In Glencore Energy UK Ltd v Cirrus Oil Services Ltd1Glencore had agreed to sell blended crude oil to Cirrus. Cirrus planned to sell the crude oil on to a third party; however, that third party refused to accept the oil from Cirrus on the basis that it was blended. Cirrus in turn refused to accept the crude oil from Glencore.

Glencore claimed damages for Cirrus’ refusal to accept the crude oil pursuant to s.50(1) of the Sale of Goods Act 1979 (the Act). Where there is an available market, such damages are normally determined by the difference between the contract price and the price the seller could have obtained in the market (s.50(3) of the Act).

In defence, Cirrus relied on an exclusion clause in the alleged sales contract:

“ ... in no event ... shall either party be liable to the other ... in respect of any indirect or consequential losses or expenses including ... loss of anticipated profits ... whether or not foreseeable.”

Cirrus argued that Glencore’s claim was a claim for loss of anticipated profit, and therefore excluded.

The Court’s decision

The Commercial Court held that Glencore’s claim for damages (contract price less market price) was not a claim for loss of profit (which would be calculated on the basis of contract price less cost price). The Court also found that this position was not affected by the fact that Glencore had been able to terminate its contract with its supplier without loss.

As the claim was not for loss of profit, it did not fall within the exclusion clause and consequently Cirrus’ defence failed and Glencore’s claim succeeded.

Conclusion

This case is another good example of the Court construing exclusion clauses very narrowly, and declining to find that a particular head of loss is excluded where the contract wording is not sufficiently clear.

Parties wanting to exclude a particular loss should therefore ensure that their contract terms are sufficiently clear and specific to achieve this aim.