Vitol SA v Beta Renowable Group SA (Rev 1)

Acceptance of a repudiatory breach requires no particular form. Communication or conduct, including an omission, may suffice if it clearly and unequivocally conveys that the contract is treated as ended. Whether it does so is fact-sensitive.

In an FOB contract, a buyer’s nomination obligation will not necessarily be a condition precedent to the seller’s duty to deliver. Where both parties know that the seller cannot perform, the alleged condition may serve no contractual purpose. Damages for non-delivery are assessed under Sale of Goods Act 1979, s. 51. A claimed hedging loss must provide a fair and proper basis of compensation; a like-for-like market comparison is required.

Vitol agreed to buy 4,500 metric tonnes of biofuel from Beta under four contracts for FOB Bilbao delivery between 16 and 30 June 2016. Beta repeatedly stated that it could not produce or deliver the biofuel. Vitol did not nominate vessels by the contractual deadline but later gave notice terminating the contracts.

The dispute concerned whether Vitol’s failure to nominate accepted Beta’s renunciation, whether non-nomination discharged Beta’s delivery obligation, and the appropriate measure of damages. Vitol claimed hedging losses or, alternatively, the difference between the contract price and market value.

1. Termination by non-nomination. Acceptance of renunciation requires no prescribed form. Conduct or omission may amount to acceptance where it clearly and unequivocally conveys an election to treat the contract as at an end. The question is fact-specific. The principle was applied from Vitol SA v Norelf Ltd [1996] AC 800.
2. Vitol’s failure to nominate by midnight on 27 June 2016 did not meet that standard. It occurred against a background of continuing negotiations and previous contractual variations. More importantly, Vitol’s email sent shortly before the deadline insisted on Beta’s continuing contractual obligation to deliver and referred to a future right to terminate. The omission was therefore inconsistent with an intention to terminate at that time.
3. Effect of non-nomination. Vitol’s nomination obligation was not an express condition precedent, and no implied condition was established. The FOB authorities relied on by Beta, including Armitage v Insole and Sutherland v Allhusen, were materially distinguishable. They did not concern a seller which had declared, before the nomination deadline, that it could not perform. Where both parties know that performance is impossible, the supposed condition precedent has no purpose and does not arise on the proper construction of the contracts.
4. Vitol validly terminated by its notice of 7 July 2016. Beta was liable for breach. The hedging claim was rejected because it combined a hypothetical onward sale with a futures transaction that had matured in March and had subsequently been rolled over. It was not a fair or proper like-for-like basis of compensation.
5. Under s. 51 of the Sale of Goods Act 1979, the alternative market-value measure applied. The comparable FOB Bilbao purchase at €864 per metric tonne was accepted as fair. Judgment was entered for Vitol for US$351,830.25, with interest and costs to be agreed.

First-instance decision in the High Court (Commercial Court). No prior appellate decision is stated in the judgment.