In the UK test case the RES COGITANS the UK Supreme Court recently gave its eagerly anticipated judgment in which it unanimously dismissed the appeal and upheld the decision of the Court of Appeal that a bunker supply contract between OW Bunker and Owners was not covered by the Sale of Goods Act 1979.

The Supreme Court was asked to determine two questions in relation to a bunker supply contract under which OW Bunker Malta Limited supplied bunkers to the vessel RES COGITANS:

  1. Is the contract a contract of sale of goods within the meaning of s.2(1) of the Sale of Goods Act 1979?
  2. If not, was it an implied condition of the contract that OW Bunker Malta Limited would perform its obligations to its supplier, in particular by paying for the goods timeously?

The answer the Supreme Court has given to these questions is: 1. No, and 2. No. Whilst the decision does not definitively answer the issue of fundamental importance ‘who pays/gets paid?’, on face value this means that OW’s failure to transfer title in the bunkers or pay its supplier for the bunkers did not release Owners from their obligation to pay OW.

This decision has not only affected disputes relating to the OW collapse, but has had wider consequences in prompting the bunker industry to reconsider their rights and obligations in contracts which contain English law and arbitration clauses. However, it is important to stress that there have been some significant differences in the wordings of the various contracts that we have seen relating to disputes of this type and it is important to ensure that each case is considered on its individual merits. In London, Clyde & Co acts for a wide range of interests in relation to OW Bunker, including shipowners, charterers, physical bunker suppliers and their respective insurers.