Case Name: WJ Alan & Company Ltd v El Nasr Export & Import Co
- Citations: [1972] EWCA Civ 12, [1972] 2 QB 189, [1972] 2 WLR 800, [1972] 2 All ER 127, [1972] 1 Lloyd’s Rep 313
- Court: England and Wales Court of Appeal (Civil Division)
- Judges: Lord Denning MR, Lord Justice Megaw, Lord Justice Stephenson
- Date of Judgment: 3rd February 1972
- Areas of Law: Contract Law, Waiver and Variation, Payment and Discharge of Obligation
Background of the case (WJ Alan v El Nasr)
The case involved two contracts of sale made in July 1967 between WJ Alan & Co Ltd (sellers) and El Nasr Export & Import Co (buyers) for 500 tons of coffee, to be shipped in two batches of 250 tons each from Mombasa. The agreed price was 262 Kenyan shillings per cwt, with payment to be made through a confirmed, irrevocable letter of credit.
The buyers arranged for a letter of credit in sterling (£) instead of Kenyan shillings, issued by a Spanish bank and confirmed by a Tanzanian bank.
The sellers accepted and utilized the sterling credit without objection.
After sterling was devalued in November 1967, the sellers claimed that the contract required payment in Kenyan shillings and sought additional money to compensate for the exchange rate difference.
The buyers refused to pay, leading to the dispute.
Legal Issues that arose
Was the original contract denominated in Kenyan shillings or sterling?
Did the sellers’ acceptance of the sterling credit mean that they waived their right to insist on payment in Kenyan shillings?
Did the contract terms change due to the sellers’ conduct?
Judgment in WJ Alan v El Nasr
The Court of Appeal ruled in favour of the buyers (El Nasr).
The contract expressly stated “Shs. 262/- per cwt,” which strongly indicated that Kenyan shillings were the intended currency of account.
But by accepting payment in sterling through the letter of credit without protest, the sellers demonstrated that they had accepted the sterling credit as fulfilling the payment obligation.
Once they acted on the sterling credit, they could not later demand additional payment in Kenyan shillings.
The sellers’ acceptance of the sterling credit amounted to a variation of the contract terms.
The court reaffirmed that a letter of credit is a conditional payment: If honoured, it discharges the buyer’s payment obligation. If dishonoured, the seller could seek payment from the buyer. In this case, the letter of credit was honoured, meaning the buyers fulfilled their obligation.
Here are some important excerpts from the judgment:
“The principle of waiver is simply this: If one party, by his conduct, leads another to believe that the strict rights arising under the contract will not be insisted upon, intending that the other should act on that belief, and he does act on it, then the first party will not afterwards be allowed to insist on the strict legal rights when it would be inequitable for him to do so.”
“If the letter of credit is honoured by the bank when the documents are presented to it, the debt is discharged. If it is not honoured, the debt is not discharged: and the seller has a remedy in damages against both banker and buyer.” (Lord Denning MR)
Conclusion
The sellers had no right to claim additional payment in Kenyan shillings, as they had waived their right to insist on payment in that currency by accepting sterling. The appeal was allowed, and judgment was entered for the buyers.
References:
https://www.bailii.org/ew/cases/EWCA/Civ/1972/12.html
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