Sale of contaminated sunflower seed oil – measure of damages

Article published on July 2014 in Stephenson Harwood Shipping Bulletin and reproduced by courtesy of Stephenson Harwood

A FOSFA tribunal considered a claim by Saipol as FOB buyers for contamination of sunflower seed oil. The sale contract was for 3,000 MT sunflower seed oil, which was shipped as part of a total cargo of 16,600 MT. Saipol were buyers of all the cargo from 5 different sellers. Before shipment all 5 consignments had been commingled. On discharge it was discovered that the entire cargo was contaminated.

The buyers claimed the difference in value between sound and contaminated cargo, and also consequential losses. Their claim against Saipol related to all 16,600 MT on the basis that each seller was in breach of contract, and each seller had contributed to the contamination of the whole; accordingly each seller was liable for the whole of the losses. The tribunal held:

1     There being no special circumstances, the applicable measure of damages was that laid down in Sale of Goods Act, s 53(3). Buyers were entitled only to the difference between goods as warranted and their actual value.

2     Sellers' liability extended only to the 3,000 MT.

Buyers appealed.


The appeal was allowed:
1     The tribunal had proceeded on the basis that the only potentially applicable measures were s 53(3) and s 54. The correct starting point was s 53(2). Under 53(2) there can be, depending upon the facts, a claim for consequential losses on the basis that they will arise in the usual course of things.

2     The tribunal had given no proper reasons for rejecting the contention as to joint contribution in breach of contract relating to the contaminated cargo as a whole.

The matter would be remitted to the tribunal to consider, applying the law as it should have been applied.

(Saipol v Inerco Trade [ 2014 ] EWHC 2211)

Authors: Michael Bundock, Senior Associate and professional support lawyer with Stephenson Harwood & Joanne Champkins, Associate specialising in marine insurance with Stephenson Harwood / Publisher: SCMO

Nicolas de Loisy

Advisory specialized in logistics, transportation, and supply chain management.