The GAFTA Board of Appeal

satisfied in full the Client’s claim of approximately USD150,000 seeking

compensation for damages specified in a washout agreement that were caused by

the failure to comply with the contract.

A washout agreement is a

settlement agreement by which a party seeks to terminate the contract, without

declaring a default, with compensation paid by the party who refuses to fulfil

the contract. Typically, the compensation is the difference between the

contractual price of the goods and the market price of the goods on the day of

such a refusal.

The question of whether the

parties concluded a washout agreement arises more and more often in trade

disputes and has become the “cornerstone” of the case.

Iryna Moroz, partner of

AVELLUM, commented as follows: “Our biggest challenge was that the parties

discussed the agreement verbally through brokers. In addition, there were no

formal labour or contractual relations between the representative of the

counterparty and the company represented by him. These circumstances served as

a ground for the counterparty to challenge the conclusion of the contract.

However, English law is

flexible as to the form of a contract, which can be concluded either verbally

or in writing using all possible means of communication. The authority of the

company’s representatives is presumed in English law. That is why the existence

of formal labour relations or other corporate restrictions in no way affects

the possibility of concluding a contract.”

The AVELLUM team successfully

proved that the parties had actually agreed the washout agreement verbally

through the broker. Furthermore, arbitrators confirmed the general position of

English law that any person who represents a company may enter into a contract,

regardless of his or her position in the company and the existence of formal

labour relations.

The AVELLUM team was led by partner Iryna Moroz with support of senior

associate Dmytro Koval.