Note: Bariven S.A. (Buyer), a Venezuelan state-owned purchasing company, contracted with Exim Brickell LLC (Seller), a Florida-based export/ import company, through PDVSA Services, Inc. (Broker), to purchase 26,000 metric tons of enriched powdered milk from China or India, valued at USD 124.41 million. Payment for the monthly shipments under the installment contract was assured by a letter of credit.

Shipments began June 2008. As a result of subsequent press reports of melamine contamination in Chinese milk products, Buyer purportedly invoked its contractual right to make pre-shipment inspections. Buyer then stopped payments, on the basis that it had revoked acceptance of "recent" shipments. Shipments 18-22 entered Venezuelan ports but were not paid for. Buyer also attempted to block payment on future shipments under the letter of credit. Seller, however, prevailed on that issue in separate litigation in Venezuela. The Venezuelan court did not look to performance on the underlying contract, and found Seller had made a complying presentation under the letter of credit.

The pre-inspection clause required Buyer to send inspectors to China. Although Buyer had invoked the clause, it did not send inspectors. In March 2009, Seller formally demanded Buyer's performance on the contract-to inspect/accept future shipments and pay for those received.

Seller sued Buyer over the payment due for the shipped milk, and Buyer countersued Seller for breach of contract. The U.S. District Court for the Southern District of Florida awarded Buyer partial damages on shipments 7 and 8 of the milk products.

After the rejection and start of litigation, Buyer confirmed that melamine contamination was present in the shipments received. Both parties appealed the trial court's decision. The United States Court of Appeals for the Eleventh Circuit, Carnes, Black, Restani, JJ., in an opinion by Restani, J., United States Court of International Trade Judge sitting in designation, affirmed in part and reversed in part.

The appellate opinion stated that Buyer had given timely and sufficient notice to revoke its acceptance of all shipments 1-16 of the milk products, and that Buyer did not repudiate the contract for shipments 23 and onward under Florida law. The appellate court also affirmed the trial court's award to Buyer of damages for storage under the milk products contract, but reversed and remanded the trial court's decision to not award such damages on the rice contract.



The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.