The Grain and FeedTrade Association

GAFTA’s Prime ObjectivesTo Promote International Trade in

Agricultural Commodities and General Produce

To Protect Members Interests

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MEMBERS

1300 MEMBERS in

85 COUNTRIES

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MEMBERS CATEGORIES• Traders • Brokers.• Superintendents.• Spices, Rice and General Produce• Arbitrators.• Professional Bodies.• Analysts.• Fumigant Operators22/12/2011 4

TRADE POLICY AND REPRESENTATION

TRADE POLICY REPRESENTING THE INTERESTS OF

MEMBERS TO AUTHORITIES WORLDWIDE.

CONVEYING PROMPTLY TO MEMBERS ANY INFORMATION

WHICH MAY AFFECT THEIR BUSINESS.

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Events and CPDP

TRAINING & EDUCATION THE CONTINUING PROFESSIONAL

DEVELOPMENT PROGRAMME

WORLDWIDE SEMINARS AND TRAINING COURSES FOR

FOUNDATION TO ADVANCED LEVEL

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CPDP

NEXT MEMBERS EVENTBuenos Aires, Argentina

5-7 March 2011Formation and Fulfilment of

Contractual Obligations22/12/2011 9

CONTRACTS

CONTRACTSGAFTA HAS A RANGE OF 80

STANDARD FORM CONTRACTS

GAFTA HANDLES ON AVERAGE 200 ARBITRATION CASES EACH YEAR

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CONTRACTS FIRST CONSIDERATIONS WHEN TRADING

• IDENTITY OF THE OTHER PARTY

• PRICE

• DELIVERY

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CONTRACTS GAFTA Contracts are standard

trading terms, reflecting the way in which trade

is customarily done.

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What is a Contract?“….. a promise or set of promises which the law will enforce”

“….. an agreement giving rise to obligations which are enforced or recognised by law.”

Chitty on Contracts (29th Edition)

What sort of Risks?• Risks in the goods

• Shipment Risks – risks of moving the goods

• Documentary Risks – risks of documents correctly reflecting the goods

• Legal Risks – passing of risk before title, possession of the goods - ownership of the goods

Different Standard Contract Terms•FOB – Free on Board•CIF – Cost Insurance Freight•C&F – Cost and Freight•X Works •DAF – Delivered at Frontier•etc

A definition - FOB•The Buyer must give “effective shipping instructions”

•Nominate and present an appropriate vessel at the load port in sufficient time•Give correct documentary instructions

A definition – FOB (2)•The Seller must:

•Deliver goods on board a ship which has been nominated by the buyer•Do so at the named port within the period stated in the contract•Bear the cost of loading•Provide goods which conform to the contract•Provide documents as agreed in the contract

A definition - CIF•Seller will provide documents which show that he has

•Obtained goods of the contract description

•Insured them for the intended voyage

•Loaded them within the agreed dates on a vessel he has fixed and paid to carry the goods to the agreed destination,

•Appropriated them to the specific contract, or

•Bought documents from someone else who has done the above

Key parts of the Contract•Identifying the goods •Description•Quality specification

•Identify if the goods provided conform to the contract

Procedures – for measuring the goods•Sampling and Analysis Risk

•Need to compare “like with like”

•Same sampling methods

•Same analysis methods

•Where, when and how?

Preservation of Cargo during Transit•When does risk pass?

•Risk of Condition?

•Requirement for Buyer to receive “satisfactory goods” SOGA 1979 S. 14

•Requirement for a reasonable contract of Carriage - SOGA 1979 S 32(2)

Other Shipment Risks (1)

•Suitability of Vessel•Shipment and Classification Clause•Can vessel reach the port, load and sail safely

•Loading and Discharge•Can port equipment reach the holds?•Appropriate methods / equipment•Stowage and ship safety

Other Shipment Risks (2)

•Time•Time allowed for loading•Whose liability if loading takes longer –demurrage risk•Difference between sale contract and charterparty terms •Loading costs – who pays for stevedoring etc.

Insurance

•Whose duty to insure?

•Terms required under the contract•When does risk in the goods pass•Is the policy provided transferable•Wharehouse to wharehouse cover

Impediments to Performance

•What is performance

•Dealing with problems •Prohibition (of export)•Force Majeure

Other Key aspects of GAFTA Contracts•Domicile

•Notices

•Non-Business Days

•International Conventions

•Arbitration – rules 125 and 126

The Ecomonic Situation• Currency Risk• Non-Performance Risk• Management

Questions / Comments

Thank you

Thank You

JoannaLees@gafta.com