Aden Refinery Company v Gunvor SA

Where a commodities contract fixes pricing by reference to a specified pricing period, postponing delivery does not itself move the price. The question is one of construction of the contract as a whole. A provisional invoice mechanism may regulate the prices available before the bill of lading date without altering the agreed pricing period.

An intermediary may have authority to conclude the original contract yet lack authority to vary it. The court will assess the intermediary’s conduct and documents to determine whether the intermediary acted for the principal or in its own right. A buyer’s failure to pay the contract price may entitle the seller to damages under Sale of Goods Act 1979, including the relevant market loss and reasonable costs of accessing that market.

The claimant agreed to buy approximately 60,000 metric tonnes of gasoil from the defendant under a contract governed by English law. Delivery was initially agreed for July 2014 but was postponed to August and then September. The claimant paid a substantial sum, contending that the price should have moved with the delivery period and that an intermediary had agreed a variation.

The defendant maintained that the contract fixed the price by reference to July pricing, accepted a limited credit for under-delivery, and advanced counterclaims for losses caused by non-payment and for demurrage under a separate contract. The issues were the construction of the pricing clause, the intermediary’s authority, the recoverable losses, and interest.

1. The claimant’s construction of clause 10 was rejected. Read in context and as part of the contract as a whole, the first paragraph fixed the price by reference to the average of July 2014 Platts prices plus the agreed premium. That pricing period did not depend on delivery occurring on 30 or 31 July. The second paragraph dealt with the prices to be used for a provisional prepayment invoice, including where the bill of lading was issued in the month before delivery. It did not move the contractual price when delivery was postponed.
2. The intermediary had authority to conclude the original contract, but not to bind the defendant to the arrangement communicated on 19 September 2014 or reflected in the invoice dated 21 October 2014. In that episode the intermediary was acting in its own right, and the documents did not give the appearance of authority to vary the defendant’s contract.
3. The claimant’s failure to make the required payment was a breach of clauses 9 and 10. The defendant was entitled to recover market loss on the remaining cargo by reference to the resale price obtained from Glencore, together with the additional freight cost incurred in moving the cargo to Fujairah for resale. The market loss was assessed at US$418,034.94 and US$150,000 was allowed for the additional freight in the Sale of Goods Act 1979 section 50(3) calculation.
4. The defendant also established its separate demurrage counterclaim in the sum of US$158,781.95. The agreed rate was US$19,000 rather than US$18,000.
5. Although the defendant accepted a credit of US$786,505.08 for under-delivery, the court declined to award interest to the defendant under section 35 A of the Senior Court Act 1981 unless the net balance of principal sums was in its favour. Further argument was reserved on the net balance and how the defendant would meet its accepted responsibility.