In a nutshell: In Orion Shipping and Trading LLC v Great Asia Maritime Ltd (The Lila Lisbon) [2025] EWCA Civ 1210the Court of Appeal in October confirmed that Buyers can recover loss of bargain damages when Sellers negligently fail to deliver the vessel before the cancelling date. 
In King Crude Carriers SA and others v Ridgebury November LLC and others [2025] UKSC 39 the Supreme Court held that when Buyers fail to provide the necessary KYC documents to open the escrow account, Sellers can only claim damages and not the deposit itself as a debt.

The Lila Lisbon: can Buyers claim loss of bargain damages?

In The Lila Lisbon Sellers negligently lost the berthing slot and so were unable to tender NOR by the cancelling date. Buyers commenced arbitration under Clause 14 of the Saleform, which provides that Sellers must compensate Buyers for their "loss and all expenses" if Sellers negligently fail to be ready to deliver the vessel by the cancelling date.

The tribunal in first instance found that Buyers could recover "loss of bargain" damages, i.e. the difference between the contract and the market price of the vessel. However, on Sellers' appeal, the Commercial Court surprised the industry by holding that Buyers could only recover accrued losses and wasted expenses, and not the loss of bargain damages.

The Court of Appeal unanimously reversed that decision, confirmed the decision at first instance of the tribunal and restored the prior industry understanding. Where Sellers' negligence leads to them not being ready by the cancelling date and Buyers cancel under Clause 14, Buyers can recover their loss of bargain damages. In The Lila Lisbon that wasUS$1.8m because the market had risen between the signing of the MOA and its cancellation.

In awarding those damages to the Buyers, the Court emphasized that Clauses 13 and 14 should operate even-handedly. Under Clause 13, if Buyers fail to pay the deposit, Sellers can claim loss of bargain damages. Therefore, if Sellers breach their duty of due diligence to deliver by the cancelling date, Buyers should similarly be able to claim loss of bargain damages under Clause 14.

The Court of Appeal also agreed with Buyers' argument that limiting their damages to wasted expenses and accrued losses was commercially imbalanced. It would mean that, whenever Buyers cancel on grounds of Sellers' negligence in a rising market, it would be negligent Sellers rather than innocent Buyers who would benefit from the increased value of the vessel.

The Supreme Court has now granted Sellers' permission to appeal – to be continued.

King Crude Carriers: when does the Seller's right to the deposit accrue?

Clause 2 of the Norwegian Saleform requires Buyers to lodge a 10% deposit within three banking days after the fulfilment of two conditions precedent: (i) the signing of the MOA, and (ii) the escrow agent's confirmation that the account is open and ready.

In King Crude Carriers, after Sellers and Buyers signed three MOAs for the sale and purchase of three oil tankers, Buyers failed to provide the necessary KYC documentation to open the escrow accounts. Sellers cancelled the MOAs and – in addition to a claim for damages - claimed the 10% deposits as debts – totalling almost US$5 million.

Because the market had risen, the vessel was worth more to the Sellers than it was when the MOA was signed, so they had suffered no net "loss of bargain". So arguably a claim in damages would have resulted in a purely nominal award. Could Sellers' debt claim succeed even though one of the two above-mentioned conditions precedents – the opening of the escrow account – was never fulfilled?

Sellers' primary argument was that the condition precedent must be deemed fulfilled when the reason for its non-fulfilment was the Buyer's breach of contract (viz. the failure to provide the KYC). This legal fiction is known as the "deemed fulfilment" principle, or the principle in "Mackay v Dick", after judicial comments in an 1881 case of the same name. Sellers' alternative argument was that their right to the deposit accrued when the contracts were made – the conditions precedent merely determined when the accrued debt became payable.

The Supreme Court unanimously rejected both arguments. It held that there is no "deemed fulfilment" principle under English law. Further, it held that the right to the deposit does not accrue when the MOA is concluded, nor when it is signed, nor three banking days after signature. It only accrues when the conditions precedent are satisfied. So, where the escrow account is never opened, Sellers cannot claim the deposit as a debt: their only remedy is damages.

The Supreme Court did not decide what damages Sellers could recover, since that was not the subject of the appeal. Often the Supreme Court is tasked with deciding only one or two out of a case's many issues. Here, the remaining issues, including the measure of damages, were remitted to the arbitral tribunal for further consideration.

When considering the above question one view taken is that, given the rising market, Sellers' damages would be nil if their loss is calculated as the difference between the contract price and the market value of the vessel at the date of breach. That is the usual "market measure" starting point for damages on non-acceptance of a ship. However, in the original arbitration, Sellers argued for a different measure of damages (in addition to their debt claim): that they should be put in the same position as if Buyers had performed their contractual obligation to provide the KYC documents. If Buyers had done that, the deposit would have accrued as a debt. Hence, Sellers should be able to sue for an amount equal to the deposit as damages. That was the outcome of a 1984 Court of Appeal case on an earlier version of the Saleform (The Blankenstein).

Following this judgment of the Supreme Court, anyone considering selling a vessel on basis of the standard wording of the Norwegian Saleform 2012 may wish to amend its wording accordingly to bring clarity and to ensure they can claim the deposit amount in such a scenario. This could be done, for example, by decoupling the accrual of the right to the deposit from the opening of the escrow account, and making the escrow agent's confirmation merely a step in the payment machinery rather than a condition precedent.

If you would like to discuss any issues arising out of these cases, please contact Dr. Nina von Borries or Iain Preston, or your usual ERG contact.