This is an important decision for all those who use the Norwegian Sale Form 2012. The Supreme Court has now held that a Buyer can claim loss of bargain damages under clause 14 of that contract if certain conditions arise.
Tracking back, readers of our blog may wish to see what we said back in October of 2025 by clicking here.
The Supreme Court has now upheld the Court of Appeal’s decision.
We will not repeat the facts, which are in our earlier blog. However, in short, the Buyers contracted to buy a Capesize bulk carrier for US$15m. The Sellers failed to tender Notice of Readiness by the extended cancelling date. The Buyers cancelled and the Tribunal held that the failure to deliver was caused by the Sellers’ “proven negligence”. They awarded loss of bargain damages of US$1.85M being the difference between the market value at cancellation (US$16.85m) and the contract price.
Dias J set that Award aside. The Court of Appeal restored it. The Supreme Court has now dismissed the Sellers’ appeal.
The joint judgment of Lord Hamblen and Lord Burrows held that the natural and ordinary meaning of “loss” in clause 14B of the contact includes loss of bargain suffered consequent on cancellation (at [25]). They set out three strands to support that conclusion. First, the ordinary market measure under section 51(3) of the Sale of Goods Act 1979 is the relevant legal context for what “loss” means on non-delivery (at [29]). Second, clause 14 has an established meaning to that effect, going back to Sotiros Shipping Inc v Sameiet Solholt (The “Solholt”) [1981] 2 Lloyd’s Rep 574 at 579, and the onus lay on the Sellers to show that meaning was clearly wrong (at [46]). Third, the commercial consequences favoured the Buyers’ construction (at [47], applying Wood v Capita Insurance Services Ltd [2017] UKSC 24 at [12]).
Two points of wider importance deserve attention.
The first is causation. Readers will recall that we flagged this as the interesting unresolved angle in our last blog. The Sellers argued that Financings Ltd v Baldock [1963] 2 QB 104 rests on causation: where a party elects to cancel under an express clause, it is that election, not the breach, which causes the loss of bargain. The Court was not asked to overrule Financings and expressly left its reconsideration open for a more suitable case (at [55]). But their Lordships were plainly unimpressed with the causation rationale, observing that if election is the effective cause where an express clause is used, the same should be true of termination for repudiatory breach (at [65]), and that a breach triggering the right will very likely be an effective cause of the resulting loss in any event (at [66]). The submission was rejected at [72]. Expect that door to be pushed at.
The second is the “clear words” argument. The Sellers contended for a converse Gilbert-Ash presumption ((Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 at 717–718; see also Triple Point Technology Inc v PTT Public Co Ltd [2021] UKSC 29 at [106] and MUR Shipping BV v RTI Ltd [2024] UKSC 18 at [44]): that clear words are needed to confer rights not available at common law. That was rejected (at [84] and [97]). Clear words remain necessary only where a damages clause would give compensation despite no loss having been suffered (at [95], applying Bunge SA v Nidera BV [2015] UKSC 43 at [26]).
Practically, Sellers on the NSF 2012 should treat the delivery window as carrying real exposure in a rising market and should document the diligence exercised in getting ready. Buyers should preserve evidence of market value at the cancellation date. Those wanting a different allocation of risk must now say so expressly in the MOA.
Nick Burgess
Partner
Gregory McManus
Associate
