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In grain trading, shipment disruptions are routine. Export embargoes, strikes, war, natural disasters — any of these can make loading impossible. Standard GAFTA contracts include a specific mechanism for this: the Prevention of Shipment clause. In this article, I’ll explain how it works, what events it covers, what procedures must be followed, and what happens if a seller gets it wrong.
Why Prevention of Shipment Exists
Under English law, a contract for sale creates strict liability. A seller must deliver goods within the agreed period, and impossibility of performance does not by itself relieve the seller of responsibility. If the government of the country of origin imposes an export ban on grain, and the contract has no protective mechanism, the seller faces default with all its consequences: liability under the default clause, arbitration costs, and reputational damage.
This is precisely why standard GAFTA contracts include Prevention of Shipment (or Prevention of Delivery in FOB contracts). It specifies what events qualify as force majeure, how contract performance is suspended, and the procedure for contract cancellation.
Brief History: From Prohibition Clause to Prevention of Shipment
Before 2014, standard GAFTA contracts contained three separate provisions for unforeseen circumstances: Prohibition Clause (export bans), Force Majeure Clause, and Strikes Clause. Each had its own mechanism and timeline. In practice, this created confusion: the same event (for example, a port blockade during armed conflict) could fall under two or three clauses simultaneously, and parties would dispute which to apply.
From 1 June 2014, GAFTA consolidated all three mechanisms into a single clause: Prevention of Shipment (for CIF/C&F contracts) or Prevention of Delivery (for FOB contracts). The central concept became an Event of Force Majeure, which now encompasses all previously separate categories: from export bans to strikes and natural disasters.
The change was structural and substantive. The new clause imposed significantly stricter requirements on sellers wishing to rely on force majeure: performance must be actually prevented, not merely hindered. The burden of proof rests entirely with the seller.
What Constitutes an Event of Force Majeure
Prevention of Shipment contains a closed list of events recognised as force majeure. Under Clause 21 of GAFTA 9 (2025 edition), Event of Force Majeure includes:
- (a) an export prohibition or other governmental or legislative act of the country of origin or the territory where the loading port is situated, restricting export wholly or partially;
- (b) blockade;
- (c) acts of terrorism;
- (d) hostilities;
- (e) strikes, lockouts or other joint action by workers;
- (f) riots or civil commotion;
- (g) breakdown of machinery;
- (h) fire;
- (i) ice;
- (j) Act of God;
- (k) unforeseen and unavoidable obstacles to transport or navigation;
- (l) any other event covered by the term ‘force majeure’.
Prohibition: Not Every Ban Relieves Obligations
Export prohibition (item (a)) is the most common basis for invoking Prevention of Shipment in grain trading. The Russian grain export ban of 2010 and Indian rice export restrictions directly fall under this heading. The 2022 Ukraine war is a different case: the inability to ship was primarily due to hostilities (item (d)) and port blockades (item (b)).
Prohibition is tied to specific territory: the country of origin or the territory where the loading port is located. If a contract explicitly specifies loading from a particular country and that country imposes a ban, the seller may invoke Prevention of Shipment. But if the contract does not specify a loading port, and goods of the same origin are available elsewhere (for example, Ukrainian corn can be purchased and loaded in Romania), the seller cannot rely on force majeure — an alternative means of performance exists.
What Is and Is Not Force Majeure
English courts have not produced a universal definition of force majeure — its meaning depends on the specific contract language. However, practice in GAFTA arbitrations and court decisions provides clear guidance.
Recognized as force majeure:
- legislative or administrative restrictions on export;
- refusal to issue an export licence;
- natural disasters disrupting transport infrastructure (e.g., a flood preventing delivery to port);
- failure of critical equipment at a terminal;
- exceptionally severe storms;
- temporary export bans.
Not recognized as force majeure:
- ordinary bad weather;
- financial difficulties of the seller;
- non-performance by third parties (e.g., sub-suppliers);
- events caused by the party’s own negligence or acts;
- market shifts (rising prices are commercial risk, not force majeure).
The “Beyond Control” Requirement
A key condition: the event must be beyond the party’s control and unforeseeable at the time of contract formation. If the seller could have avoided the consequences or should have anticipated the event, the clause does not apply.
A typical example: a seller concludes a FOB grain contract from a port in a region where seasonal flooding regularly disrupts elevator operations. If floods in that region are seasonal and predictable, the seller cannot invoke Prevention of Shipment because they should have foreseen this and accounted for it in the contract.
How Prevention of Shipment Works
The clause sets out a clear sequence: from notice through to cancellation. I’ll examine each step.
Step 1. Notice to Buyer
If the seller believes an Event of Force Majeure is preventing or may prevent shipment, the seller must notify the buyer. The notice should state the reasons for the anticipated delay.
Notice must be given within 7 consecutive days from the occurrence of the event or no later than 21 consecutive days before the commencement of the loading period, whichever is later.
Step 2. Suspension of Performance
If notice requirements are met, contract performance is suspended during the force majeure event. Neither party is liable to the other for delay during this period.
Suspension applies only to the extent that performance is actually prevented. If the seller can ship part of the contract quantity, the seller must do so. The clause relieves only the portion of obligations that are genuinely impossible.
Step 3. Buyer’s Cancellation Option
If the Event of Force Majeure continues for 21 consecutive days after the end of the loading period, the buyer gains the right to cancel the unshipped balance. The buyer must serve notice on the seller no later than the first business day after the 21-day period expires.
This cancellation right belongs to the buyer — in both CIF/C&F contracts (Prevention of Shipment, e.g., GAFTA 9) and FOB contracts (Prevention of Delivery, e.g., GAFTA 64). The seller has no equivalent right — only the ability to suspend and wait.
