In grain trading, the broker often has a convenient role: visible when the deal works, invisible when it fails. When the vessel is not loaded, payment does not arrive and demurrage starts running, the question becomes practical: can the broker be pursued, and where?
A broker may be named in a GAFTA form as broker or intervening broker. That is normal. It is not, by itself, a basis for liability.
The sale contract remains a contract between buyer and seller. The broker’s name usually identifies his role in arranging the deal and, often, the commission.
“But he signed the confirmation” is not enough. Being present at the wedding does not make you a party to the divorce.
Being named in the contract is one thing. Assuming an obligation is another.
A broker may be exposed if he effectively signs as a party.
If the confirmation says “we hereby sell” without the protection of “as brokers only”, the broker may have moved himself dangerously close to principal status. An unexpected career as a trader.
He may also be exposed if he confirms a deal without authority. Broker says: “Seller confirms 5,000 mt of wheat.” Seller later says: “I said I would think about it.” The market moves. The loss may then travel back to the broker on a breach of warranty of authority basis - the old Collen v Wright logic.
Under English law, a person who purports to act as agent impliedly warrants that he has authority. If you say “confirmed”, you are also saying you had the authority to confirm.
Another risk is “clarifying” the terms into a new version. March becomes March/April. Protein 12.5% becomes “12.5% min, 11.5% acceptable”. One creative line in a confirmation, and the quality dispute has a co-author.
There is also negligent misstatement. “Do not worry, this is standard market practice.” “They are already loading; the contract will catch up.” “They always do it this way.” If the counterparty relies on that statement and suffers loss, the Hedley Byrne route starts looking less theoretical.
And finally, the broker may give a separate undertaking in his own name: a promise to supervise performance, a payment assurance, or a statement about the counterparty’s financial standing. A separate document can live separately from the sale contract - and the broker may become a separate debtor under it.
A careful broker puts this wording in every confirmation - not in pale grey text at the bottom, but clearly in the body of the document.
If it is missing, either the broker is inexperienced or he does not care. Both options deserve attention.
If the wording is properly included, many claims against the broker become much harder before arbitration even starts.
GAFTA arbitration usually binds buyer and seller, not the broker.
Applicable law and jurisdiction are different questions. English law may apply even where the forum is not an English court.
Depending on the documents, the claim may go to LCIA, the English Commercial Court, or a local court where the broker is registered - Dubai, Turkey, Cape Town, wherever the relevant defendant sits.
The key question is not “where do we want to sue?” but “what is the legal construction?” What obligation was assumed? What obligation was breached? What clause actually binds the broker?
Find the basis - and the forum usually follows.
Without that, the broker remains in his favourite role: present on every call, chasing everyone at midnight, “helping as much as possible” - and when things burn, calmly saying: “I only introduced the parties. Don’t kill the messenger.”
Before chasing a broker, three questions need answers: in what capacity did he sign, did he have authority, and what clause actually binds him. Without those, the broker stays in his favourite role: "I just put you in touch."