Key takeaways
Clear contractual wording
Will be upheld even if it is unfavourable to one party.
Non-acceptance of goods
Seller should go into market to sell goods and mitigate loss.
Date for assessment of damages
This is when seller should reasonably have gone into market.
Socar Trading SA -v- City Trade Investments SA [2026] EWHC 1240 (Comm)
In a dispute in which the Buyer under two oil trading contracts chose not to appear at the trial nor to be represented, the Court has held that the Buyer was in repudiatory breach of both contracts in failing to take delivery of the minimum contractual quantities of product. The Buyer’s ’wash out’ defence was rejected.
The Court emphasised that the fact that the contracts may have become uncommercial for the Buyer was no reason to depart from the natural and unambiguous contractual wording.
The background facts
Socar Trading SA (Socar), as Seller, claimed market loss damages of US$ 3,025,202 from City Trade and Investment SA (City), as Buyer, arising from City's alleged breach of two contracts for the sale of ultra low sulphur diesel (ULSD).
Socar had the benefit of various storage tanks at the ports of Mersin and Samsun in Turkey via a storage agreement with Altinbas Petrol VE Ticaret AS (Alpet). Socar would bring in cargoes of ULSD into the tanks it had hired from Alpet. It was from those tanks that it could then deliver, via inter tank transfers (ITT), cargoes to buyers like City.
The contracts
The parties entered into two contracts, the Mersin Contract and the Samsun Contract, via email in the form of deal recaps.
Under the Mersin Contract concluded on or around 31 December 2019, Socar agreed to sell to City a test parcel of 15kt (+/- 10% at City's option) of ULSD on an ITT basis at the Mersin Alpet Terminal basis.
Under the Samsun Contract concluded on or around 21 January 2020, Socar agreed to sell to City 10Kt (+/- 10% at City's option) of ULSD on an ITT basis at the Samsun Alpet Terminal basis. The terms were materially similar to the Mersin Contract subject to differences in respect of the period, price and pricing.
The price of the ULSD under each Contract was to be calculated by a combination of a temporally variable component priced from a market index and a fixed premium:
the high monthly quotations for ULSD 10ppm for CIF Med Genoa/Lavera in the Platts European Marketscan publication ("Platts") and
a premium of US$ 14pkt for the Mersin Contract and US$22mpt for the Samsun Contract.
Each Contract was intended by the parties to operate as a single test delivery of ULSD. There was no obligation to do so, but, if the trial deliveries were deemed to be a success, the parties would then have the option to extend the respective deals to a 12-month term contract should they so wish.
Both Contracts incorporated a ’Special’ provision in the following terms:
‘Buyers commit to perform for take over entire qty as agreed within ops limites. In the event, for any comprehensive reason beyond buyers' control, buyers remain short with the takeover of min required ITT qty, then such unlifted qty shall be moved to the next delivery month and shall be cumulatively performed. As per FIFO method, by second month, first this unlifted parcel shall be prices and taken over. Any incremental cost due to such roll over, such as insurance, storage, finance and hedge costs, shall be born to buyer as additional premium, in reference to such parcel quantity.’
Performance of the Contracts
In practice, City would notify Socar how much product under either Contract it wished to take delivery of at any particular time.
Socar and City’s traders would agree an ITT release date for the ULSD, as well as the precise quantity and the pricing date if City wanted to take a portion of the ULSD for which it was entitled to pull the ’trigger’, as opposed to the pre-priced monthly average portion of the ULSD.
Once the traders had agreed the terms of a ULSD ITT, the operations and finance teams would take over. Socar would make sure that either pre-payment had been made, or payment security arranged, before authorising an ITT to take place. Socar would initiate all the practical quality inspection and customs formalities.
Default
City, at its request, took delivery of a total of 4,500kt of ULSD under the Mersin Contract. Only the single delivery of 1,000kt in the month of January 2020 was priced on the January average basis. Socar chased City in correspondence from the end of January, through February, and into March 2020 as to its intentions. On 26 February 2020, City’s representative emailed Socar’s representative saying the Mersin Contract was ’out of market realities and overpriced’.
On 28 February 2020, Socar replied that City was under an obligation to lift the outstanding ULSD amounts under the Mersin Contract and the Samsum Contract and asked City to perform. City, at its request, took delivery of a total of 4,500kt of ULSD, all priced on the February Average basis.
On 3 March 2020, Socar sent a Notice of Default to City in respect of both the Mersin Contract and the Samsun Contract. Socar alleged City had been required to take full delivery in January 2020 under the Mersin Contract and in February 2020 under the Samsun Contract and that City was in breach of contract by having failed to do so. Socar called upon City to perform by taking full delivery under both Contracts by 9 March 2020.
City continued to take portions of ULSD under each Contract, but no long-term contract was ever concluded.
Socar served notice stating that it terminated the Mersin Contract and the Samsun Contract on 15 September 2020.
