Issues Of Contractual Commitment And Determining When The Specification Of Goods Is Part Of Their Description

Proton Energy Group SA v. Orlen Lietuva [2013] EWHC 2872 (Comm)

We previously reported on the earlier incarnation of this case (in our April 2013 Legal Update: "The relevance of market expert evidence in determining whether a deal has been done"), in which the Claimant was unsuccessful in an application for summary judgment. This latest decision of the Commercial Court follows the full trial of the case on the question of whether a binding contract had been concluded between the parties. The trial judge also addressed the parties' various arguments in relation to the terms of the contract and the judgment contains an interesting passage on the often thorny question of whether the contract specification forms part of the description of the cargo or is simply dealing with quality.

The background facts

Proton Energy Group SA ("Proton"), a Swiss trader of oil and gasoline related products, and Public Company Orlen Lietuva ("Orlen"), a petroleum refining company incorporated in Lithuania, exchanged e-mails regarding the sale and purchase of crude oil mix. The parties accepted that the following exchanges had occurred on 14 June 2012:

Proton e-mailed Orlen a "firm offer" to sell CIF Butinge, Lithuania 25,000mt +/- 10% in Seller's option of crude oil mix CN27090090, European origin as per the specifications attached, with delivery period at the discharge port during 10-15 July 2012 and at a price based on five quotations after the bill of lading date. The offer was expressly stated to be "valid till 14.06.12 COB". E-mail correspondence continued between the parties on the same day, culminating in a one-word e-mail from Orlen at 13:42 stating "Confirmed". At 15:55, Proton entered into a contract (by an unsigned email recap) to buy the product from its supplier, Trafigura. Orlen did not open any letter of credit and it did not accept the cargo. Proton notified Orlen that it was accepting Orlen's failures to open a letter of credit and/or to take delivery of the cargo as repudiatory breaches of contract and was thereby bringing the sale contract to an end.

Proton's position was that the "confirmed" email at 13:42 was the point at which a contract came into existence. Orlen disagreed.

The Commercial Court decision

Was there a contract?

The Judge approached the question of whether there was a contract by first setting out the relevant legal principles by reference to Lord Clarke's judgment in the Supreme Court in RTS Flexible Systems Ltd. V. Molkerei...