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BP Oil International, Limited v. Empresa Estatal Petroleos de Ecuador

United States Court of Appeals for the Fifth Circuit
332 F.3d 333 (2003)


Facts

BP Oil International, Ltd. (BP) (plaintiff) entered an agreement with Empresa Estatal Petroleos de Ecuador (PetroEcuador) (defendant) for the delivery of gasoline CFR (cost and freight) to La Libertad, Ecuador. Per the agreement, the gasoline was to have no more than three milligrams per 100 milliliters of gum content when tested before shipment. The gasoline was tested prior to shipment and passed the three-milligram test. The gasoline was tested again at the destination port and failed the test. PetroEcuador would not accept delivery, and BP sold the gasoline to another buyer at a loss. BP brought suit for breach of contract in federal district court. The district court applied Ecuadorian law and granted summary judgment for PetroEcuador. BP appealed, arguing that CFR meant that the risk of damage to the gasoline passed to PetroEcuador once the gasoline was loaded onto a ship for delivery. The Court of Appeals for the Fifth Circuit disagreed with the district court and applied the United Nations Convention on Contracts for the International Sale of Goods (CISG), not Ecuadorian law.

Rule of Law

Issue

Holding and Reasoning (Smith, J.)

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