THE LILA LISBON [2026] UKSC 23 - THE SUPREME COURT UPHOLDS THE COURT OF APPEAL’S FINDING THAT BUYERS ARE ENTITLED TO LOSS OF A BARGAIN DAMAGES UNDER CLAUSE 14 OF THE NOREWEGIAN SALEFORM 2012

On 22 July 2026, the Supreme Court handed down judgment in The Lila Lisbon [2026] UKSC 23, unanimously holding that:

“if a Memorandum of Agreement on the SALEFORM 2012 form is lawfully cancelled by a buyer under clause 14 because the vessel is not delivered by the cancelling date as a result of the seller’s “proven negligence”, the buyer is entitled to recover loss of bargain damages even though there has been no accepted repudiatory breach of contract.”

MFB Solicitors and Helmsman Law acted for the successful buyers, who were represented by David Lewis KC and Eliza Bond, both of Twenty Essex.

Background:

The buyers and sellers entered into a memorandum of agreement on the Norwegian Saleform 2012 form (“MoA”) for the sale of the MV Lila Lisbon (the “Vessel”).  Clause 14 of the MoA provided that:

“14. Sellers’ default

Should the Sellers fail to give Notice of Readiness in accordance with Clause 5(b) or fail to be ready to validly complete a legal transfer by the Cancelling Date the Buyers shall have the option of cancelling this Agreement. … In the event that the Buyers elect to cancel this Agreement, the Deposit together with interest earned, if any, shall be released to them immediately.

Should the Sellers fail to give Notice of Readiness by the Cancelling Date or fail to be ready to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement.”

The Vessel was not ready for delivery within the contractual cancelling date. The sellers proposed a revised cancelling date. The buyers accepted the revised cancelling date under Clause 5(c) of the MoA without prejudice to the rights under Clauses 5(d) and 14 to claim damages for all loss and expense suffered. After the sellers’ failure to deliver the Vessel within the revised cancelling date, the buyers cancelled the MoA.

For the purposes of the point at issue in the appeal, the Tribunal found that the sellers failed to deliver the Vessel within her revised cancelling date as a result of their proven negligence and that the buyers were entitled to loss of a bargain damages under clause 14 of the MoA.  In this context, loss of bargain damages refers to damages assessed as the difference between the (lower) contract price of the vessel and the (higher) market value of the vessel at or shortly after termination.

The sellers appealed to the High Court, where Dias J found that the buyers were not entitled to loss of bargain damages.  The Court of Appeal overturned the High Court judgment, reinstating that the Tribunal’s finding that the buyers were entitled to loss of bargain damages.

The sellers appealed to the Supreme Court.

The Supreme Court judgment:

The Supreme Court found unanimously that the buyers were entitled to loss of bargain damages pursuant to clause 14 of the MoA. The key findings in relation to the language of clause 14, as set out in paragraph 24 of the judgment, were:

• That “due compensation” means appropriate compensation using the common law principles of causation, remoteness and mitigation.

• The buyers are to recover “loss” and “all expenses” whether or not they decide cancel, but one would expect the loss and expenses to be different across the two situations.

• Where there is a cancellation, as “loss” is general and unqualified, it is wide enough to cover the loss in fact suffered by the buyers and, on the facts of this case, a loss of a bargain was actually suffered.

• For these reasons, the natural and ordinary meaning of “loss” in the context of clause 14 is that it includes loss of bargain suffered by the buyers consequent on the cancellation of the MoA.

In further support of its conclusion, the Supreme Court considered:

• Clause 13 of the Norwegian Saleform 2012, where it remarked that it would be “surprising, as a matter of contractual symmetry” that loss of a bargain damages are recoverable for buyers’ default in clause 13 but not sellers' default in clause 14.

• Section 51(3) of the Sale of Goods Act 1979, by which the normal measure of damages for non-delivery under a sale contract is loss of a bargain damages.

• Past decisions, practice and established meaning, with remarks that “there are a number of authorities which stress the importance of certainty, predictability and consistency in the interpretation of industry-wide standard form contracts” and there “are also a number of authorities which emphasise the importance of not disturbing an established interpretation”.

• Commercial consequences to the rival interpretations, noting that “it is well-established that such consequences may be an aid to interpretation” and that “on the Sellers’ case sellers have a perverse incentive to delay completing in a rising market in the hope that buyers may lose patience and cancel, leaving sellers with a more valuable ship.”

The Court also concluded that neither the sellers’ submissions on the causation principle nor clear words principle were sufficient to displace the Court’s “strong prima facie conclusion on the proper interpretation of clause 14”.

For any queries about this case, please contact Charlie Young and Ellie Hall.