Orion Shipping and Trading LLC v Great Asia Maritime Ltd [2025] EWCA Civ 1210 concerned the sale of the bulk carrier The Lila Lisbon for $15m, a transaction governed by the industry-standard Norwegian Saleform 2012 (NSF 2012). The commercial context was defined by a significant appreciation in the vessel’s value: by the time of the alleged breach, the market price had exceeded the agreed contract price, creating a substantial “loss of bargain” for the Buyer. The Arbitrators found that the seller’s failure to deliver was due to “proven negligence” which did not constitute a repudiatory breach.
Nugee LJ held that a cancellation resulting from “proven negligence” as equivalent to a non-delivery. This entitled the buyer to the “loss of bargain” damages, even though the breach was non-repudiatory.
Shipping Law: interpretation of a “Sellers’ Default” under NSF 2012
Nugee LJ eschewed the binary characterisation of the “Cancelling Date” as either giving rise to an automatic breach (sounding in damages) or the right of rescission (with no secondary obligation to pay damages). His Lordship held (at [59]) that while it creates no absolute guarantee to deliver the vessel in time, it imposes a qualified obligation of reasonable diligence. Consequently, a failure to exercise such diligence transforms a mere delaying event into an actionable breach, engaging the full measure of expectation damages.
This intermediate position resolves a critical tension in the commercial architecture of the sale. To treat the deadline as absolute would impose an undue burden on the seller; conversely, to reduce it to a mere condition subsequent (triggering cancellation but engaging no damages) would improperly hollow out the buyer’s contractual rights. The Court’s solution is elegant: the right to cancel acts as a mechanical exit, separate from the right to damages which remains fault-based.
This ruling prevents “perverse incentives” in a rising market and Sellers deliberately dragging their feet to force a cancellation and capture the resale surplus, ensuring that the contract does not inadvertently reward a party for its own default.
Contract law: The scope of remedies and the Baldock principle
The decision of Dias J, in Orion Shipping and Trading Ltd v Great Asia Maritime Ltd [2024] EWHC 2075 (Comm), (at [45(iii)]) was predicated on the causation hurdle established in Financings v Baldock [1963] 2 Q.B. 104. The Baldock principle is a “trap” for the innocent party: where a contract is terminated pursuant to a contractual option for a non-repudiatory breach, the law treats the decision to cancel (rather than the breach itself) as the proximate cause of future loss. The innocent party is entitled to accrued losses up until the moment of cancellation. So, the buyer’s remedy is structurally confined to the reliance interest (wasted expenditure), effectively precluding any claim for the expectation interest (loss of bargain).
Nugee LJ disapplied this restriction through a two-stage analysis. First, as a matter of construction, he held that the parties had effectively “contracted out” of the Baldock default. Second, and more significantly for general contract theory, his Lordship (at [118–119]) distinguished the nature of the transaction. He observed that Baldock concerned a long-term instalment contract (hire-purchase), where the loss of future income streams is indeed contingent on the contract remaining alive. By contrast, a ship sale is a unitary transaction focused on the transfer of a specific asset. In this context, the failure to transfer title is the direct cause of the loss of bargain; the cancellation is merely the formal mechanism of acknowledgement.
This distinction is doctrinally compelling. The Baldock protection was designed to shield a breaching lessee from being saddled with future rent liabilities by an opportunistic lessor. It has no proper application to a single-point sale where the asset itself has appreciated. To hold otherwise would generate a commercial perversity: it would incentivise a seller in a rising market to exercise “strategic negligence” thereby retaining the asset’s increased value while paying only nominal reliance damages.
