Glencore Energy UK Ltd v Cirrus Oil Services Ltd

A contract may be concluded by email where the parties objectively intend to be bound, even though detailed terms or formal documentation remain for later agreement. The court determines that intention from the communications and surrounding circumstances, not undisclosed subjective beliefs. A reference to an incomplete trading name may identify a contracting company where the context makes the intended entity objectively ascertainable. Under section 50 of the Sale of Goods Act 1979, the contract-price and market-price differential compensates for loss of the bargain and is not necessarily loss of anticipated profits. A contractual exclusion of loss of anticipated profits therefore does not exclude that statutory measure without sufficiently clear wording.

Glencore claimed damages for Cirrus Oil’s refusal to take a cargo of Ebok crude oil. Glencore relied on a firm offer sent by email on 3 April 2012 and Cirrus Oil’s email response on 4 April stating that Tema Oil Refinery had agreed to the cargo.

The principal issues were whether the emails created a binding contract, whether the buyer was Cirrus Oil or its parent company Woodfields Energy Resources Ltd, the recoverable market-value damages, and whether clause 32.1 of the incorporated BP General Terms and Conditions excluded the claim.

1. Contract formation. Applying RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co [2010] 1 WLR 753 and Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601, the question was whether the parties objectively intended to create legal relations and had agreed the terms regarded by them or the law as essential. Parties may be bound immediately while leaving detailed or formal terms for later agreement.
2. The 3 April email was expressly a firm offer, identified the principal terms and incorporated the BP 2007 terms. Cirrus Oil’s 4 April email was an acceptance before the extended deadline. Its reference to later fine-tuning concerned detailed terms and did not make the agreement subject to contract.
3. The buyer was objectively identifiable as Cirrus Oil. “Cirrus … (Full trading name)” referred to a company whose name began with “Cirrus”, and the parties’ previous dealings made Cirrus Oil the natural and obvious referent. A corporate group could not itself be the contracting buyer.
4. Damages. The appropriate measure was the difference between the contract price and the market price under section 50(2) and (3) of the Sale of Goods Act 1979. This measure compensated for the loss of the bargain and was not a computation of lost profit. The market value was assessed at DTD minus $3.75 per barrel CFR Tema. After deduction of commission, damages were $3.78 per barrel on 661,500 barrels, totalling $2,500,470.
5. Clause 32.1 did not exclude the statutory measure. Although it referred to loss of anticipated profits, it did not clearly exclude the contract-price and market-price differential. Such an exclusion would produce an unlikely and uncommercial result requiring much clearer words. Judgment was entered for Glencore for $2,500,470, with interest and costs following the event.

First-instance decision. No appellate history is stated in the judgment.