AVELLUM successfully represents the client in GAFTA appeal

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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.

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