Great Asia Maritime Limited v Orion Shipping and Trading LLC
| Judges | Lord Briggs, Lord Hamblen, Lord Burrows, Lord Stephens, Lord Doherty |
| Judgment of | Lord Hamblen and Lord Burrows, the other members of the court agreeing |
| Hearing | 2 June 2026 |
| Judgment | 22 July 2026 |
| Court | The Supreme Court of the United Kingdom |
| Jurisdiction | England and Wales |
| Appellant | Orion Shipping and Trading LLC, the sellers |
| Respondent | Great Asia Maritime Limited, the buyers |
| On appeal from | [2025] EWCA Civ 1210 |
| Below | Arbitration award 7 September 2023; Commercial Court on a section 69 appeal, 9 August 2024 |
Summary
Terminate under an express clause rather than for a repudiatory breach and, on one long-standing reading of English law, you lose your damages for the rest of the bargain. That reading traces to a decision of 1963, where an owner who terminated a hire-purchase agreement for two missed instalments was confined to the arrears.
The sellers built on it here, and added that clear words are needed before a clause can give a party more than the common law would. Both arguments failed. Where the parties have written their own compensation provision alongside the right to terminate, the 1963 limitation has nothing left to do. The appeal was dismissed and the buyers keep US$1.85 million.
Background and facts
On 4 June 2021 the parties signed a memorandum of agreement on amended Norwegian Saleform 2012 terms for a vessel at US$15 million, cancelling date 20 August 2021. The sellers were not ready. The buyers agreed a fresh date of 15 October 2021, reserving their rights. They were not ready then either. On 18 October the buyers applied to arrest the vessel, which the arbitrators held was a purported cancellation.
The arbitrators found the sellers negligent on both occasions and awarded US$1,650,992 for the first failure and US$1,850,000 for the second, the difference between the market value of US$16,850,000 and the price. On appeal the Commercial Court held the clause reached only losses crystallised at cancellation. The Court of Appeal restored the award.
The issue
Clause 14 has two limbs. The first gives the buyers an option to cancel if the sellers fail to tender notice of readiness or to be ready to complete a legal transfer by the cancelling date. The second obliges the sellers to make due compensation for the buyers' loss and for all expenses, with interest, where that failure is due to proven negligence, and whether or not the buyers cancel.
Both sides accepted that due compensation imports the ordinary rules of causation, remoteness and mitigation. The question was whether loss in the second limb reaches the loss of the bargain itself. It was common ground that the readiness obligation was an innominate term and that its breach was not repudiatory.
The decision
The court started with the words. Loss is general and unqualified, and compensation is payable whether or not the buyers cancel. If loss did not include the bargain, the sellers could not say what it would cover on a cancellation.
Authority pointed the same way. Loss of bargain had been held recoverable under clause 14 of the form since 1981, and it had never been suggested that the amendments made since altered the position.
Unless clearly wrong, where a standard term has an established meaning, that is the meaning which would be conveyed to a reasonable person in the position of the parties at the time of contracting.Lord Hamblen and Lord Burrows, paragraph 45
The onus sat on the sellers. On their causation argument, the court declined to reopen the 1963 authority, Financings Ltd v Baldock: no submissions had been made on what departing from it would mean.
We are therefore assuming that Financings is good law and leave open for another more suitable case whether Financings should be reconsidered.Lord Hamblen and Lord Burrows, paragraph 55
The court then assumed a causation reading of that case in the sellers' favour and dismissed the appeal anyway. Financings concerned a bare termination clause. Clause 14 does not stop there.
But where the parties have gone on, beyond a bare express termination clause, to provide an express compensation clause (as they have done here with clause 14B), it would defeat the purpose of that express compensation clause if one were to interpret it in line with the Financings causation principle.Lord Hamblen and Lord Burrows, paragraph 70
Parties remain free to exclude loss of bargain expressly, and there were no such words here. The clear words argument fell to a shorter answer: the principle it rests on protects rights being taken away, and does not run in reverse.
Taking away rights or remedies is significantly different from conferring additional rights or remedies.Lord Hamblen and Lord Burrows, paragraph 84
One limit survives, and it marks off the cases the sellers relied on.
We accept that clear words would be needed if an express damages clause were to override the compensatory principle by giving compensation where no loss has been suffered.Lord Hamblen and Lord Burrows, paragraph 95
The appeal was dismissed at paragraph 99. Financings was left standing and open. The buyers had a fallback, that it should be confined to long-term contracts, raised only against the possibility of losing on interpretation; they did not lose, so the court never reached it.
Practical implications
This was a ship sale form and the ruling construes that form, but the reasoning is not confined to it. Where a construction or engineering form does what clause 14 does, giving a right to terminate and then stating what the terminating party may recover, the 1963 limitation is not read into that second element unless the words put it there.
The shift is in how a termination decision gets taken. The old caution was to avoid terminating under a contractual power for a breach short of repudiation, because that was thought to cost the forward-looking damages. Where the contract carries its own compensation machinery, test that caution against the wording.
For drafting, the court said parties may exclude loss of bargain from an express compensation clause. A form intended to give accrued losses only has to say so.
Practice points
- Read the termination provisions of your form as two things, not one: the right to bring the contract to an end, and any express statement of what the terminating party may recover. The second changes the damages analysis and is where this judgment bites.
- Where the form has its own compensation provision, do not assume that terminating for a non-repudiatory breach costs you the value of the remaining bargain. That assumption now has to be argued from the words of the clause.
- If you are drafting or amending and you want accrued losses only, write the exclusion in. The court accepted that parties can do it and found no such words in this form.
- Do not treat this as the end of Financings Ltd v Baldock. The court assumed it good law, declined to reconsider it, and expressly kept the question open. A bare termination clause with no compensation provision is still governed by it.
- Where a standard form has carried a settled meaning through successive editions, that meaning holds unless it is clearly wrong, and the burden sits on the party attacking it. Check the drafting history of an amended form before assuming a familiar clause still reads as it used to.