Key takeaways
Cancellation rights
Buyers can recover difference between contract and market price even where no repudiatory breach.
Loss under Clause 14
Wide enough to cover loss of bargain damages.
Due compensation under Clause 14
Recovery will be based on usual principles of remoteness, causation and mitigation.
Great Asia Maritime Ltd v Orion Shipping and Trading LLC [2026] UKSC 23 (22 July 2026)
In its latest judgment on the Norwegian Saleform, the Supreme Court has confirmed that a buyer cancelling a memorandum of agreement (MOA) can claim the difference between the MOA price and the prevailing market price if the seller negligently failed to tender a notice of readiness by the Cancelling Date.
The judgment contains important guidance for contracting parties in a volatile market.
The background facts
The facts of the case were relatively simple.
The Sellers agreed to sell the Lila Lisbon (Vessel) to the Buyers on the terms of a memorandum of agreement (MOA) on the Norwegian Saleform 2012 (NSF 2012) but failed to tender a notice of readiness by the Cancelling Date due to its proven negligence.
The Buyers cancelled the MOA under clause 14 of the NSF 2012, and brought a damages claim for US$1,850,000, being the difference between the market price of the Vessel as the latest time for permissible delivery under the MOA and the MOA price.
Procedural history
The matter first went to arbitration under LMAA terms, where the tribunal sided with the Buyers.
The Sellers then successfully appealed to the High Court, where the High Court judge found that the MOA does not impose an obligation to tender a timely notice of readiness, and that all that the buyer can claim under clause 14 of the NSF 2012 is losses up to cancellation but not thereafter. See our article: NSF 2012: No Loss of Bargain Damages | Hill Dickinson
The Court of Appeal disagreed and held that the sellers under an MOA in the NSF 2012 form are indeed under a positive obligation to use reasonable or due diligence to tender a timely notice of readiness. Consequently, and also as a matter of formulation and symmetry with the established interpretation of clause 13 of the NSF 2012, the Buyers were correct to claim as damages the difference between the prevailing market and the MOA price. See our articles on this decision: MOA Buyers: Recovering Loss of Bargain | Hill Dickinson; Loss of Profit: Lila Lisbon MOA Implications | Hill Dickinson
The Supreme Court decision
In a robust unanimous judgment, the Supreme Court affirmed the judgment of the Court of Appeal. In summary, it held as follows:
As a matter of wording alone, clause 14 of the NSF 2012 allows a buyer to seek recovery for loss of bargain on the usual common law principles of causation, remoteness and mitigation. If the opposite were true, then it is difficult to imagine what loss clause 14 would be referring to, when providing that the negligent seller ’shall make due compensation to the Buyers for their loss and for all expenses’ (since loss must mean something other than expenses).
Contractual symmetry requires that clause 13 and clause 14 of the NSF 2012 be read in an equivalent manner. Since it is established law (Firodi Shipping Ltd v Griffon Shipping Llc [2013] EWCA Civ 1567 (10 December 2013)) that clause 13 allows the innocent seller to claim for loss of bargain, the same should apply to the innocent buyer’s claim under clause 14.
The Buyers’ claim was similar to a standard claim for non-delivery of goods. Under the Sale of Goods Act 1979, the standard measure of damages for such claims is loss of bargain.
Case law on older versions of the Norwegian Saleform allowed the cancelling buyer to claim damages for loss of bargain, and there had been no attempts to amend clause 14 in response to such case law. The need for certainty and predictability in the interpretation of standard forms (such as the Norwegian Saleform) suggested that the established interpretation should not be challenged.
The Sellers’ interpretation would encourage uncommercial conduct in a rising market: sellers would have an incentive to delay delivery, and innocent buyers would have to delay cancelling at the potential risk of waiving their rights.
Comment
A step back closer to commercial fairness: The fact that the Supreme Court relied on the uncommercial results the Sellers’ position would generate to side with the Buyers is a welcome step away from the harsh statement in King Crude Carriers SA & Ors v Ridgebury November LLC & Ors (Rev1) [2025] UKSC 39 (12 November 2025) at [78] that ’Contract law permits efficient breach and the defendant may therefore profit from its wrong.’ International business has a strong preference for commercial fairness and an aversion for technicality. The latest judgment of the Supreme Court reassures the international business community that English law is far from a box-ticking exercise and that English courts are very much alive to the commercial consequences of court judgments.
A multi-faceted approach: The Supreme Court decision demonstrates the multi-factorial approach English courts adopt when interpreting a contract. Text, context, form, previous case law and commercial repercussions are all given thorough consideration to reach a conclusion that is legally principled, historically consistent, commercially sensible, predictable and intuitively fair.
Clear words: Parties often argue that, had the contract intended to permit a remedy, it would have said so expressly. The Supreme Court has now clarified that the ’clear words’ principle is not one-size-fits-all. Clear words are required to deprive a party of its common law rights, but the rules of interpretation can be used to add to those rights, even in the absence of clear words. However, a claimant will not be able to bypass the fundamental compensatory principle (i.e. that damages aim to place the injured party in the same financial situation as if the contract had been performed).
For more information on how our Shipping experts can support you, contact us today.
