UK Supreme Court Backs Buyer Compensation in Ship Sale Case

The UK Supreme Court has ruled that buyers may claim loss-of-bargain damages under the Norwegian Saleform 2012 contract when a seller’s negligence delays delivery, even if the breach is not severe enough to amount to a repudiatory breach.

The unanimous decision arose from the collapsed $15 million sale of the capesize bulk carrier Lila Lisbon, which Orion Shipping and Trading had agreed to sell to Great Asia Maritime. The dispute began after the vessel was not delivered by the revised cancellation deadline because the seller had sent it on an additional voyage. Great Asia Maritime subsequently cancelled the agreement and sought compensation after the ship’s market value had increased to $16.85 million.

An arbitration panel awarded the buyer $1.85 million in damages, representing the difference between the agreed purchase price and the vessel’s market value at the time.

Although the High Court later overturned that award, the Court of Appeal reinstated it. Orion Shipping then appealed to the Supreme Court, which has now rejected the seller’s final challenge.

In its ruling, the Supreme Court concluded that the term “loss” in clause 14 of the Saleform 2012 contract includes compensation for the loss of the commercial bargain when a contract is cancelled because of the seller’s proven negligence.