Prevention of Shipment and Extension of Shipment clauses in GAFTA contracts

ADM Industries Centers Ltd (trading as ADM Israel) v Inerco Trade SA [2026] EWHC 1873 (Comm)

The High Court has overturned a GAFTA Board of Appeal decision, ruling that reliance on a force majeure clause under GAFTA Form 48 required timely service of the notice. Late service would deprive the party serving the notice from being able to rely on the force majeure clause, even where the opposing party suffered no prejudice as a result of the delay. The decision also provides welcome guidance on the meaning of the “unforeseeability” limb of the force majeure clause in GAFTA contracts.

Key Takeaways

The High Court has decided that:

(a) In the context of the GATFA Form 48 force majeure clause (titled “Prevention of Shipment”, and which is shared with other GAFTA contract forms), “unforeseeable” means an event whose probability is so remote that it can properly be regarded as "negligible" – but not so improbable that it is “far fetched” or “inconceivable”.

(b) Compliance with the notice requirements set out in the force majeure clause is a condition precedent to reliance on the clause. Failure to give timely notice will preclude reliance on force majeure.

(c) “Originally stipulated [shipping] period” in the Extension of Shipment clause includes the shipment period that is already extended by the operation of the force majeure clause. 

Background 

The dispute arose out of a February 2023 contract for the sale of 60,000 MT of Ukrainian corn on GAFTA Form 48 terms. Shipment was due between 15 April and 15 May 2023. The contract was concluded against the backdrop of the Black Sea Grain Initiative ("BSGI"), established following Russia's invasion of Ukraine to ensure that grain and foodstuffs could continue to be exported from Ukraine into world markets¹.  Under the BSGI, vessels entering the Ukrainian Black Sea grain corridor required inspection by the Joint Coordination Centre ("JCC"). 

The sellers (Inerco) nominated a vessel to perform the carriage. However, from approximately 7 to 18 May 2023 Russian inspectors on the JCC ceased conducting inbound inspections of non-Russian vessels, preventing such vessels from loading cargo in Ukraine. For context, the BSGI had operated for 288 days, during which there had been 14 stoppages in total, 13 of which lasted up to 2 days. The length of the stoppage in May 2023 was, therefore, unusual. 

On 16 May 2023 (i.e. some 9 days after the stoppage started), the sellers invoked force majeure pursuant to clause 20 of GAFTA Form 48 (which is shared by other GAFTA contract forms). 

Clause 20 sets out a number of force majeure events, one of which, at sub-paragraph (k), concerns "unforeseeable and unavoidable impediments to transportation or navigation". 

The effect of the force majeure clause was to suspend the sellers’ shipment obligation for the duration of the force majeure event. Further, if the force majeure event continued for 21 days after the end of the shipment period, the buyers would have the option to cancel the unfilled part of the contract. 

The buyers (ADM) rejected the force majeure notice, taking the position that shipment remained due by 15 May 2023. The buyers maintained their position even (i) after the stoppage lifted on 18 May and (ii) the sellers stated on 19 May that they would perform the shipment. The sellers treated this as a repudiation of the contract, accepted the alleged breach and resold the cargo. 

The tribunal in the first-tier arbitration, holding that the sellers had not established a reliable force majeure event, found in favour of the buyers. The sellers then successfully appealed to the GAFTA Board of Appeal, which awarded them approximately USD 3.12 million in damages, plus costs. The buyers appealed to the High Court under section 69 of the Arbitration Act 1996 on three questions of law, namely:

Issue 1: On a proper construction of GAFTA 48, clause 20 (Prevention of Shipment), what is the meaning of “unforeseeable” in sub-paragraph (k) of the first paragraph of the clause?

Issue 2: Under GAFTA 48, clause 20 (Prevention of Shipment), is it a condition precedent to reliance on that clause that the sellers have served notice of the occurrence on the buyers within 7 days of its commencement (where that is later than 21 days before the commencement of the shipment period)?

Issue 3: Can a seller rely on GAFTA 48, clause 10 (Extension of Shipment) to extend time for performance beyond that permitted by clause 20 (Prevention of Shipment)?

Issue 1: What does "unforeseeable" mean?

Clause 20 concerns "unforeseeable and unavoidable impediments to transportation or navigation". The sellers argued that the length of the BSGI inspection stoppage was unforeseeable.

