China Coal Solution (Singapore) Pte Ltd v Avra Commodities Pte Ltd

• Jurisdiction: Singapore
• Judge: Judith Prakash JA,Chao Hick Tin SJ,Woo Bih Li J
• Judgment Date: 20 August 2020
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 83 of 2019
• Date: 20 August 2020

China Coal Solution (Singapore) Pte Ltd

and

Avra Commodities Pte Ltd

[2020] SGCA 81

Judith Prakash JA, Chao Hick Tin SJ and Woo Bih Li J

Civil Appeal No 83 of 2019

Court of Appeal

Contract — Formation — Parties exchanging four e-mails agreeing on quantity, quality, price, laycan and type of vessel — One party subsequently sending draft contract on standard terms — Whether parties entered into contract on basis of first four e-mails alone

Held, allowing the appeal:

(1) The parties had not intended to create legal relations on the basis of the First Four E-mails alone: at [27].

(2) First, the wording of cl 26 was significant in that it included provisos that the Draft Contract “shall only come into force after being signed by both the Buyer and the Seller”, and, as an alternative, that “the Buyer's nomination of a performing vessel shall signify binding acceptance of all the terms … even if the Buyer has not executed this Agreement”. This clause made clear that parties intended to be bound only if one of these two exclusive situations in which the contract would come into existence arose: at [28] and [29].

(3) Second, cl 26 was contained in Avra's standard terms, which Avra had insisted upon. As the correspondence demonstrated, Avra staunchly refused to exercise any flexibility in modifying most of these terms despite China Coal's requests to that effect. Having insisted on the terms of the formal contract, it did not lie in Avra's mouth to now allege that China Coal could not hold it to cl 26, which was part of the package of terms it initially refused to depart from: at [32] and [33].

(4) Third, in relation to the position taken by China Coal in its e-mail of 4 May 2017, this was better characterised as reflecting its wish to maintain a cordial working relationship with Avra, than as a recognition that it was contractually bound. In any event, it was not the subjective view of a party that prevailed but the intention of the parties viewed objectively: at [34].

(5) Fourth, in relation to the September 2015 dealing, Avra no doubt did not expressly allege that the exchange of e-mails was not binding without the execution of a formal contract. However, it did not perform. Nor did China Coal take any follow-up action. Parties appeared to have preferred to let sleeping dogs lie, save for keeping alive the possibility of a quid pro quo in future transactions should their positions be reversed: at [35].

Case(s) referred to

Global Asset Capital Inc v Aabar Block SARL [2017] 4 WLR 163 (refd)

Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 (folld)

R1 International Pte Ltd v Lonstroff AG [2015] 1 SLR 521 (refd)

Rudhra Minerals Pte Ltd v MRI Trading Pte Ltd [2013] 4 SLR 1023 (refd)

Facts

The appellant (“China Coal”) and the respondent (“Avra”) were companies involved in commodity trading. They began transacting with each other in 2015. The dispute arose out of attempts to enter into one such transaction in March to April 2017, involving three shipments of Indonesian steam coal (“the Cargo”).

On 29 March 2017, Avra and China Coal exchanged four e-mails in which they agreed on quantity, quality, price, laycan and type of vessel to be deployed (the “First Four E-mails”). Avra then sent China Coal a draft contract on its standard terms (the “Draft Contract”). Amongst other terms, the Draft Contract contained terms reflecting the matters agreed on in the First Four E-mails. It also contained an entire agreement clause with “subject-to-signature” and “Buyer's nomination” provisos (“cl 26”).

On 6 April 2017, China Coal proposed amendments to the Draft Contract, though it did not revisit cl 26 or any of the matters agreed on in the First Four E-mails. Avra rejected most of China Coal's proposed amendments, reiterating that these were either “non-negotiable terms from [the] shipper” or “standard terms as accepted in business confirmation and previous contracts”. This exchange concluded with Avra executing the final draft of the Draft Contract on 18 April 2017 and asking China Coal to do the same. China Coal failed to do so and, on 4 May 2017, e-mailed Avra seeking to “carry out only one cargo … and cancel other two [sic] cargoes”. On 29 May 2017, Avra's lawyers wrote to China Coal purporting to formally terminate the contract on the basis of the latter's “material breaches” or “anticipatory repudiatory and/or repudiatory breach” of contract.

