrong, on Buyers’ owninterpretation we would still be unable to find in Buyers’ favour, as the evidence which theyhave adduced as to the quality of the goods at discharge is quite inadequate to the task ofdisproving the accuracy of the results set out in the Certificates at load. Thus, the dischargeanalysis results relate to less than 80% of the cargo; the results were obtained 4 - 6 weeksafter the cargo had been discharged and sampled; the sampling was not carried out byFOSFA recognised superintendents; and Sellers were never invited to be present either atthe sampling or the analysis carried out on the samples taken at discharge.

7.11 Thus, Buyers’ claims fail, not only as a matter of construction of the contract, but alsobecause they have been unable to prove that the goods failed to meet the contractualquality specifications.

7.12 In all these circumstances and for all these reasons WE FIND AND HOLD THAT Buyers’claims FAIL.

7.13 Buyers argued that as the Analyst 1 Certificates presented as part of the contractualdocuments did not have the FOSFA seal, they were not contractual. It is true that underthe terms and conditions of the FOSFA contract form, certificates are required to bear theFOSFA seal and that the absence of such seals would entitle Buyers to reject. However inthis case the Certificates issued by Analyst 1, who are approved analyst members ofFOSFA, were accepted by Buyers without comment. Further, had Buyers raised the matterat the time, the omission could have been easily rectified.

WE FIND that by taking up and paying for the documents without protest Buyers havewaived their right to now argue that the Certificates were uncontractual.

8.0 AWARD

Having so found that Buyers’ claims and their appeal fail -

8.1 WE AWARD that Buyers shall pay the fees, costs and expenses of this Appeal. If Sellersshall have paid any or all such costs in the first instance, they shall be entitled to immediatereimbursement.

8.2 WE FURTHER AWARD that the fees, costs and expenses of the First Tier Arbitration shallbe for Buyers’ account.

8.3 WE FURTHER AWARD that Buyers shall pay the fees and expenses of Sellers’Representative.

8.4 WE FURTHER AWARD that Buyers shall pay Sellers’ legal costs, to be taxed by the Boardif not agreed.