Remedies for Breach of Shipping Contract
Remedies of the Seller:
The buyer will normally be in breach of the contract by refusing to accept the goods, or by refusing to pay for them. The remedies here will depend upon whether the property has passed or not. As we have seen above, if the property has passed, the price will be due. Thus, if the property has passed, the seller can sue for the price of the goods and his damages will be the entire contract price. This remedy is also available if it is stipulated that the price is to be paid on a certain day and that day has passed.
If the property has not passed, however, the seller will have to sue for damages for non-acceptance of the goods. The disadvantage with this is that the seller will still have the goods and will be obliged to reduce his damages by selling them elsewhere. As a result his recoverable damages will be the difference between the contract price and the price at which he later sold the goods to a third party. This will frequently be negligible.
Stoppage in Transitu : A further valuable remedy for the seller is the right of stoppage in transitu, conferred by the English Sale of Goods Act. This gives the seller the right to stop the goods in the course of carriage and to repossess them when the buyer is insolvent, and there is an obvious danger that the seller will not be paid. There are two important conditions – the insolvency of the buyer, which is paramount and the goods, must still be in transit and not have been delivered to the buyer. If the carrier is the buyer’s agent (as in a FOB contract), delivery to the carrier will in law be delivery to the buyer and the right will not be available. The Courts are fairly lenient, however, and in the case of FOB contracts where the seller’s duty terminates on delivery to the ship, they have tended to regard the carrier as an independent party and not the buyer’s agent – so the right of stoppage may still be exercised. The right is exercised simply by informing the carrier. The seller will be liable for payment of any freight.
Lien: If the seller still has the goods in his possession and the buyer becomes insolvent, the seller may retain the goods in defiance of his duty to deliver by exercising his unpaid seller’s lien.
Remedies of the Buyer:
If the seller is in breach of a condition of the contract, as in the following circumstances:
– late delivery
– short delivery (not delivering a sufficient quantity)
– delivery of damaged goods or goods otherwise in breach of the seller’s undertakings
– non delivery
– tender of defective documents.
The buyer may reject the goods or, at an earlier stage, the documents (note: acceptance of the documents does not necessarily prevent subsequent rejection of the goods), and sue for damages for non-delivery of the goods. Such damages will be the difference between the contract price and the market price of the goods at the time the goods ought to have been correctly delivered. As with the Seller’s right to damages for non-acceptance these may be negligible.
If the buyer decides not to reject the goods, or has lost his right to reject them by having unduly interfered with the goods, he will keep them, and sue for damages for defective delivery. In this case his damages will be calculated according to the difference between the value of his goods as and when delivered and the market value of those goods had they been correctly delivered (i.e. on time, or undamaged).
The Buyer’s equivalent of the seller’s right to sue for the price is to demand the actual correct delivery of the goods, and thereby the performance of the contract. This is known as asking for an Order for Specific Performance. This is only likely to be granted if it is impossible to obtain the contract goods at any price elsewhere, and is consequently a very rare order for a Court to make.