In Great Asia Maritime Ltd v Orion Shipping and Trading LLC [2026] UKSC 23, the United Kingdom Supreme Court considered whether a standard contractual compensation clause entitled a buyer to recover loss of bargain damages following termination, in the absence of a repudiatory breach by the seller.

The dispute arose under a Memorandum of Agreement (MOA) for the sale of a vessel, entered into on amended Norwegian Saleform 2012 (NSF) terms. The MOA incorporated clause 14, which entitled the Buyers to cancel the agreement if the Sellers failed to be ready to complete delivery by the Cancelling Date. If the failure was due to the Sellers’ “proven negligence”, clause 14 further required the Sellers to provide “due compensation” for the Buyers’ “loss and for all expenses together with interest”.

The Sellers failed to have the vessel ready by the revised Cancelling Date due to their proven negligence. The Buyers cancelled the MOA and claimed loss of bargain damages of US$1.85 million, representing the difference between the contract price and the market value of the vessel at the date of cancellation. The arbitrators found loss of bargain damages were recoverable under the contract cancellation clause and additionally held that it would be inconsistent to require a repudiatory breach.

The Sellers appealed the Award on a question of law and successfully argued before the Commercial Court that the clause did not give rise to an entitlement to loss of bargain damages absent a repudiatory breach. The decision of the Commercial Court was subsequently reversed by the Court of Appeal, which found that “the natural and ordinary meaning of the word “loss” in Clause 14(b) as including that loss of bargain unless there is some legal principle which prevents that”.

This finding was the subject of a further appeal to the Supreme Court. In determining the appeal, their Lordships placed significant weight on the wording of clause 14 in the context of the NSF. The Court held that the term “loss” was general and unqualified and that loss of bargain was the most obvious form of loss likely to be suffered by a buyer exercising its contractual right of cancellation. If loss of bargain damages were excluded, it was difficult to identify what loss the clause was intended to compensate following cancellation.

Several contextual matters supporting that interpretation were also considered. These included the longstanding judicial and industry acceptance that clause 14 and its predecessors permitted recovery of loss of bargain damages. The Supreme Court reaffirmed the importance of certainty, consistency and predictability when interpreting widely used standard form commercial contracts and noted that established interpretations should generally be maintained unless clearly wrong.

The decision confirms that a contractual compensation clause may confer an entitlement to loss of bargain damages following termination, even where the underlying breach is not repudiatory, provided that result is supported by the language, context and commercial purpose of the clause.

The decision can be found here.