Step 4. Automatic Cancellation
If the buyer does not exercise the cancellation right, the contract remains in force for a further 14 consecutive days. After this additional period expires, if the Event of Force Majeure is still ongoing, the unshipped balance automatically cancels.
Maximum lifespan of the contract after the loading period ends while force majeure continues: 21 + 14 = 35 consecutive days.
Step 5. Resumption After Force Majeure Ends
If the Event of Force Majeure terminates before the contract is cancelled, the seller must promptly notify the buyer of the event’s cessation. The seller then receives as much time to ship as remained under the original contract before the force majeure occurred. If less than 14 days remained, a minimum of 14 consecutive days is granted.
Burden and Standards of Proof
The burden of proof rests entirely with the seller. The seller must prove:
- that an Event of Force Majeure listed in the clause has occurred;
- that the event prevented (not merely hindered) performance of the contract;
- that the event was beyond the seller’s control, unforeseeable at contract formation, and not caused by the seller’s acts or omissions;
- that notice was served within the required timeframe;
- upon the buyer’s request, to provide satisfactory evidence confirming the delay or impossibility.
The “prevented” standard is among the highest in contract practice. Even if performance became significantly more expensive or difficult, this is insufficient. In Seagrain LLC v Glencore Grain BV [2013] EWHC 1189 (Comm), affirmed by the Court of Appeal ([2013] EWCA Civ 1627), the court found that Ukrainian customs requirements to send all samples to a Kiev laboratory for analysis did not amount to an export prohibition. Such measures slowed customs clearance but did not restrict export itself — therefore, the seller could not invoke the prohibition clause.
In Public Company Rise v Nibulon SA [2015] EWHC 684 (Comm), the court examined Ukraine’s introduction of grain export quotas. The contract on GAFTA 78 terms contained the standard prohibition clause (clause 17) and a separate provision obliging the seller to obtain an export licence at its own cost and risk (clause 11.3). The buyer (Nibulon) argued that these provisions conflicted with each other and that since the seller had assumed the risk of obtaining the licence, the prohibition clause was inapplicable to it. However, Hamblen J., applying the test from Pagnan v Tradax, rejected this argument: the two clauses did not conflict and could operate simultaneously. The obligation to obtain a licence did not override the prohibition clause — if export was prohibited, the seller remained entitled to invoke the standard contractual protection. The case was remitted to the GAFTA Board to determine whether the seller’s inability to perform was caused by the quota restrictions themselves or by insufficient efforts to obtain the licence.
Prevention of Shipment and the Default Clause: Their Relationship
If the seller correctly invokes Prevention of Shipment and complies with all procedural requirements, the contract is suspended or cancelled without either party’s liability. In this case, the default clause does not apply: no default, no damages.
However, if the seller commits a procedural error — for instance, notifying cancellation prematurely — liability depends on the circumstances. Formally, the seller may be in default, but damages are assessed considering all factors, including whether force majeure actually occurred.
The landmark case Bunge SA v Nidera BV [2015] UKSC 43 illustrates this. The contract provided for sale of 25,000 tonnes of Russian wheat FOB Novorossiysk on GAFTA 49 terms. On 5 August 2010, Russia announced a wheat export ban effective 15 August. The seller (Bunge) notified the buyer of cancellation on 9 August — before the ban took effect and before the loading period (starting 23 August) had begun. The buyer (Nidera) treated this as repudiation and accepted it, declaring the seller in default.
The case reached the UK Supreme Court. The court held: although the seller was formally in default due to premature notice, the buyer’s damages could be only nominal. The reason: the export ban would inevitably have taken effect and made performance impossible. The buyer cannot recover full contract damages for non-performance of a contract that could not have been performed regardless.
In practice, this means a procedural error formally puts the seller in default, but damages may be minimal if the force majeure event would genuinely have prevented performance. Nevertheless, relying on this protection is risky — far safer to follow all procedural requirements of Prevention of Shipment scrupulously.
Prevention of Shipment vs. Frustration: The Difference
Frustration under English common law is a doctrine that automatically terminates a contract when an event makes performance physically or legally impossible or fundamentally changes the nature of obligations. Unlike Prevention of Shipment, frustration requires no notices, does not impose waiting periods, and applies equally to both parties.
In practice, frustration rarely applies to GAFTA contracts for two reasons. First, GAFTA contracts are for sale of unascertained (bulk) goods of specified description and quality: the seller is free to choose the source, and inability to obtain goods from one supplier does not “frustrate” the contract if goods are available on the market. Second, most events that might trigger frustration are already covered by Prevention of Shipment. Frustration cannot be used to fill gaps in contractual protection or to bypass procedural requirements.
Practical Guidance
For sellers: When an event occurs that may affect shipment, first check whether your contract includes Prevention of Shipment (or in older contracts, separate Prohibition and Force Majeure Clauses). Clause numbers vary: in GAFTA 9 it is Clause 21, though other proformas may differ. Notify the buyer as soon as possible within the permitted timeframe. Your notice should describe the event and explain why shipment is impossible or delayed. Simultaneously begin gathering evidence: official government orders, chamber of commerce certificates, correspondence with port operators, meteorological reports. As Bunge v Nidera showed — do not rush to notify before force majeure actually occurs, or you risk being in default.
For buyers: If you receive a notice from the seller, do not ignore it. Check whether notice was served timely, whether the claimed event appears in the Event of Force Majeure list, and whether it genuinely prevents performance. Remember that 21 days after the loading period ends, you gain the right to cancel the unshipped balance — you must exercise this right within one business day or lose it.
If you have questions about Prevention of Shipment or need help drafting a notice, gathering evidence, or pursuing an arbitration dispute over a GAFTA contract, contact me:
