Vitol S.A. v JE Energy Ltd.

A recap recording the essential terms of a commodities sale may constitute a concluded contract, supplemented by later negotiations which settle outstanding detail. In an FOB sale, “laycan” ordinarily identifies the period by which the buyer’s vessel must arrive, giving the seller a right to cancel if it does not.

An amendment to a letter of credit may be required merely to preserve its cashability and does not necessarily vary the underlying shipment deadline. A buyer must provide the agreed documentary credit in satisfactory terms. For damages under section 50(3) of the Sale of Goods Act 1979, the market measure is prima facie, but other evidence may establish market value where ordinary market evidence is unavailable.

Vitol claimed damages after JE Energy failed to perform a contract for the FOB sale of fuel oil for loading at Tema, Ghana. JE Energy contended that no binding long-form contract had been concluded, that the laycan had been varied, that Vitol had failed to load by the latest shipment date in the letter of credit, and that Vitol was itself in breach.

The court determined the contractual terms, the meaning and effect of the laycan, the parties’ obligations concerning the documentary credit, the alleged estoppel by convention, and the appropriate measure and amount of damages following JE Energy’s repudiation.

1. Contract formation. The Deal Recap contained the essential terms of a concluded contract. The later exchanges were negotiations over fuller terms against the background of that concluded contract. The Deal Recap and agreed long-form terms therefore formed part of the contract, applying the approach in Pagnan v Feed Products and Statoil ASA v Louis Dreyfus Energy Services LP (The Harriette N).
2. Laycan. In an FOB sale, “laycan” ordinarily means the period within which the buyer’s vessel must arrive at the loading port. JE Energy’s failure to present a vessel within the agreed 23–24 December 2019 window entitled Vitol to cancel. Vitol’s decision not to cancel left it entitled to demand performance and to allow a reasonable, non-frustrating period for loading.
3. Letter of credit and alleged variation. The parties’ agreement to amend the latest shipment date in the letter of credit was required to ensure that the credit remained cashable. It did not establish an agreement that Vitol had undertaken to load by 31 January 2020. JE Energy failed to provide the agreed confirmed credit for US$17.5 million in satisfactory terms. Vitol was entitled to maintain the financial hold and was not in breach.
4. Estoppel. The requirements for estoppel by convention identified in Revenue and Customs Commissioners v Benchdollar Ltd, as approved and applied in Tinkler v Revenue and Customs Commissioners, were not met. There was no expressly shared common assumption that 31 January was a contractual termination deadline.
5. Repudiation and damages. JE Energy’s declaration that the contract was null and void was repudiatory. Vitol accepted the repudiation on 10 February 2020. There was an available market for the fuel oil. The usual market measure under section 50(3) of the Sale of Goods Act 1979 applied, with the market premium assessed at US$75 per metric tonne. Judgment was entered for Vitol for US$3,292,650, with interest at 8% above LIBOR under the agreed contractual clause. JE Energy’s counterclaim was dismissed.