BP Oil International Ltd v Vega Petroleum Ltd & Anor

Contracts expressly providing for FOB delivery are construed as sale contracts requiring the seller to deliver, or procure delivery of, the goods at the agreed loading point. A buyer’s contractual right to have quantities ascertained or accumulated does not replace the seller’s delivery obligation or constitute the consideration for which the price was paid.

Where the goods are never delivered and the contract is terminated, the buyer may recover the price paid for the undelivered goods on a failure-of-basis claim. A time-bar clause triggered by delivery, or by the date on which goods should have been delivered in a case of total loss, does not apply where delivery never occurred and there was no total loss.

BP Oil International Limited bought Gulf of Suez Mix crude oil under a series of contracts with Vega Petroleum Limited and Dover Investments Limited. The contracts required delivery FOB Ras Shukheir Terminal, with an alternative FIP delivery option. BP paid US$17,235,448, but 211,387 barrels were never delivered.

The defendants contended that the contracts transferred an unconditional entitlement to lift oil, so that payment was non-refundable. They also relied on breach, termination, estoppel, contractual time-bar provisions and alleged value obtained from the entitlement. The central issues were the proper construction of the contracts and whether BP had a restitutionary remedy following termination.

1. Construction. The contracts were conventional FOB sale contracts. Clauses 5 and 6 had distinct functions: clause 5 identified and reconciled the quantities, while clause 6 imposed the delivery obligation. The contracts did not provide that delivery occurred merely when GUPCO was informed of the contracts or when an entitlement accrued (paras [132]–[154]).
2. The factual matrix did not create the ambiguity needed to support the defendants’ construction. The contracts were formal, professionally drafted agreements using well-understood FOB terminology. Commercial context could not override clear language or supply a fundamentally different bargain (paras [155]–[178]).
3. Breach. The defendants were responsible for procuring delivery through EGPC and GUPCO, which were the entities controlling operations at Ras Shukheir. BP had made effective requests for laycans, but EGPC failed to approve a laycan in May 2015. That failure constituted breach because BP could not effectively nominate a vessel without a laycan (paras [180]–[194]).
4. Termination. BP had acquiesced in the breach for a considerable period. The contracts were ultimately terminated when BP commenced proceedings asserting termination, which the defendants accepted (paras [195]–[198]).
5. Failure of basis. Under section 54 of the Sale of Goods Act 1979, BP could recover payments for which it received no delivery. The administrative steps establishing an entitlement were not the substance of the bargain. BP had paid for delivered goods, not a tradeable or independently valuable entitlement to lift them. The defendants’ reliance on shipbuilding authorities was misplaced because those contracts combined sale and services, whereas these were contracts of sale simpliciter (paras [199]–[222]).
6. The alternative implied-term claim was unnecessary. If considered, the proposed term would fail the requirements of obviousness, necessity, clear expression and consistency with the express contract (paras [223]–[226]).
7. The estoppel arguments failed. The defendants established neither an unequivocal representation nor the necessary crossing of the line, reliance, detriment or unconscionability. The no-oral-variation clause and the parties’ FOB-shaped dealings reinforced that conclusion (paras [227]–[246]).
8. The contractual time bar did not apply. It was triggered by delivery or, in a case of total loss, by the date on which delivery should have occurred. Neither trigger existed where the goods had never been delivered and there was no total loss. Any ambiguity would in any event be resolved narrowly against barring the claim (paras [247]–[256]). The claim therefore succeeded in full.