In this case, the English Commercial Court determined the “date of default” for the purposes of the default clause in the Grain and Feed Trade Association 100 contract (“<span class="news-text_medium">GAFTA 100</span>”) where a seller had accepted the buyer’s anticipatory breach of contract. The court also addressed whether an advance payment made before finalising the contract could be recovered, even if the seller did not suffer any loss due to the buyer’s non-performance.
This was an appeal of an arbitration award from the Board of Appeal of GAFTA. The underlying contract incorporated the standard GAFTA 100 terms, including the default clause. Before finalising the contract, the claimant made an advance payment to the defendant contingent on the final agreement. When the parties failed to reach an agreement, the claimant, on several occasions, requested a payment return from the defendant. The defendant, having accepted the claimant’s repudiatory breach of the contract, was then sued by the claimant for the return of the advance payment. The defendant contended the payment was non-refundable and that it had incurred a loss due to the claimant’s breach.
The First-Tier Tribunal ruled that the “date of default” was 7 May 2018, when the defendant accepted the repudiation, and the advance payment was refundable. The Tribunal found no evidence of loss suffered by the defendant. The defendant appealed, arguing the date of default should be tied to the claimant’s breach and that the advance payment was non-refundable.
The appeal was partially upheld. The court found that the “date of default” should be tied to the date of the repudiatory breach, not the date of its acceptance. The court noted that anticipatory breaches discharge contractual obligations. Thus, the default date could not be later than the acceptance of such a breach. The court determined 27 April 2018, when the claimant’s communication was deemed a repudiatory breach, should be considered the true “date of default” rather than 7 May 2018.
Regarding the advance payment, the court assessed the clause’s meaning within the context of the contract. It ruled that the advance payment should not automatically be treated as non-refundable in the event of the buyer’s default, especially when the seller suffered no loss. The ruling emphasized that if the parties intended for the advance payment to be non-recoverable, they would have expressly stated this in the contract.
The court’s decision clarifies the interpretation of default dates in the context of anticipatory breaches. It reinforces that advance payments should not be deemed non-refundable without explicit contractual terms.
