CTI Group Inc v Transclear SA [2007] EWHC 2070 (Comm) (14 September 2007)

CTI Group Inc v Transclear SA [2007] EWHC 2070 (Comm) (14 September 2007)

The risk of supplier failure in unqualified f.o.b. contracts is borne by the seller unless the supplier is excused by frustration. The sellers' suppliers were not legally bound to supply, so their refusal was not a frustrating event. No implied term could discharge the parties in these circumstances, as such a term would contradict the express allocation of risk in the contract.

Citation
[2007] EWHC 2070 (Comm)
Parties
Claimant/buyers: CTI Group Inc; Defendant/sellers: Transclear SA
Jurisdiction
England and Wales
Judgment Date
14 September 2007
Procedural Posture
Arbitration Appeal / Appeal From Partial Final Award of Arbitral Tribunal
Outcome
Appeal allowed; tribunal's findings on frustration and implied term set aside.
Legal Topics
Frustration of Contract, Implied Terms, Sale of Goods, Risk Allocation in Supply Contracts
Contract Law Commercial Law International Trade Frustration of Contract Implied Terms Sale of Goods Risk Allocation in Supply Contracts

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Parties

CTI Group Inc

Claimant/buyers

Transclear SA

Defendant/sellers

Procedural Posture

Arbitration Appeal / Appeal From Partial Final Award of Arbitral Tribunal

Legal Issues

  1. 1 Whether the f.o.b. contracts were frustrated by supplier refusal due to third-party intervention
  2. 2 Whether there was an implied term discharging parties if suppliers refused to supply due to intended use or destination

Ratio Decidendi

The risk of supplier failure in unqualified f.o.b. contracts is borne by the seller unless the supplier is excused by frustration. The sellers' suppliers were not legally bound to supply, so their refusal was not a frustrating event. No implied term could discharge the parties in these circumstances, as such a term would contradict the express allocation of risk in the contract.

Court Disposition

Appeal allowed; tribunal's findings on frustration and implied term set aside.

Orders

  • Tribunal's findings that the contracts were frustrated or discharged by implied term are set aside.
  • Submissions to be heard on consequential orders, including referral of damages issues back to the tribunal.