Bunge SA v Nidera BV

Factual and Procedural Background

The Respondent (grain buyer) and the Appellant (grain seller) concluded an FOB contract on 10 June 2010 for 25,000 (+/-10%) metric tonnes of Russian milling wheat. The contract incorporated the Grain and Feed Trade Association (“GAFTA”) Form 49, including its prohibition clause (clause 13) and default clause (clause 20). The shipment window was 23–30 August 2010.

On 5 August 2010 the Russian Government announced a wheat export embargo effective 15 August – 31 December 2010. Citing clause 13, the Appellant emailed the Respondent on 9 August 2010 declaring the contract cancelled. On 11 August 2010 the Respondent treated that communication as an anticipatory repudiation and accepted it, reserving a claim for damages. The next day the Appellant offered to reinstate the contract on its original terms; the Respondent refused.

Arbitration followed under GAFTA rules. The first-tier tribunal held that the Appellant’s cancellation was premature and therefore a repudiation, but awarded only nominal damages because the embargo would have prevented performance in any event. The GAFTA Appeal Board agreed that the Appellant had repudiated but, applying clause 20(c), awarded the Respondent US $3,062,500 (difference between contract and market price on 11 August 2010).

The Commercial Court (Judge [Last Name]) and the Court of Appeal (Judge [Last Name], Judge [Last Name] and Judge [Last Name]) upheld the Appeal Board. The present judgment concerns the final appeal.

Legal Issues Presented

1. Whether GAFTA clause 13 (prohibition) operates only when it is certain, after the event, that performance is prevented.
2. Whether GAFTA clause 20 excludes common-law principles governing damages for anticipatory repudiation, specifically:
   • (a) the duty to mitigate, and
   • (b) the compensatory principle articulated in The Golden Victory.
3. Whether the compensatory principle in The Golden Victory is confined to instalment or period contracts.
4. Whether the Respondent’s refusal to accept the Appellant’s offer to reinstate the contract constituted a failure to mitigate.

Arguments of the Parties

Appellant’s Arguments

• Clause 13 entitled the Appellant to cancel; even if the cancellation was premature, the embargo meant the Respondent ultimately suffered no loss.
• Under common law, subsequent events that would have eliminated loss (the embargo) must be considered (The Mihalis Angelos; The Golden Victory).
• Clause 20 should not override the compensatory principle; “based on” does not establish a mandatory floor for damages.
• The Respondent failed to mitigate by rejecting the Appellant’s unconditional offer to reinstate the contract.

Respondent’s Arguments

• Clause 20(c) provides a self-contained and certain formula: damages equal the difference between contract price and market price on the “date of default.”
• Because the parties agreed the default date was 11 August 2010 and agreed the market evidence, the tribunal was bound to award the calculated loss.
• The Appellant’s reinstatement offer did not alter the Respondent’s vested right to damages and was reasonably refused.

Table of Precedents Cited

Court’s Reasoning and Analysis

Judge [Last Name], delivering the lead judgment, began with the common-law compensatory principle: damages must reflect the actual value of the contractual benefit lost—no more and no less. The Court held that The Golden Victory correctly states that principle and is not confined to instalment or period contracts.

The Court then construed GAFTA clause 20:

• The phrase “in default of fulfilment of contract” encompasses both non-performance when due and anticipatory repudiation.
• Sub-clauses (a)–(c) create a mechanism for deriving a market-based price comparison, but do not constitute an exhaustive code for every head of loss.
• Clause 20 requires damages to be “based on” the price differential; the wording does not compel an award where the differential does not represent an actual loss.
• Therefore, clause 20 does not displace common-law rules that consider supervening events (here, the embargo) or the need to mitigate.

Applying those principles, the embargo would have prevented shipment during the contractual window even if the Appellant had not repudiated. Consequently, the Respondent suffered no measurable loss. The GAFTA Appeal Board erred in treating clause 20(c) as a rigid formula that automatically generated a monetary award.

On mitigation, the Court noted that the Appellant’s offer to reinstate would have placed the Respondent in exactly the position contemplated by the original bargain, reinforcing the conclusion that any substantial loss was illusory.

Holding and Implications

APPEAL ALLOWED. The substantial damages award is set aside and replaced by nominal damages of US $5. The parties were invited to make written submissions on consequential issues, including costs.

Implications:

• Confirms that the compensatory principle in The Golden Victory applies equally to single-shipment sale contracts; courts must account for known supervening events when quantifying loss.
• Clarifies that GAFTA clause 20 governs the method for establishing market price or value but does not exclude consideration of mitigation or subsequent events that eliminate loss.
• Signals to commodity traders that standard-form default clauses will not override fundamental common-law compensation principles unless drafted in unequivocal terms.