''Vitol SA v. Norelf Ltd, The Santa Clara''

996 Year 996 ( CMXCVI) was a leap year starting on Wednesday (link will display the full calendar) of the Julian calendar. Events By place Japan * February - Chotoku Incident: Fujiwara no Korechika and Takaie shoot an arrow at Retired Em ...

A.C. 800;

3 W.L.R. 105;

3 All E.R. 193, is an

English contract law English contract law is the body of law that regulates legally binding agreements in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries ...

case about the effect of non-performance in accepting a contracting partner's repudiatory breach of contract.

Facts

Norelf Ltd contracted to sell a cargo of

propane Propane () is a three-carbon alkane with the molecular formula . It is a gas at standard temperature and pressure, but compressible to a transportable liquid. A by-product of natural gas processing and petroleum refining, it is commonly used a ...

to Vitol SA in 1991. The propane market had been very volatile. The cargo was being shipped (on the ''Santa Clara'') from

Houston Houston (; ) is the most populous city in Texas, the most populous city in the Southern United States, the fourth-most populous city in the United States, and the sixth-most populous city in North America, with a population of 2,304,580 in ...

, U.S. It was meant to leave before March 7. On March 8, while it was still being loaded, Vitol sent a telex to Norelf saying it did not wish the contract to continue because it was not going to arrive on time (i.e. Vitol repudiated the contract). The ship was loaded, and it sailed on March 9. The price of the cargo fell. Neither side did anything further to perform the contract. Norelf sold the cargo at a loss, and then claimed damages ($950,000) from Vitol for breach of contract. The arbitrator held that Vitol's telex was an

anticipatory breach Anticipation is an emotion involving pleasure or anxiety in considering or awaiting an expected event. Anticipatory emotions include fear, anxiety, hope and trust. When the anticipated event fails to occur, it results in disappointment (if posit ...

of contract, but Norelf's failure to take further steps to perform the contract was sufficient communication to Vitol that they had accepted the repudiation. Vitol's appeal was dismissed in the High Court by Phillips J. But it succeeded in the Court of Appeal, who held that a mere failure to perform contractual obligations could not constitute acceptance of the repudiation. Norelf appealed to the House of Lords.

Judgment

Lord Steyn (with whom

Lord Mackay of Clashfern James Peter Hymers Mackay, Baron Mackay of Clashfern, (born 2 July 1927) is a British advocate. He served as Dean of the Faculty of Advocates, Lord Advocate, and Lord Chancellor (1987–1997). He is a former active member of the House of Lo ...

, L.C., Lord Griffiths,

Lord Nolan Michael Patrick Nolan, Baron Nolan, (10 September 1928 – 22 January 2007) was a judge in the United Kingdom, and from 1994 until 1997 was the first chairman of the Committee on Standards in Public Life. In the words of his obituary in ''The ...

and

Lord Hoffmann Leonard Hubert "Lennie" Hoffmann, Baron Hoffmann (born 8 May 1934) is a retired senior South African–British judge. He served as a Lord of Appeal in Ordinary from 1995 to 2009. Well known for his lively decisions and willingness to break w ...

concurred) allowed Norelf's appeal. In some circumstances an innocent party may simply fail to perform his obligations under a repudiated contract, and that was enough to accept the repudiation. So communication (orally or written) was not always necessary. The question was whether the innocent party's conduct did convey, unequivocally, that he was treating the contract as repudiated. A failure could be unequivocal. Because Norelf was the respondent, in a defensive position, the Court of Appeal had been wrong to say that Norelf required to seek a certificate under the

Arbitration Act 1979 The Arbitration Act 1979 (c.42) was an Act of the Parliament of the United Kingdom that reformed arbitration law in England and Wales. Prior to 1979, arbitration law was based on the Arbitration Act 1950, which allowed use of the "Case Stated" p ...

, s.1(7) before being allowed to argue that the award was sustainable on alternative grounds. Lord Steyn read the following.at 810-812

Notes

{{reflist English termination case law House of Lords cases 1996 in United Kingdom case law

Facts

Judgment

See also

Notes