Commercial Court sheds light on the meaning of 'typicals' versus 'guarantees' in fuel oil dispute

Mercuria Energy Trading SA -v- Onex DMCC [2026] EWHC 130 (Comm)

This was a claim of US$ 26,033,735.00 brought by Mercuria Energy Trading SA (Mercuria) against Onex DMCC (Onex), alleging that the fuel oil sold to it by Onex was tainted with a quantity of Organic Chlorides (OCs) that exceeded a range set out in the typicals section of the contract.

The Commercial Court dismissed the claim in full, finding in favour of Onex. The decision determined that under a contract for the sale of commodities that incorporates the BP GTCs, 'typical' specifications for the goods sold are distinct from the guaranteed specifications, and do not create additional guarantees as to the description, quality or fitness for purpose of the goods

Hill Dickinson’s Mark Aspinall, Dimitra Damaskopoulou and Katia Tsidemidi acted on behalf of Onex. Counsel instructed on behalf of Onex were Simon Rainey KC and Henry Ellis.

The background facts

Both parties were oil traders that entered into an agreement for the sale by Onex and the purchase by Mercuria of Iraqi SOMO (State Oil Marketing Organisation) Basrah Pipeline High Sulphur SRFO (Product) on CIF terms, with delivery in the US Gulf Coast (Contract).

The Contract incorporated the BP Oil International Limited General Terms & Conditions for Sales and Purchases of Crude Oil and Petroleum Productions 2015 Edition, Version 1.2 (BP GTCs).

The Contract provided that the sale was for '…SOMO BASRAH PIPELINE HIGH-SULPHUR STRAIGHT-RUN FUEL OIL IN LINE WITH THE FOLLOWING TYPICALS…' and included two tables: (a) a first table for SRFO Typicals, including a 4.1ppm requirement / 5ppm maximum for OCs; and (b) a second table for the Guarantees, which did not include a requirement for a maximum OCs content.

The Product was loaded onto the Reliable Warrior (Vessel) between July and August 2022 in parcels and at different loading points.

On 13 September 2022, Mercuria’s buyer rejected the Product as the OC levels exceeded the 5ppm guarantee in their contract.

In one of its attempts to mitigate its losses, Mercuria sold the Product described as 'SRFO' to Trafigura, Shell, Hartree Partners LLP and Buckeye Bahamas Hub Limited under separate resale contracts in January 2023.

Mercuria commenced proceedings against Onex for breach of contract.

The issues

Mercuria claimed for breach of quality and description and alleged that:

1. Onex was obligated to deliver SRFO 'in line with' the Typical 4.1ppm for OCs content under the Contract. The wording created an obligation, and section 59.1.1 of the BP GTCs did not 'declaw' this obligation. Although this section was incorporated into the Contract, it was overridden by the wording of the Contract terms agreed by the parties and the 'in line' requirement; and would otherwise be in conflict with the Contract terms agreed.

2. Onex was obligated to deliver SRFO that was '100% SOMO IRAQI HSSR', as stated in the Contract, and Onex was in breach of this guarantee.

3. Onex was obligated to deliver SRFO that was not inferior to 'SOMO BASRAH PIPELINE HIGH-SUPHUR STRAIGHT-RUN FUEL OIL' as described under the Contract and Onex was in breach of this description.

Onex defended the above points as follows:

1. Within the BP GTCs framework, and particularly sections 57.1.61 and 59.1.1, Onex did not have an obligation to deliver SRFO 'in line with' the Typical of 4.1ppm. Typicals are not guarantees and are not part of the description, quality or fitness obligations. Any obligations as to the quality of the SRFO were exclusively dealt with under section 59.1.1, the 'Quality' and the Guarantees sections of the Contract, and there was no conflict between the BP GTCs provisions and the Contract as alleged by Mercuria.

2. '100% SOMO Iraqi HSSR' addressed the Iraqi origin, supplied by SOMO, not the SRFO’s quality. Alternatively, Onex argued that the OCs content was volumetrically only present in insignificant quantities and was as a result de minimis.

3. The elevated OCs did not strip the SRFO of its commercial identity as SRFO, and therefore Onex had not breached the description. The SRFO was in fact resold as such to multiple counterparties.

The Commercial Court decision

The Court agreed with Onex, finding that the Contract terms and the BP GTCs should be construed together as forming the whole Contract, and that a reasonable person would have understood the Contract to draw a distinction between the Guarantees and the Typicals. The wording 'in line with' did not elevate Typicals to Guarantees. The Court also found no conflict between the BP GTCs and the parties’ agreed Contract terms, but that the BP GTCs explained rather than withdrew from the agreed terms.

In relation to the '100% SOMO IRAQI HSSR' and 'SOMO BASRAH PIPELINE HIGH-SUPHUR STRAIGHT-RUN FUEL OIL', the Court agreed with Onex’s points and concluded that the former description related to the origin of the SRFO, and the latter had not been breached, as the commercial identity of the fuel oil had not been lost and the SRFO had been described, sold and accepted as SRFO, regardless of whether the elevated OCs impacted the SRFO’s value.

As the Court agreed with Onex on liability, it dismissed Mercuria’s claim in full. However, the Court made an important comment on the assessment of damages under s.53 of the Sale of Goods Act 1979. It found that section s.53(3) is a prima facie measure of loss and had Mercuria won on liability, it would be appropriate to compare the value of the cargo at the time of breach with its value as at the date it was sold.

Comment

This decision is particularly significant, as it explains the way in which the BP GTCs are framed and operate, and it explains that the effect of the wording 'in line with typicals', does not create additional guarantees as to quality or description, where a contract includes a separate section on guarantees.

As to the description issues, this decision demonstrates the importance of a product’s commercial identity and the real-world trading evidence.