The buyers argued, relying on the concept of foreseeability in tort law cases, that an event is foreseeable if there is a “real risk” or “one that is not far-fetched”. Since interruptions to the BSGI inspection process had previously occurred, the relevant interruption could not be described as unforeseeable. 

The Court rejected that argument. The judge held that the concept of foreseeability must be interpreted in the context of a force majeure clause rather than by reference to tort law principles and emphasised that force majeure provisions are intended to allocate exceptional contractual risks not otherwise addressed in the contract. 

The Court held that "unforeseeable" means an event whose probability, viewed at the time of contracting, is so remote that it may properly be regarded as negligible; negligible being taken to mean that the probabilities are “so small that in commercial terms it could be disregarded”. The test involves asking whether it is probable both theoretically and practically.

However, it need not be so improbable as to be “inconceivable” or “so far fetched that nobody would ever imagine it could ever happen”. The Court considered that if it is interpreted to operate in such narrowly confined circumstances, the clause would serve little useful purpose as a force majeure clause. 

As the Court acknowledged, this assessment involves finely balanced value judgements.  

Issue 2: Is the 7-day notice requirement in the force majeure clause a condition precedent?

The force majeure clause provides that performance is suspended by a force majeure event provided that the seller serves notice within 7 consecutive days of the occurrence of the relevant event. 

The GAFTA Board had concluded that the notice requirement was not a condition precedent and that a late notice could nevertheless be effective where the buyer suffered no prejudice. 

The Court disagreed.

The judge held that the words "provided that" are the language of condition precedent and that timely notice is a mandatory prerequisite to reliance on clause 20. 

Given the Court’s decision that it was a condition precedent, it became necessary to consider whether the notice made by the sellers on 16 May 2023 was one made within the 7 days from the occurrence of the force majeure event. The GAFTA Board had not made a factual finding as to when the force majeure event commenced: was it from 7 May when the stoppage started, or perhaps from 9 May when it became clear that it was an unforeseeably lengthy stoppage? If the force majeure event had started on 7 May, then the 16 May notice was too late, and the sellers' claim would fail. 

The Court ultimately decided that the question of whether an effective force majeure notice had been served should be remitted to the GAFTA tribunal to decide.

Issue 3: Interaction between Extension of Shipment clause and the Prevention of Shipment clause

GAFTA forms contain an Extension of Shipment clause, giving the sellers the option to extend the time for shipment by up to 8 days beyond the “originally stipulated period”, with the quid pro quo that the price of the goods would be reduced in accordance with the length of the extension. 

The question was relevant as it affected the date that the sellers would be considered to have defaulted on their obligation to deliver the goods, as it is from this date when damages are to be assessed. Did “originally stipulated period” mean the stipulated shipment deadline (in this case, 15 May 2023), or the one extended by the force majeure clause (in this case, 13 June 2023)? 

The Court decided that what had been “originally stipulated” in the contract would also include the prospect of an extension as provided for by the Prevention of Shipment clause, such that the “originally stipulated period” was the one already extended. 

The Court considered that this interpretation better reflected commercial common sense and avoided anomalous consequences in the assessment of damages and shipment allowances. For instance, if the sellers had invoked the extension in the Extension of Shipment clause before invoking the extension under the Prevention of Shipment clause, the sellers would have suffered a price reduction. 

Comment

This case serves as a useful reminder that the notification requirement in force majeure clauses is often expressed as a strict prerequisite. Failure to comply with this requirement will prevent a party from relying on the escape valve provided by the force majeure clause.

The case also offers welcome guidance on the meaning of the “unforseeability” limb of the force majeure clause in GAFTA contracts. As the Court recognised, however, assessing whether an event is unforeseeable involves value judgements along a spectrum, raising the question: at what point would a risk move from negligible to notable? The arbitral tribunal had found that a BSGI stoppage beyond two days was statistically insignificant, paving the way for the Court to conclude that the 11-day stoppage in this case was unforeseeable. 

The difficulties this presents to commercial parties in having to make that judgement should not be understated, particularly against the backdrop of an ongoing war where consistency of action among the belligerent states is rare, and where information flow is often restricted or inconsistent. This case demonstrates that a careful weighing exercise is required whenever a party wishes to invove force majeure.

[1] That Initiative commenced in 2022 but ended on 6 May 2023 after Russia’s refusal to renew the Initiative.