Breach of Contract Claim Barred by Contract Provision Making Third-Party Quality Assessment Binding

On December 1, 2020, the First Department issued a decision in Curacao Oil N.V. v. Trafigura Pte. Ltd., 2020 NY Slip Op. 07130, holding that a breach of contract claim was barred by a contract provision providing for a third-party to assess compliance with the contract's quality standards, explaining:

The motion court properly dismissed the breach of contract claim based on the independent inspector's final and binding quality determination of the fuel oil purchased by plaintiff under the contract. Although plaintiff asserts that this case is distinguishable from Sempra Energy Trading Corp. v BP Prods. N. Am., Inc. relied on by the motion court, we see no reason to deviate from the contract interpretation principles applied in that case. Here, although plaintiff maintains that the independent inspector's quality determination did not apply to characteristics not tested, the motion court properly determined that the contract did not provide for such a carveout. For the same reasons, the breach of warranty claim was properly dismissed, as the purported warranty on which plaintiff relies was expressly limited by the independent inspector's determination.

(Internal citations omitted).

Commercial litigation involves more than courts. Disputes often are--by agreement--decided by private arbitrators or, as here, an independent inspector. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding a dispute that is subject to an arbitration or other dispute resolution agreement.