Lloyd's Maritime and Commercial Law Quarterly
COMMODITY SALES AND THE COMPENSATORY PRINCIPLE
Paul Todd*
International commodity sales differ in important respects from other contracts. This article argues that a principled case can be made for exempting them from a strict application of the compensatory principle, that the analytical tools are in place for so doing, and that it is still possible to do so after the Supreme Court decision in Bunge v Nidera.
I. INTRODUCTION
The main actors in the international commodity market are among the world’s largest companies,1 and the overwhelming proportion of tonnage shipped internationally constitutes commodities in one form or another.2 To the extent that the Supreme Court decision in Bunge SA v Nidera BV
3 affects trading in international commodities, it is potentially of immense economic importance. The decision also points up deep-rooted problems of legal analysis, which have their origins in the earlier House of Lords decision in Gill & Duffus SA v Berger & Co Inc.4 The issue considered here is how the compensatory principle applies to international commodity sales: that in awarding damages for breach of contract, the injured party is entitled to such damages as will put him in the same financial position as if the contract had been performed but, crucially, not more than that.
* Professor of Commercial and Maritime Law, University of Southampton.
1. The Financial Times cites as “dominant players” Archer Daniels Midland, Bunge, Cargill, Louis Dreyfus Company (the so-called “ABCD companies”) and Glencore, for dry commodities: “Archer Daniels Midland hurt by weak grain export”, Financial Times, 3 May 2016. To that we should add Vitol and Gunvor, principally for wet. Both the latter had profits exceeding $1 billion in 2015: “Oil traders enjoy commodity price rout”, Financial Times, 27 March 2016.
2. In 2006, over 6 billion tonnes of commodities were shipped, well over 80 per cent of total tonnage, compared with just over a billion of containerised goods, or well under 20 per cent: M Stopford, Maritime Economics, 3rd edn (Routledge, Abingdon, 2009), 56 (table 2.3: a breakdown of world tonnages between 1995 and 2006). (In value terms, containerised cargoes may figure higher.)
3. [2015] UKSC 43; [2015] Bus LR 987; [2015] 2 Lloyd’s Rep 469, infra, fnn 165–180, and text thereto, extending (to the extent applicable) the principles of Golden Strait Corp v Nippon Yusen Kubisha Kaisha (The Golden Victory) [2007] UKHL 12; [2007] 2 AC 353; [2007] 2 Lloyd’s Rep 164, infra, fnn 130–159, and text thereto, to apply them to an international commodity sale. On the particular contracts to which the decision applies, see infra, text to fnn 177–180.
4. [1984] AC 382; [1984] 1 Lloyd’s Rep 227 (HL). See infra, text to fnn 50–121.
Commodity sales and the compensatory principle
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