Lila Lisbon: Court of Appeal Clarifies Seller's Liability Under Norwegian Saleform 2012

On 2 October 2025, the Court of Appeal issued a significant ruling on the interpretation of the Norwegian Saleform 2012, confirming that Sellers may be liable for loss of bargain damages when failing to deliver a vessel by the cancelling date where the failure was due to proven negligence on the Seller’s behalf.

The Underlying Dispute

The case involved the cancellation of a Memorandum of Agreement for the sale of the vessel “Lila Lisbon.” The Buyers terminated the contract after the Sellers failed to serve notice of readiness by an extended cancelling date. Although the Sellers had not repudiated the agreement, an arbitration tribunal found that clause 14 entitled the Buyers to damages equal to the difference between the market value of the vessel and the contract price at the time of termination.

Clause 14: Compensation for Failure to Deliver

Clause 14 of the Norwegian Saleform 2012 provides that if Sellers fail to serve notice of readiness by the cancelling date in clause 5, they must compensate the Buyers for losses and expenses, including interest, where the failure is due to proven negligence—regardless of whether the Buyers cancel the agreement.

Commercial Court’s Reversal of Tribunal’s Decision

The tribunal’s interpretation was challenged under section 69 of the Arbitration Act 1996. Dias J, sitting in the Commercial Court, held that the Sellers were not liable for loss of bargain damages. Her reasoning was twofold: (a) the Sellers were not under a contractual obligation to tender notice of readiness by the cancelling date, and (b) clause 14 did not support recovery of such damages. She also concluded that any obligation to meet the cancelling date was not a condition of the contract and therefore did not amount to a repudiatory breach.

Court of Appeal’s Findings

On further appeal, the Court of Appeal overturned Dias J’s decision. It held that:

• Sellers are required to exercise reasonable diligence to deliver the vessel by the cancelling date. This duty is comparable to an owner’s obligation  of reasonable diligence to meet a charterparty laycan, as established in The Democritos [1976] 2 Lloyd’s Rep 149.
• Clause 14 does permit recovery of loss of bargain damages. The Court reasoned that cancellation due to delayed delivery results in the loss of the contractual bargain, which clause 14 was intended to compensate—even in the absence of repudiation.

Implications

This judgment is a key reference point for legal professionals advising on the Norwegian Saleform 2012. It marks the first time a court has confirmed that:

• A seller’s obligation to deliver by the cancelling date involves reasonable diligence.
• Clause 14 encompasses loss of bargain damages.

The decision also engages with the principle from Financings Ltd v Baldock [1963] 2 QB 104, which concerns the recoverability of such damages following contractual cancellation. Nugee LJ’s comments suggest—though without a definitive ruling—that this principle may not apply to single-transaction sale contracts (see paragraph [119]).

Ed Mills-Webb, Ross Attfield, and James Stephenson of Preston Turnbull acted for Orion Shipping and Trading LLC, instructing Alexander Wright KC and Robert Scriviner of 4 Pump Court.

The judgment can be found here.