Lloyd's Maritime and Commercial Law Quarterly
DAMAGES FOR ANTICIPATORY BREACH
Francis Dawson*
Bunge v Nidera
Bunge SA v Nidera BV
1 is a case of considerable importance for those interested in the sale of goods and in the law of contract generally. The Supreme Court2 unanimously affirmed the reasoning of the majority of the House of Lords in The Golden
Victory
3 and held that subsequent events may be taken into account in assessing damages for the anticipatory breach of a sale of goods contract in respect of which there existed an available market. The opinions given by Lord Sumption and Lord Toulson address both the nature of the breach which occurs when a renunciation prior to the time of performance is accepted by a counterparty and the contract is brought to an end for an anticipatory breach, and the manner in which that breach is ordinarily remedied. As a consequence, there are valuable observations as to the application of the market rule under the Sale of Goods Act 1979.
The case concerned a contract for the sale of 25,000MT of Russian wheat fob Novorossiysk, entered into in June 2010 for August shipment. The contract incorporated the provisions of GAFTA form 49, which is the standard form designed for goods delivered from central or eastern Europe in bulk or bags on fob terms. Shipment was scheduled for the period 23–30 August 2010. The contract contained a prohibition clause which deemed the contract to be cancelled if an executive act restricted the export of the contract goods. On 5 August, the buyer nominated its vessel. On the same day the Russian government embargoed exports of wheat from Russian ports between 15 August 2010 and 31 December 2010. On 9 August 2010 the seller notified the buyer of the export ban and cancelled the contract. This notification of cancellation was premature and was treated by the buyer as a wrongful repudiation of the contract. The seller offered to reinstate the contract on the same terms but the buyer would not agree.
The buyer commenced arbitration proceedings seeking damages under the default provision contained in the GAFTA terms. The default clause provided that the damages were to be based on the difference between the contract price and the price of a substitute transaction or on the actual or estimated value of the goods on the date of default. So far as relevant, the terms of the clause were as follows:
“20. DEFAULT — In default of fulfilment of contract by either party, the following provisions shall apply:
- (a) The party other than the defaulter shall, at their discretion have the right, after serving notice on the defaulter, to sell or purchase, as the case may be, against the defaulter, and such sale or purchase shall establish the default price.
1. Bunge SA v Nidera BV [2015] UKSC 43; [2015] Bus LR 987 (“Bunge (SC)”).
2. Lords Neuberger, Mance, Clarke, Sumption and Toulson.
3. Golden Strait Corp v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] UKHL 12; [2007] 2 Lloyd’s Rep 164; [2007] 2 AC 353. The decision was the subject of criticism by GH Treitel, “Assessment of Damages for Wrongful Repudiation” (2007) 123 LQR 9; B Coote, “Breach, anticipatory breach, or the breach anticipated?” (2007) 123 LQR 503; Francis Reynolds, “The Golden Victory—A Misguided Decision” (2008) 38 HKLJ 333; and (Lord) Michael Mustill, “The Golden Victory—Some Reflections” (2008) 124 LQR 569.
CASE AND COMMENT
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