Application of the Rye Terms in GAFTA Contracts and Arbitration
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Rye Terms are specific provisions in GAFTA contracts that provide assurance to the buyer regarding the condition of the goods upon arrival. These terms clearly define the parties' responsibilities and provide legal protection against possible damage upon delivery or the situations that the goods not being in the contractually agreed condition.
The inclusion of the Rye Terms in a GAFTA contract facilitates the buyer's claim for compensation if the goods are not in the contractual condition upon arrival. In this way, the seller agrees to compensate the buyer for any damages, deterioration, or products delivered that are not of the specified quality.
The parties may have agreed on a compensation amount in advance. However, if no such agreement is made, GAFTA arbitration may determine the compensation amount based on a percentage of the contract price. According to Article 2.1 of GAFTA Arbitration Rules No. 125, the buyer must notify the seller of their intention to initiate arbitration within 10 days of the completion of the unloading.
Following the notice, the buyer notifies GAFTA with the relevant documents regarding the claim. Following this application, GAFTA appoints an arbitration panel consisting of three arbitrators, and the dispute is heard by this panel.
If compensation is awarded, the buyer and seller must cooperate in any claims against the ship operator or third parties. Any additional collections from third parties after payment to the buyer will be refunded to the seller, after any expenses incurred by the buyer are deducted.
The buyer is obligated to provide the necessary documents for the preparation of the average statement. The seller must also return documents such as insurance policies and certificates to pursue its claims.
According to Article 6 of the GAFTA Arbitration Rules No. 125, arbitration awards rendered under the Rye Terms are binding and final on the parties. There is no appeal against the award, which increases the finality and effectiveness of the process.
The Rye Terms are critical provisions in GAFTA contracts that ensure delivery security. The GAFTA arbitration mechanism offers parties an effective and binding means of resolving disputes. Therefore, it is crucial for parties engaged in international commodity trade to carefully integrate these provisions into their contracts.
As Ulutürk Attorney Partnership, we provide comprehensive and effective legal advice to our clients regarding GAFTA contracts and arbitration proceedings.
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