Grain trading requires precision and professionalism to avoid financial losses. With over a decade of experience in market analysis and logistics, ASAP Agri combines global expertise with local insights, collaborating with Black Sea insiders and legal experts to deliver accurate data, help minimize risks, and provide comprehensive market insights.

To further support this approach, we partnered with AGA Partners to develop a material focusing on the critical role of communication and conduct in grain trading. In this fast-paced industry, deals are often concluded in minutes, with quick confirmations and actions often outweighing formal contracts. Inna Stepanenko, Senior Analyst at ASAP Agri, examines this phenomenon alongside AGA Partners' Senior Associate Ievgen Boiarskyi and Associate Viktor Romaniv.

Inna Stepanenko

Senior Analyst

ASAP Agri

 

Ievgen Boiarskyi

Senior Associate

AGA Partners

 

Viktor Romaniv

Associate

AGA Partners

 

Inna Stepanenko: It’s becoming more common in the grain trade for contracts to go unsigned, with parties relying solely on business confirmations before execution. Is this trend causing any significant issues?

Ievgen Boiarskyi: In grain trade, contracts are indeed formed at lightning speed. Bids and offers often stay valid for just 15 minutes or less, leaving little time to negotiate every clause in a full-style contract, let alone finalize it with signatures and stamps.

To address this, English law provides a highly adaptable framework tailored to the rapid nature of commodity trading. It requires agreement only over the essential terms — such as the commodity, price, and delivery period — which are typically captured in the business confirmation. Once these core terms are agreed upon, whether orally or in writing, the contract becomes legally binding under English law. Signing or stamping the contract is not required.

Similarly, parties can change their agreements or waive their rights under them through their words or actions without a separate formal agreement. These flexible rules are designed to honor the practical realities and genuine intentions of grain traders, ensuring that their agreements are upheld in the dynamic trade environment.

Inna Stepanenko: Can you provide an example that illustrates the potential problems that may arise in connection with this?

Viktor Romaniv: Of course. There are numerous cases where parties modify their contracts through words or actions, but later deny those changes, citing the absence of a formal signed agreement.

A particularly illustrative situation involved one of our clients. Acting as a seller, they concluded a CIF contract for 6,000 MT of wheat to be shipped from Ukraine to Egypt. The agreed shipment period was “till 5th of March 2023”, with no extensions allowed.

Due to unforeseen circumstances, the vessel berthed only on 5 March. After the contractual shipment period had ended, the client explicitly communicated the problem with the shipment delay to the buyer. The buyer raised no objections; on the contrary, both parties began discussing drafts of the shipping documents.

Encouraged by this cooperative exchange, the seller proceeded to load the wheat, completing the shipment by 7 March, when the bills of lading were issued. Upon receiving the payment documents, the buyer even complained about payment issues through their buying company and requested that their subsidiary be specified as the payer. This payment mode was acceptable to the seller.

However, on 13 March, the buyer suddenly rejected the goods, claiming the bills of lading had been issued beyond the agreed shipment period.

Inna Stepanenko: Interesting! So, the case was taken to arbitration, right?

Ievgen Boiarskyi: Exactly. Our client was confident that the buyer’s conduct demonstrated their agreement to accept delivery beyond the original shipment period. Based on this, London arbitration was initiated to recover the losses caused by the drop in the market price.

The buyer, however, contested the claim, arguing they were within their rights to reject the goods. They maintained that the shipment was late, falling outside the agreed contractual period, and emphasized that no formal agreement had been signed to extend the shipment timeline.

Inna Stepanenko: What was the arbitration decision in this case?

Viktor Romaniv: The arbitrators ruled in favour of our client.

While the arbitration emphasized that the buyer’s mere silence about the late shipment did not amount to acceptance, they examined the broader context of the case. Key factors, such as the buyer’s approval of drafts of shipping documents, their request to change payment terms, and their notification about proceeding with payment, painted a clear picture. These actions indicated that the buyer had, at some point, accepted the late shipment.

As a result, the tribunal concluded that the buyer had effectively changed the contractual terms regarding the shipment period through their conduct, thereby waiving their right to reject the goods for late shipment. Importantly, this change did not require a signed additional agreement.

Inna Stepanenko: What are the key lessons to take away from this decision?

Ievgen Boiarskyi: There are several important considerations for traders to keep in mind.

  1. Informal Approach of English Law.

Under English Law, the terms of a contract can be changed during performance, either explicitly (e.g., through written agreements or correspondence), or impliedly (e.g., through words or conduct).

  1. Mind the Possible Waiver of Your Rights.

Continuing with a contract despite a serious breach involves the risk of losing the right to terminate it. This is known as a ‘waiver’ of the right.

  1. Speak Up If You Disagree.

If you disagree with a breach or deviation, clearly communicate your objections. Silence can be risky – when combined with certain conduct, it may be interpreted as acceptance of a new way of performing the contract.

In the fast-moving world of trade, every action — or lack thereof — carries weight. Clear and timely communication is vital to safeguard your rights and avoid unintended waivers that could have far-reaching consequences.