Note: Profindo Pte. Ltd. (Seller) sold 2,750 metric tons of cement to Abani Trading Pte Ltd (Buyer). Their Agreement was a "cost and freight" agreement (CFR), requiring Seller to procure a vessel. Pursuant to the Agreement, Buyer was allowed 2.75 days of laytime to discharge the cement from the vessel. However, during the period of discharge, port authorities required the vessel to leave its berth, delaying discharge of the cement by two days. The vessel's owners imposed demurrage charges on Seller, which it paid. Buyer refused to reimburse Seller for the demurrage charges.

Seller then sued Buyer, alleging that under the CFR Agreement Buyer was responsible for the delay since laytime continued to run whether or not the ship was in port. The District Judge ruled in favor of Buyer, noting that the Agreement did not specify that Buyer would be liable for demurrage regardless of whether the ship was berthed, that laytime was in fact suspended when the vessel was not berthed, and that Buyer was not liable for the Seller's claim. On appeal, the High Court, Prakash, J., reversed.

Buyer argued that since the vessel was not berthed and the cement could not be discharged for two days, laytime must be suspended for those two days. Conversely, the Seller argued that the court should follow the principle that "once demurrage has become payable no expected peril can have effect on the duty to pay demurrage".

The appellate court concluded that the burden of proof rested on Buyer. Since the discharge took more than the agreed upon 2.75 days, the Judge ruled that Buyer bore the burden of showing that the Agreement allowed for a suspension of laytime when the ship was forced to leave the berth. The Judge further noted that demurrage runs immediately after the stipulated laytime expires and only ends when the discharge is complete.

The Judge also stated that since a CFR Seller is not under any duty to deliver the goods to the port of discharge, it would be quite remarkable to hold it liable for any delays incurred while discharging the goods. The Judge went on to state that "it is more logical and more in line with commercial realities to hold that such risks, unless they have been expressly allocated to [Seller] by a specific term in the contract, are to be born by the [Buyer]. Since the Agreement did not specify who the risk should fall on if the discharge of goods was interrupted after the laytime had commenced . . . laytime continued to run during the period when the Buyer could not have discharged the goods". The Judge further noted that the Agreement did not contain any qualifiers as to Buyer's obligation to pay demurrage.



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.