Before the disputed transaction, China Coal and Avra had transacted with each other on three previous occasions in September 2015, July 2016 and March 2017. All their dealings proceeded similarly, in that: (a) Avra would e-mail China Coal to propose key terms; (b) China Coal would respond with a counter-proposal; (c) the parties would reach agreement in their “business confirmation emails”, and (d) Avra would e-mail to China Coal a draft contract in its own standard form for comment and approval. Parties signed draft contracts in respect of only the July 2016 and March 2017 transactions, which were duly carried out. In respect of the September 2015 dealing, the parties' positions were reversed – it was Avra who failed to execute the draft formal contract and China Coal who insisted that the parties had nevertheless entered into a concluded contract, though China Coal did not follow up with any legal action against Avra.

Avra sued China Coal for breach of contract. The High Court judge (“the Judge”) held that the parties had entered into a contract for the sale and purchase of coal on the basis of the First Four E-mails and found China Coal liable for damages. China Coal appealed only in respect of the Judge's decision on liability.

The issues on appeal were: (a) whether (and if so, when) a contract came into existence between China Coal and Avra; and (b) whether that contract was unenforceable due to uncertainty or incompleteness.

Tan Wee Kong and Poh Ying Ying Joanna (JLex LLC) for the appellant;

Tan Boon Yong Thomas, Hoon Yi ShyuanandNurulhuda Atiqah binte Sawal (Haridass Ho & Partners) for the respondent.

20 August 2020

Judgment reserved.

Judith Prakash JA (delivering the judgment of the court):

1 In proceedings below, the High Court judge (“the Judge”) held that the plaintiff (“Avra”) and the defendant (“China Coal”) had entered into a contract for the sale and purchase of coal on the basis of four e-mails exchanged in March 2017 (“the First Four E-mails”). The parties had intended to create legal relations on those e-mails alone, and the contractual terms were sufficiently certain and complete. In his grounds of decision (see [2019] SGHC 287) (“GD”), the Judge found China Coal liable for about US$1.6m in damages and interest. China Coal appealed only in respect of the Judge's decision on liability.

2 We reserved judgment after hearing the parties and now deliver our decision. The point at issue in this appeal is one that courts have been asked to decide over and over again and that is whether a binding contract has come into existence between the feuding parties. The decisions sometimes go one way and sometimes the other and the main explanation for differing outcomes in what seem to be the same factual situations is that in fact they are not the same once considered in sufficient detail. Thus, to determine any of these cases the utmost attention has to be paid to the facts and we therefore set them out below.

The factual background

3 China Coal and Avra are Singapore companies involved in trading commodities. They started transacting with each other in 2015. The present dispute arises out of attempts to enter into one such transaction during the months of March and April 2017, involving three shipments of Indonesian steam coal (“the Cargo”) which Avra asserted China Coal had agreed to buy from it.

The alleged contract for the Cargo

4 In the exchanges recounted below, China Coal was represented by its deputy purchasing manager, Mr Wei Pengfei (“Mr Wei”), who is also known as “Richard”. Avra was represented mainly by its coal marketer, Mr Zhou Jungang (“Mr Zhou”, also known as “Gary”), and its director, Mr Benjamin William Burgess (“Mr Burgess”).

5 On 29 March 2017, Avra and China Coal exchanged the First Four E-mails, which are reproduced in full in the GD ([1] supra) at [9]–[13]. The exchange commenced in the morning at around 11.00am with an e-mail from Avra to China Coal offering to sell the latter about 185,000mt of Indonesian steam coal. China Coal responded at about 2.00pm with a counter-offer which included a revised price. In its reply at about 2.20pm, Avra accepted the price offered for gearless vessels but put in a counter-offer regarding the price for geared vessels. At 4.14pm, China Coal sent the last of this series of e-mails stating “Confirm your good offer as below”. Essentially, by the First Four E-mails, the parties agreed on the quantity and quality of cargo, price, laycan and type of vessel to be deployed. The first of these e-mails also indicated that in respect of sampling or analysis, an “Independent Surveyor [was] to be mutually agreed”. It was the First Four E-mails that grounded the Judge's finding that there was a concluded contract for the sale of the coal. Mr Zhou testified that there were also telephone discussions between himself and Mr Wei on 29 March 2017 that touched on price, though he could not recall most of the other contents of the discussions.

6 Later on the evening of 29 March 2017, some four hours after the last of the First Four E-mails was sent out, Avra sent China Coal a draft contract entitled “FOB Coal Sale Agreement” containing its standard terms (“the Draft Contract”) for China Coal's “review/confirmation”. The Draft Contract contained terms reflecting the matters agreed on in the First Four E-mails, as well as other terms such as nomination of vessels, loading terms and allocation of risk. Relevant to this...