Case details
Summary
A contract may be formed on agreed recap terms even though the parties continue negotiating detailed terms. Later correspondence does not incorporate disputed terms unless the parties objectively intended it to do so. The “last shot” principle is not a universal rule and applies only where the parties’ objective intention supports it.
A contractual reference to crude oil of the quality “usually” made available requires usual or normal quality. A loading-terminal sampling procedure does not exclude other evidence of quality unless the contract clearly makes it conclusive.
For defective goods, the prima facie measure under Sale of Goods Act 1979, section 53(3), may be applied or used in a quasi-form where appropriate. A known sub-sale does not displace that measure unless the parties contemplated loss being assessed by reference to that sub-sale.
Factual background
BP Oil International Limited purchased a cargo of Russian Export Blend Crude Oil from Glencore Energy UK Limited. The parties agreed recap terms incorporating BP’s general terms, but exchanged further correspondence disputing detailed contractual provisions.
The cargo was later found to contain abnormal levels of organic chlorides. BP claimed damages for breach of contractual quality obligations, including diminution in value, storage and transportation costs, cargo-volume loss, hedging losses and demurrage.
The principal issues were whether disputed sale-contract terms had been incorporated, whether the cargo complied with the quality provisions, the proper measure of damages, and whether the additional heads of loss were recoverable.
Held
- Contract formation. The exchanges of 1 and 2 April 2019 formed a contract on the recap terms, including the GT&Cs. The later correspondence did not amount to agreement on all or part of Glencore’s detailed sales-contract terms. The wording of the 4 April email expressly required agreed terms to be accepted in writing and showed that negotiations remained incomplete.
- Last-shot principle. Glencore’s 8 April email was capable of being a counter-offer, but the case was not a conventional battle of forms. The principle stated in Tekdata depended on objective intention and did not automatically apply to continuing negotiations over whether an existing contract should be varied. BP’s clear statement that non-response or performance would not constitute acceptance prevented acceptance by the conduct relied upon.
- Quality. Section 59.1.1 of the GT&Cs required delivery of REBCO of the quality usually made available at the loading point and time. “Usually” meant typical or normal quality and did not mean whatever oil happened to be available on that occasion. Section 9.1 prescribed a sampling and testing procedure, but did not make the loading-terminal analysis conclusive or exclude other evidence. The Intertek and NWO evidence established that the cargo was contaminated and outside the contractual quality parameters.
- Damages. Under sections 53(2) and 53(3) of the Sale of Goods Act 1979, the appropriate measure was the difference between the value of sound and contaminated crude. The parties’ sub-sale was not within the relevant contemplation as a transaction by which loss should be measured. The contaminated value was assessed at Dated Brent minus US$8 per barrel, supported by the sale to BPOESA and other market evidence. A quasi-section 53(3) approach was appropriate where value was established after delivery.
- Other losses. Storage, transportation, cargo-volume losses and demurrage were recoverable. Hedging losses were rejected because the retrospective calculation did not prove the actual mitigation loss. Judgment was therefore entered for BP in the amounts identified at paragraph 504, totalling the diminution in value, storage and transportation costs, adjusted cargo-volume loss and demurrage.
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