International Trade Law

Bills of Lading Cases

Contract Law

Remedies for Breach Cases

Bunge SSA v Nidera BV [2015] UKSC 43

Key Points

• A supervening event after the date of the breach of contract can be taken into account in the assessment of damages, whether the contract provides for repeated performance or a one-off sale.
• Damages clauses are presumed to be consistent with common law principles unless they are construed to be a complete code that excludes all other considerations.
• In the case of an anticipatory breach by the seller for non-delivery, the relevant market price (for the purposes of the measure of damages) will generally, in practice, be determined by the principles of mitigation: damages are determined by reference to the market price which the buyer obtained, or would have done, when going into the market for a substitute contract.

Facts

• The buyer (C) and the sellers (D) of Russian wheat entered into a standard form contract, known as GAFTA Form 49.
• Under the Prohibition Clause, each party is entitled to cancel the contract without any liability in the event of an export ban.
• Under the under the Default Clause, it is provided that damages for default of fulfilment by either party are to be assessed based on the difference between the contract price and the market price at the time of the breach.
• On 5 August, Russia announced a prohibition on the export of agricultural products from 15 August until the end of the year.
• D purportedly cancelled with contract on 9 August; the buyer treated this as a repudiation on 11 August, and claimed damages representing the difference between the contract price and the market price on that date.
• At arbitration, it was agreed by the parties that the cancellation amounted to anticipatory repudiation as the ban could have been lifted by the time of shipment
• Question arose as to the extent of D's liability under the Default Clause.
• The arbitral body had awarded substantial damages to C on two grounds:
  1. Even though the export ban had in fact remained in place after the repudiation, supervening events after the date of breach are irrelevant when dealing with contracts for a one-off sale; and
  2. The damages clause was exhaustive in determining the damages to be awarded and excluded application of The Golden Victory.
• The arbitral award was upheld by the judge on both grounds and the Court of Appeal on the latter ground.