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Fonterra-Danone court action hinges on contract

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Business News | Tuesday December 3 2013 7:23

Fonterra-Danone court action hinges on contract

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UPDATED 10:31am: Potential court action between Fonterra and Danone will hinge on what type of contract the companies used.

Months of talks between the two dairy giants have failed to reach a solution, after Danone recorded millions in losses which it's blaming on Fonterra's botulism contamination scare.

Commercial lawyer Stephen Franks told Newstalk ZB's Rachel Smalley he doesn't like Danone's chances.

"The standard Fonterra terms of trade actually exclude all indirect liability, liability for loss of profit."

There's no telling what strategy two dairy giants will go for, if their fight ends up in court.

Mr Franks says Fonterra is in a strong position, but there are still several ways it could play out in court.

"There might be an argument confined largely to just exactly what was lost.

"It could be that Fonterra is saying 'Well you didn't lose it permanently, it just delayed sales, you ran down your stock'."

Fonterra director of global sales Tim Dean says the advice from their lawyers is that they don't have to pay anything at all, but they put the commercial settlement on the table because they wanted to preserve the business relationship.

He says that may have fallen through, but they still hope to avoid ending up in arbitration.

Photo: Getty Images

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