Galaxy Energy International Ltd v Murco Petroleum Ltd

A contractual delivery period must be construed according to the wording and commercial context of the particular agreement. Where an agreed three-day period requires no further narrowing, standard provisions addressing narrowed laycans do not convert it into a mere laytime provision.

For damages for late delivery, market value is assessed at the date of breach. Where the relevant commodity is ordinarily traded using a spread of benchmark quotations, that spread may provide a fairer measure than a single daily quotation, even though the latter is easier to calculate.

Galaxy claimed damages from Murco for late delivery of 35,000 MT of fuel oil sold on FOB terms for delivery during 15–17 January 2012. The cargo was delivered on 21 January. Murco argued that the contract contained an extension of the delivery period, alternatively that the delivery provision was concerned only with laytime and vessel arrival. It also disputed the pleaded damages and raised unpleaded arguments concerning loss and hedging.

The principal issues were whether the extension wording formed part of the contract, whether the agreed delivery period was a laycan or a latest delivery date, and how market value should be calculated.

1. Contract formation and terms. The contract was concluded on 4 January, alternatively on 11 January, without the additional wording allowing such extension as the seller required to effect or complete delivery. Galaxy’s operational conduct was consistent with the earlier agreement and did not objectively amount to acceptance of the later provision. Murco knew that Galaxy was considering the wording, and its failure to respond to Galaxy’s deletion of it was significant.

2. Construction of the delivery provision. The three-day period for delivery was not merely a laytime provision. Clauses 7 and 8 of Murco’s General Terms and Conditions addressed cases where a broader date range required narrowing to a three-day laycan. No narrowing was required or made here. The reasoning in The “Luxmar” [2007] 2 Lloyd’s Rep 542 concerned a materially different contractual arrangement and did not govern this case.

3. Unpleaded issues. Murco was not permitted at trial to introduce arguments that Galaxy had suffered no loss because of its sub-sale, or that Galaxy had hedged the transaction. Those issues had not been pleaded. Particularly in a smaller Commercial Court case, proportionality required the parties to know in advance the issues they had to meet.

4. Market value. Damages were to be assessed by reference to market value at the date of breach. Platt’s was presently the best available source of market information, but it was not itself an exchange or literal market. The evidence showed that oil cargoes were commonly priced over a spread of Platt’s quotations. That approach more closely reflected the market value of real transactions than a single daily quotation, despite its greater complexity. The approach in Glencore Energy v Transworld [2010] EWHC 141 (Comm) was a useful example on different evidence and did not establish a general rule. Choil Trading v Sahara Energy [2010] EWHC 374 (Comm) likewise concerned a different valuation exercise.

5. Galaxy succeeded and was entitled to recover damages calculated using a spread of Platt’s prices. The parties were invited to agree the precise spread, failing which the court would determine it at hand down.

First-instance judgment in the High Court (Commercial Court). The judgment does not state any prior appellate decision in this litigation.