This is a recent dispute where several interesting issues were argued before Lionel Persey KC, sitting as a Judge of the High Court, in London. These included, inter alia: the meaning of Laycan in the context of this FOB sale; the formation of the sales contract; whether the parties had agreed the negotiated long form; the FOB Buyer’s failure to extend the shipment period on the LC; que quantum of damages to be awarded, if any, to the Sellers.
- The Claimant, Vitol S.A. (“Vitol”), the Seller, claimed damages from the Defendant, JE Energy Ltd. (“Jeda”), the Buyer, arising from the repudiation of a contract for the sale of 30,000MT (-/+ 10%) of Fuel Oil to be delivered FOB Tema in Ghana. Jeda denied liability and contended that Vitol was itself in repudiatory breach of contract.
- As to the meaning of “Laycan” in the context of a FOB sale for Fuel Oil, Vitol contended that Laycan in this sales contract was a laycan in the classic sense, namely “Laycan” in a charterparty means the earliest day upon which an owner can expect his charterer to load and the latest day upon which the vessel can arrive at its appointed loading place without being at risk of being cancelled. When the term is found in fob sales it means that the seller can cancel the contract if the vessel, which it is the buyer’s duty to procure, does not arrive at the port by the cancellation date. This is the classic definition of laycan as found, for example, in ERG Raffinerie Méditerranée SpA v Chevron USA Inc (“The LUXMAR”) [2007] 2 Lloyd’s Rep.542 at [16-18]. Jeda submitted, however, that these parties did not mean “laycan” in the classic sense above when they used it in this Contract. Instead, they say that “laycan” simply means the shipment or loading period.”
- The Judge concluded that Jeda’s submission was to be rejected as it was “contrary to the usual meaning given to “laycan” in fob contracts. It is also contrary to the long-form terms that were agreed between the parties and the 2015 BP Oil International Limited General Terms and Conditions for Sales and Purchases of Crude Oil and Petroleum Products that was specifically incorporated into the Contract by the “Other Terms” provision. Clause 6.1.2 of the latter expressly provided that the vessel nominated by the Buyer shall arrive at the loading terminal and in all respects be ready to commence loading the crude oil deliverable thereunder by no later than 2359 on the last day of the laydays. There is no evidence before me to suggest that the parties had agreed that a different meaning was to be given to “laycan”. Jeda’s failure to present a vessel within the arrival window stipulated in the laycan clause gave Vitol the right to terminate upon the expiry of the laycan. Vitol’s decision not to do so meant that it was entitled to demand performance and, all other things being equal, had a reasonable time (i.e. one that was not frustrating) in which to load the cargo after Jeda had provided a vessel.”
- Arguments were exchanged as to the Buyers’ obligation to extend the amend the LC to ensure that the shipping documents could be paid for and not rejected by the bank. We leave the reader to enjoy both parties’ arguments.
- Finally, the Judge had to consider the Quantum of damages to be awarded to Vitol, if any. The Judge had to deal with the fact that the contract had not a clause resorting to the mean quantity in case of default, there, citing McGregor on Damages, the Judge persuaded the parties to agree on the assumption that Jeda would have performed the contract in the most beneficial way to their interest. The relevant part of the judgment reads: “The parties originally put their case on the basis that Vitol’s loss, if any, was to be assessed on the basis that the contract was for the sale of 30,000MT of fuel oil. The contract was, however, for the sale of “30,000MT +/- 10%”. I raised with the parties whether the claim should in fact be limited to 27,000MT (i.e. 30,000MT – 10%) on the assumption that it should be assumed that Jeda would have performed the contract in the way most beneficial to their interests.”
- Finally unpersuaded by Vitol argument as to the market price value of the fuel oil at the time of default, the learned Judge considered that the sale to Litasco by Vitol and the end of January 2020 represented the market value of the goods at that date and awarded damages for US$3,292,650.
For a reading of the judgment clic here.