Tsakiroglou & Co Ltd v Noblee Thorl

Legal Case Summary

Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] AC 93 [1961] 2 All ER 179; [1961] 2 WLR 633; [1961] 1 Lloyd’s Rep 329; 105 Sol Jo 346

CONTRACT, OBSTACLES TO PERFORMING THE CONTRACT, FORCE MAJEURE, CIF CONTRACT, DUTY TO SHIP BY CUSTOMARY ROUTE, SALE OF GOODS, FRUSTRATION OF CONTRACT, IMPLIED TERMS

Facts

The appellants agreed to sell to the respondents Sudanese groundnuts for shipment to Hamburg during November/December 1956. The agreement included a CIF (cost, insurance and freight) term (requiring the seller to arrange the carriage of the goods by sea to Hamburg and to provide the buyer with the necessary documents to obtain the groundnuts from the carrier).  A force majeure clause was also incorporated in the contract. It provided that in cases of force majeure the deadline for the delivery of the goods should be extended by no more than two months, after which the contract should be cancelled.

At the beginning of November, the Suez Canal was closed to navigation due to the military operations by the British and French armed forces against Egypt, but the goods could have been shipped around the Cape of Good Hope. The alternative route via the Cape of Good hope was almost twice as long and respectively the freightage was more costly. The sellers failed to ship the goods. The case became subject to arbitration proceedings and the umpire held that the sellers were in default. His decision was later confirmed

Issues

(1) Were the appellants bound to ship the groundnuts via the Cape of Good Hope?

(2) Was the shipment of the groundnuts via the Cape of Good Hope a frustration of the contract?

(3) Could the appellants rely on the force majeure clause incorporated in the contract?

Decision / Outcome

The appeal was dismissed.

(1) The term that the groundnuts needed to be shipped via the Suez Canal was not implied.

(2) Given that the customary route via the Suez Canal was closed, by virtue of s 32 (2)Sale of Goods Act 1893, the appellants were bound to ship the goods via a reasonable and practicable route, despite the fact that this would have cost more to them.

(3) The shipping of the groundnuts via the Cape of Good Hope did not render the contract fundamentally different and therefore, did not present a frustration of the contract.

(4) The appellants could not rely on the force majeure clause incorporated in the contract since it covered the ‘shipment’ of the goods, not the failure to ship them. Shipment meant loading the goods on the board of a ship prepared to carry them to the contractual destination.