Supreme Court confirms buyers can claim loss of bargain damages under Norwegian Saleform clause 14 without repudiatory breach

The Supreme Court has ruled that buyers who cancel a shipbuilding sale contract under clause 14 of the Norwegian Saleform 2012 can recover loss of bargain damages, measured as the difference between the contract and market price, even without an accepted repudiatory breach.

In Great Asia Maritime Limited v Orion Shipping and Trading LLC [2026] UKSC 23, Lord Hamblen and Lord Burrows, giving the judgement of the court, dismissed an appeal by the sellers of the vessel M/V Lila Lisbon against a Court of Appeal decision restoring an arbitral award in favour of the buyers. The dispute concerned clause 14 of the Norwegian Saleform, the standard form contract most commonly used for second-hand ship sales, which entitles buyers to cancel where sellers fail to give notice of readiness or complete delivery by the cancelling date, and separately entitles them to "due compensation" for their loss and expenses where that failure results from proven negligence.

The sellers' vessel missed both an original and a revised cancelling date due to what arbitrators found was proven negligence, including a failure to properly arrange crew disembarkation and an unauthorised intervening charter. The buyers cancelled the agreement and were awarded compensation including US$1.85 million reflecting the rise in the vessel's market value above the contract price by the date of cancellation. The Commercial Court, reversing the arbitrators, held that clause 14 did not permit recovery of such loss of bargain damages absent a repudiatory breach, a conclusion the Court of Appeal subsequently overturned.

The central legal question was whether loss of bargain damages following contractual cancellation require a repudiatory breach, as established in the hire-purchase context by the Court of Appeal in Financings Ltd v Baldock. The sellers argued that the effective legal cause of any loss of bargain following cancellation under an express termination clause is the innocent party's own election to terminate rather than the underlying breach, and separately that clear words were required before a compensation clause could be read as conferring rights beyond those available at common law, invoking what they termed the Novasen presumption.

The Supreme Court rejected both arguments. It held that clause 14, properly construed, was of general and unqualified scope, and that the word "loss" naturally extended to loss of bargain, particularly given that no plausible content could otherwise be given to the compensation provision on cancellation. The court found support in the equivalent buyers' default provision at clause 13, in the ordinary sale of goods measure of damages under section 51 of the Sale of Goods Act 1979, and in a consistent line of authority since Sotiros Shipping Inc v Samieiet (The Solholt) in 1981 establishing that loss of bargain damages have long been understood as recoverable under this clause, an established meaning the industry had never sought to displace through subsequent amendments to the form.

On the causation argument, the court declined to disturb Financings itself but held its reasoning had no application once parties had gone beyond a bare termination clause to agree an express compensation provision. On the clear words argument, the court held that principle applies to the exclusion of existing rights, not to the conferral of additional contractual rights, and that in any event a genuine loss of bargain had in fact been suffered, so no question arose of compensating an unsuffered loss. The appeal was dismissed.