Prior History: Kolmar Ams., Inc. v. Koch Supply & Trading, LP, 10 Civ. 7905 (JSR), 2011 WL 6382566 (S.D.N.Y. Dec. 14, 2011) [USA], noted in 2012 ANNUAL REVIEW OF INTERNATIONAL BANKING LAW & PRACTICE at 443.

Note: Kolmar Americas, Inc. (Buyer/Applicant) arranged for a commercial letter of credit to secure the purchase of 10,000 metric tons of Xylene feedstock per month from Koch Supply & Trading, LP (Seller/Beneficiary). The parties agreed to split the September 2010 delivery between two 5,000 MT shipments delivered at two different ports: Houston and Corpus Christi, Texas. At Houston, Seller delivered the first shipment, which contained less than the contracted amount of feedstock. Continuing to Corpus Christi, the vessel chartered by Buyer to carry the second shipment was supposed to tender a Notice of Readiness by 30 September 2010. When it became clear that the vessel would not tender its Notice by the end of September, Seller proposed modifying the contract, extending the deadline to 2 October at the cost of 6 cents/gallon. Buyer replied that it reserved its rights to the original contract price and obtained a "supplemental letter of credit". On 4 October, Seller informed Buyer that the September shipment was cancelled.

Buyer then sued Seller for breach of contract. The U.S. District Court for the Southern District of New York, Rakoff, J., ruled that Buyer had breached the contract by failing to accept delivery. On appeal, the U.S. Court of Appeals for the Second Circuit, Katzmann, Lynch and Mauskopf, JJ., affirmed,

Buyer claimed that it never arranged to have its delivery split into two shipments, or in the alternative, it reached an agreement with Seller to extend the deadline, or in the alternative, Seller waived the 30 September deadline. The appellate court observed that Buyer had forfeited its argument that it was not required to accept two separate shipments and the affirmative defense that Seller had waived the 30 September deadline by not raising those issues in the trial court.

The appellate court also rejected Buyer's argument that the parties had expressly agreed to extend the deadline because Buyer merely reserved its rights instead of responding to Seller's unequivocal demand for a price increase. The court did not find that Buyer's supplemental LC demonstrated Buyer's acceptance of Seller's demand because the LC "simply ensured that [Seller] would have possession of the disputed funds while the parties litigated their dispute." The court noted the contract between Buyer and Seller required that all modifications be in writing, and therefore contrary to Buyer's argument, the parties' actions could only establish mutual assent if they were "unequivocally referable" to the modification.



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.