Vitol Sa -v- Norelf Ltd; HL 10 Jul 1996

References: Gazette 10-Jul-1996, Times 01-Jul-1996, [1996] AC 800, [1996] 2 Lloyds Rep 225
Coram: Steyn, Mackay, Griffiths, Nolan, Hoffmann LL
The seller was to deliver propane by a ship set to leave on a certain date. The market was falling. The buyer, when it was clear that the ship would be unable to leave on the day fixed, sent a telex to say that the the contract was repudiated. The seller did nothing, but later sued for the loss on a later sale. The buyer said that the seller’s mere failure to carry out his side of the contract was sufficient to be an acceptance of the repudiation, thus excusing the buyer from the purchase.
Held: The seller’s appeal succeeded. A party suffering a repudiation of a contract can notify his election to accept or affirm the contract in any way: ‘a failure to perform may sometimes signify to a repudiating party an election by the aggrieved party to treat the contract as at an end.’ Silence can be held to be an acceptance of a contract, and it can exceptionally, and as a question of fact, also amount to an acceptance of a repudiation. All that is required for acceptance of a repudiation at common law is for the injured party to communicate clearly and unequivocally his intention to treat the contract as discharged
Lord Steyn said: ‘The primary purpose of the Act of 1979 was to reduce the extent of the court’s supervisory jurisdiction over arbitration awards. It did so by substituting for the special case procedure a limited system of filtered appeals on questions of law.’ and ‘It is now possible to turn directly to the first issue posed, namely whether non-performance of an obligation is ever as a matter of law capable of constituting an act of acceptance. On this aspect I found the judgment of Phillips J. entirely convincing. One cannot generalise on the point. It all depends on the particular contractual relationship and the particular circumstances of the case. But, like Phillips J., I am satisfied that a failure to perform may sometimes signify to a repudiating party an election by the aggrieved party to treat the contract as at an end. Postulate the case where an employer at the end of a day tells a contractor that he, the employer, is repudiating the contract and that the contractor need not return the next day. The contractor does not return the next day or at all. It seems to me that the contractor’s failure to return may, in the absence of any other explanation, convey a decision to treat the contract as at an end. Another example may be an overseas sale providing for shipment on a named ship in a given month. The seller is obliged to obtain an export licence. The buyer repudiates the contract before loading starts. To the knowledge of the buyer the seller does not apply for an export licence with the result that the transaction cannot proceed. In such circumstances it may well be that an ordinary businessman, circumstanced as the parties were, would conclude that the seller was treating the contract as at an end. Taking the present case as illustrative, it is important to bear in mind that the tender of a bill of lading is the pre-condition to payment of the price. Why should an arbitrator not be able to infer that when, in the days and weeks following loading and the sailing of the vessel, the seller failed to tender a bill of lading to the buyer he clearly conveyed to a trader that he was treating the contract as at an end?’
Statutes: Arbitration Act 1979
This case cites:

  • At first instance – Vitol Sa -v- Norelf Ltd (the ‘Santa Clara’) QBD (Times 20-May-93, Gazette 25-Aug-93, [1994] 4 All ER 109, [1994] 1 WLR 1390)
    The parties chartered for delivery of molasses. The ship was not going to be ready for the intended start date and the charterer repudiated the contract in a telex alleging breach of condition. The market was falling rapidly. The sellers did . .
  • Appeal from – Vitol Sa -v- Norelf Ltd (‘the Santa Cara’) CA (Times 02-Jun-95, Ind Summary 12-Jun-95, [1995] 3 All ER 971, [1996] QB 108)
    The parties agreed to buy and sell molasses to be delivered on the Santa Clara which was set to leave on a certain date. The market was falling, and when the buyer saw that the ship would not be ready in time, it sent a telex saying that this was a . .
  • Cited – Overseas Buyers -v- Granadex ([1980] 2 Lloyd’s Rep 608)
    The court considered the meaning of a promise by one party to use its best endeavours.
    Held: Mustill J said: ‘it was argued that the arbitrators can be seen to have misdirected themselves as to the law to be applied, for they have found that . .
  • Cited – Fercometal -v- Mediterranean Shipping Co SA, The Simona HL ([1989] AC 788, [1988] 2 All ER 742, [1988] 3 WLR 200, [1988] 2 Lloyds Rep 199)
    The House considered the options available to a party faced with an anticipatory repudiation of a contract.
    Held: Affirmation or election requires an unequivocal choice between two inconsistent causes of action.
    Lord Ackner said: ‘When A . .
  • Went too far – State Trading Corporation of India Ltd -v- M Golodetz Ltd CA ([1989] 2 Lloyd’s Rep 277)
    Kerr LJ said: ‘What is commonly referred to as an acceptance of a repudiation must be communicated to the party in breach or at least overtly evinced. . An unequivocal act which is inconsistent with the subsistence of the contract may be sufficient, . .
  • Cited – Rust -v- Abbey Life Assurance Co ltd CA ([1979] 2 LLoyd’s Rep 334)
    The failure by the proposed inured to reject the insurance policy offered to him for seven months, was enough to justify an inference that he had accepted the policy. . .

This case is cited by:

  • Cited – Force India Formula One Team Ltd -v- Etihad Airways PJSC and Another QBD (Bailii, [2009] EWHC 2768 (QB), [2010] ETMR 14)
    The parties had entered into a sponsorship agreement, with the claimants undertaking to display the name of the defendants on their car. After the agreement, the claimant company had been taken over by parties with interests competing with those of . .

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