UK Supreme Court · [2026] UKSC 23
The Supreme Court held that an express compensation clause allowed a buyer to recover its loss of bargain after cancelling a ship sale,...
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In June 2021, Great Asia agreed to buy the second-hand vessel LILA LISBON from Orion for US$15 million. The contract used the Norwegian Saleform 2012, a standard form commonly used for ship sales.
The contract set a cancelling date. Orion was expected to use reasonable diligence to have the vessel ready, but it undertook an intervening voyage and missed the revised date of 15 October 2021. Great Asia cancelled three days later.
The seller's failure was negligent, but it was not a repudiatory breach. It was not serious enough under the general law to support loss-of-bargain damages on that basis alone.
Great Asia relied on clause 14. It gave the buyer a cancellation right and required compensation for the buyer's 'loss' and expenses if the failure was caused by proven negligence. The dispute was whether 'loss' reached the value of the bargain.
| Stage | Result |
|---|---|
| Arbitration | The buyer recovered US$1.85 million. |
| High Court | The seller succeeded because the breach was not repudiatory. |
| Court of Appeal | The arbitration result was restored. |
| Supreme Court | The seller's appeal was unanimously dismissed. |
The Court started with the language. 'Loss' was general and unqualified, and the most obvious loss after cancellation in a rising market was the bargain itself. Without that loss, it was difficult to identify what meaningful loss the clause would cover.
The wider contract supported that reading. The buyer-default clause used materially similar compensation wording and had been understood to cover loss of bargain. The Court rejected a universal rule requiring unusually explicit words before a contractual remedy can produce this result.
What the court focused on
No. The result depends on the wording and context of the contract. A right to terminate does not automatically create a right to every category of loss.
It is the value of the contractual deal that the innocent party lost. Here it was the difference between the US$15 million contract price and the vessel's US$16.85 million market value at cancellation.
The same drafting issue appears in supply, asset-sale, software, distribution and services agreements. Many contracts give an express exit right without stating clearly what compensation follows.
Supreme Court explains damages under an express termination clause
The Supreme Court held that an express compensation clause covered loss-of-bargain damages even though the seller's breach was not repudiatory.