The parties’ arguments
Socar contended that, under the Contracts, City was primarily obliged to take and pay for at least 13,500kt of ULSD under the Mersin Contract by the end of January 2020, and 9,000kt of ULSD under the Samsun Contract by the end of February 2020 respectively. City was afforded the opportunity through the rollover provision (Rollover) in the Special provision to "shift" some of the 13,500kt to February 2020 under the Mersin Contract and some of the 9,000kt of ULSD to March 2020 under the Samsun Contract without being in breach of its acceptance and payment obligations. Otherwise, it was in breach of contract.
City contended that it was only obliged to accept and pay for as much of the 15,000Kt of ULSD under the Mersin Contract as it could during January 2020, and that anything it could not accept by 31 January was to be simply washed out. Equally, it was only obliged to accept and pay for as much of the 10,000kt of ULSD under the Samsun Contract as it could during February 2020, and anything it could not accept by the end of February was to be washed out.
The Commercial Court decision
Liability
The Court gave the words ’Quantity: 15KT +/- 10% [Buyer's Option] .... Delivery Period: 1-31 January 2020" and the words "Quantity: 10KT +/- 10% [Buyer's Option] .... Delivery Period: 1-29 February 2020’ in each of the two Contracts their full force and effect.
In each Contract, the stated test delivery quantity, the precise scope of the Buyer's Option to require more or to take less than that stated quantity, and the delivery period were clear and express. Where the parties had used unambiguous language, the Court had to apply it.
The entire purpose of each Contract was that the transaction would act as a test. The parties must have been specifically focussing on the issue covered by the provisions as to Quantity and Delivery Period when agreeing the wording of these provisions.
The Buyer's Option was plainly intended to regulate between the parties the potential for City to require a greater or lesser amount of ULSD. It was clearly in contemplation that the exact amount of 15,000kt or 10,000kt of ULSD need not be purchased under the relevant Contract but an explicit bracket was placed upon the amount City was contractually obliged to accept and pay for. Indeed, this bracket was for the benefit of, and controlled by, City itself. That being so, the provisions were effective to exclude the suggestion that City could simply take such amount as it decided it wished to take without any obligation to purchase at all by way of test.
The Rollover provision had been expressly included in the Contracts. Although it could be argued there was no ’next delivery month’ if the Contracts were not extended beyond the identified one month ’Delivery Period’, the Rollover provision was capable of application to the trial cargo under each Contract. It was intended to operate to benefit City in circumstances where City would otherwise have been in breach of contract at the end of January 2020 and February 20202 respectively.
Interpreting each Contract as a whole, the wording of the ’Special’ Rollover provision emphasised City's basic contractual commitment to take the ’Quantity’ of ULSD as specified: ’Buyers commit to perform for take over entire qty as agreed within ops limites.’
The subsequent express reference to the ’[minimum] required’ could only be read as a further reference to the Buyer's Option to take 10% less than the stated quantity: ’In the event, for any comprehensive reason beyond buyers control, buyers remain short with the takeover of min required ITT qty, then such uplifted qty shall be moved ...’.
Clear wording would have been required to achieve the uncommercial consequences of City having no contractual obligation to take any quantity of ULSD in the Delivery Period (or otherwise). This would have placed Socar entirely at risk that, having performed its own part of the bargain, it could be left with the entirety of the quantity of ULSD that it had obtained for test delivery to City in its own tanks at the end of the trial period. There was no wording to support such a conclusion in the Contracts.
The Court concluded that City was in repudiatory breach of both Contracts.
Quantum
S.50 of the Sale of Goods Act 1979 provides as follows:
"50 Damages for non-acceptance.
Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for nonacceptance.
The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer's breach of contract.
Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted or (if no time was fixed for acceptance) at the time of the refusal to accept."
It was accepted that there was an available market at Mersin and Samsun. However, the parties differed on the correct date for the assessment of damages.
The Court stated that the date of assessment was designed to replicate the innocent seller's obligation to mitigate its loss. It therefore represented the date on which a reasonable seller in Socar's position would have gone into the market to sell the ULSD that had not been accepted by the putative buyer.
In this case, the Court allowed for a margin of time following City’s late, non-contractual performance when it would have become clear to Socar that City would not be performing further and it should, therefore, go into the market. The Court also took into account Socar’s expert evidence on the quantum of the market losses claimed. It awarded US$2,312,636 in respect of the Mersin Contract, and US$712,558 in respect of the Samsun Contract.
Comment
The Court dismissed City’s alternative pleaded case that it was not obliged to take any further delivery of ULSD under the Mersin Contract after 31 January 2020 and under the Samsun Contract after 29 February 2020 because it was inconsistent with the purpose of the Contracts to require City to pay for ULSD it had not been able to lift. The implication of such a term would conflict with the express terms of each Contract.
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