Vitol Sa v Norelf Ltd: HL 10 Jul 1996

(The Santa Clara) 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 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?’


Steyn, Mackay, Griffiths, Nolan, Hoffmann LL


Gazette 10-Jul-1996, Times 01-Jul-1996, [1996] AC 800, [1996] 2 Lloyds Rep 225


Arbitration Act 1979


England and Wales


At first instanceVitol Sa v Norelf Ltd (the ‘Santa Clara’) QBD 30-Apr-1993
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 fromVitol Sa v Norelf Ltd (‘the Santa Cara’) CA 26-May-1995
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 . .
CitedOverseas Buyers v Granadex 1980
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 . .
CitedFercometal v Mediterranean Shipping Co SA, The Simona HL 1988
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 farState Trading Corporation of India Ltd v M Golodetz Ltd CA 1989
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, . .
CitedRust v Abbey Life Assurance Co ltd CA 1979
Delay in objection indicated assent to contract
The court was asked whether a binding contract had been concluded between an applicant for an investment in property bonds and the insurance company offering such bonds when, in response to an application form submitted by the applicant, accompanied . .

Cited by:

CitedForce India Formula One Team Ltd v Etihad Airways PJSC and Another QBD 4-Nov-2009
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 . .
CitedPhones 4U Ltd v EE Ltd ComC 16-Jan-2018
The parties contracted for the marketing of contracts for the marketing of the defendant’s mobile phone contracts. On the claimant entering administration, the defendant exercised a clause in their contract to terminate the contract. The claimant . .
Lists of cited by and citing cases may be incomplete.

Contract, Arbitration

Updated: 15 May 2022; Ref: scu.90181