Gunvor SA v Sky Oil & Gas Ltd (Previously Known As Keystone Trade Oil & Gas Group (UK) Ltd)

Where commercial parties have reached agreement on essential terms, subsequent formal terms may become part of the contract through established dealing, absence of objection and performance after receipt. Failure to make a contractually required prepayment may constitute an event of default entitling the seller to terminate under the contract and recover damages. Where no available market exists at the contractual delivery location, damages may be assessed by reference to the nearest available and accessible market, together with reasonable costs of reaching that market. The value of goods delivered but not paid for may also be recovered at the contractual price.

Gunvor SA claimed damages from Sky Oil & Gas Ltd for breach of a contract for the sale of gasoline for delivery by ship-to-ship transfer at Hodeidah. The defendant had failed to make required prepayments, had not taken delivery of the remaining cargo, and did not participate in the trial. The issues included whether the parties had concluded a contract incorporating the claimant’s formal terms, whether the defendant’s payment failure entitled the claimant to terminate, and how the claimant’s losses should be assessed.

1. Contract formation and incorporation. The parties concluded a contract on 29 July 2016. The formal terms sent on 9 August, as revised on 18 August, were incorporated. The claimant’s established practice of issuing such terms, the defendant’s knowledge of that practice, its failure to object, and its continued performance after receiving the terms supported that conclusion.
2. Default and termination. The defendant’s failure to make the US$10.5 million payment due on 23 August 2016 was an event of default under clause 25 of the contract. The claimant was entitled to give notice of an early termination date and to treat the contract as terminated by the defendant’s repudiation. It was unnecessary to determine which of two communications effected termination. The termination discharged the parties from further primary performance and engaged the defendant’s secondary obligation to pay damages.
3. Loss on the remaining product. The claimant was entitled to damages based on the nearest available market. No sufficient market existed in Yemen at the termination date because there were not enough buyers willing and able to perform. Fujairah was an available and accessible market. The claimant therefore recovered the difference between the contractual price and the Fujairah market value, assessed at the termination date, together with the cost of shipping the product to Fujairah. This approach ensured proper compensation under section 50(3) of the Sale of Goods Act 1979.
4. Delivered but unpaid product. The defendant had received 5,988.567 mt of gasoline without making the required prepayment. The claimant was entitled to recover its contractual value, US$4,006,291.44.
5. Judgment was entered for the claimant for the market loss of US$11,539,527, the Fujairah freight cost of US$438,750, and the contractual value of the delivered product of US$4,006,291.44, together with interest and costs as applicable.