Petroplus Marketing AG v Shell Trading International Ltd

A contractual pricing mechanism referring to the bill of lading date is not ordinarily qualified by an implied term restricting it to dates resulting from contractual performance. Express payment machinery requiring payment without deduction, set-off or counterclaim may require the buyer to pay the invoiced amount first and pursue any claim separately. The principle that a party cannot benefit from its own breach is subject to the parties’ express contractual intention. A variation is not established where one party’s communication proposes a new pricing term and the other party accepts parts of it while proposing material changes, since the exchanges do not show an intention to agree piecemeal.

Petroplus Marketing AG sought summary judgment for the unpaid balance of the price of petroleum products sold to Shell Trading International Ltd. The parties had originally agreed that the price would be calculated by reference to Platts quotations around the bill of lading date. A subsequent written confirmation contained an erroneous alternative formula, and the parties exchanged further communications without agreeing on all proposed amendments.

Delivery was delayed. Shell contended that the later communications varied the pricing provision, that Petroplus was estopped from relying on the original formula, and that Petroplus could not obtain the benefit of a later bill of lading date resulting from its breach. Shell also advanced a cross-claim for late delivery and demurrage. The central issues were whether the pricing provision had been varied and whether Shell could withhold payment pending determination of its cross-claim.

1. Variation. The communications did not establish an agreement to vary the pricing provision. Although the requirements of offer and acceptance may be applied flexibly after a contract has been concluded, Shell’s response accepted some parts of Petroplus’s new proposal while requiring changes to the pricing terms and other provisions. The parties had not evinced an intention to be bound by the proposal piecemeal.
2. Estoppel. Shell’s estoppel by representation argument failed. There was no evidence that Shell relied on a representation of fact as to what Petroplus was willing to agree on 12 June 2008. The alleged reliance appeared instead to concern Shell’s belief or expectation about the contractual terms.
3. Benefit from breach. The general principle that a party cannot rely on its own contractual breach to obtain a benefit may arise as a matter of construction or implication. It is not absolute and may be displaced by the express terms or the parties’ intention, as explained in Richco International Ltd v Alfred C. Toepfer International GMBH [1991] 1 Lloyd’s LR 136.
4. Payment machinery. The pricing and payment provisions created machinery requiring Petroplus to be paid by reference to the bill of lading date notwithstanding Shell’s contention that delivery was late. The payment provision required payment without deduction, set-off or counterclaim. Construing “bill of lading date” as limited to a contractually compliant date would frustrate that machinery and the contractual intention that the seller be paid first, with disputes pursued separately. The reasoning in Totsa Total Oil Trading SA v Bharat Petroleum Corp. Ltd. [2005] EWHC 1641 (Comm) supported that conclusion.
5. Cross-claim. Shell’s arguments based on circuity of action and the close relationship between the price claim and the counterclaim did not prevent summary judgment. Petroplus was entitled to summary judgment, with directions for the trial of Shell’s counterclaim to be addressed separately.