29/01/2026
Commercial Court holds that “typicals” are of no contractual effect in a contract of sale of oil
Contracts for the sale of commodities often identify “typical” characteristics or specifications of the product being sold. There has previously been no authority on the contractual status of such “typicals”. In Mercuria Energy Trading SA v Onex DMCC [2026] EWHC 130 (Comm), the Commercial Court has now provided some guidance.
Lionel Persey KC held that, where a contract incorporates the widely-used BP General Terms & Conditions for Sales and Purchases of Crude Oil and Petroleum Products 2015 (“the BP GTCs”), an express provision in the contract that the product be “in line with the following typicals” created no contractual promise or warranty.
David Lewis KC and Andrew Feld acted for Mercuria.
Background
The dispute arose from the sale by Onex to Mercuria of a parcel of Iraqi High Sulphur Straight Run Fuel Oil (SRFO), CIF US Gulf Coast. The parcel was loaded in stages at Khor Al Zubair and Fujairah and was carried on the vessel “RELIABLE WARRIOR” to the US Gulf Coast. Upon discharge it was discovered that the cargo contained a significantly higher than normal quantity of organic chlorides (at around 16ppm).
The sale contract identified the product sold as being “SOMO Basrah pipeline high-sulphur straight-run fuel oil in line with the following typicals:” There followed a table of test results including Organic Chlorides with a “result” of 4.10ppm and a “Min-Max” of “5ppm Max”. The contract went on to provide that the product would also “meet the following guarantees”, after which there followed a table of specifications that did not include organic chlorides.
The contract also incorporated the BP GTCs “except as specifically detailed above”. The BP GTCs: (1) defined “typical” in Section 57.1.61 as being “a quality or characteristic often attributable to… Product from a particular source, given without guarantee and not amounting to a representation or warranty that such typical quality or attribute will be present in the… Product supplied…”; (2) provided at Section 59.1.1 that “whether set out in these General Terms and Conditions or in the Special Provisions, neither typicals nor any stipulation as to time of delivery shall form part of the… Product’s description, quality or fitness for purpose”.
Mercuria sued Onex for damages, saying that the elevated organic chlorides gave rise to a breach of contract, either because the product was not “in line with the following typicals” as regards organic chlorides, or because the contamination was such that the product was not, or was not only, “SOMO Basrah pipeline high-sulphur straight-run fuel oil”
The Decision
The Judge held that there was no contractual obligation regarding the levels of organic chlorides, notwithstanding the express provision that the product be “in line with the following typicals”.
His reasoning was that:
- The words “in line with” did not on their true construction import any warranty – they had no more contractual significance than “as follows” or “in accordance with”;
- The words “in line with the following typicals” had to be construed in accordance with the definition of “typicals” in Section 57.1.61. The parties had used the word “typicals” in the sense there defined, i.e. as a characteristic identified without any guarantee, representation or warranty;
- That was supported by the fact that the contract separately identified “typicals” and “guarantees”, suggesting that the “typicals” were something different from “guarantees”;
- There was therefore no inconsistency or conflict between the specially-agreed terms of the contract and the BP GTCs. Applying the guidance in Septo Trading Inc v Tintrade Ltd (The Nounou) [2021] EWCA Civ 718 [2021] 2 Lloyd’s Rep 591, the specially-agreed term and the BP GTCs could fairly and sensibly read together, such that the “typicals” identified were non-binding and had no contractual effect.
As to the secondary argument, the Judge was of the view that, applying the law in Ashington Piggeries v Christopher Hill [1972] AC 441 the words “SOMO Basrah pipeline high-sulphur straight-run fuel oil” related to the description of the product, not its quality, such that the test was whether the product had lost its commercial identity as Iraqi SRFO. The Judge held that it had not, in particular because it was resold under the description Iraqi SRFO, even if the sale was into the downgraded bunker fuel market rather than the refinery feedstock market. The fact that the organic chloride contamination was commercially significant, in that it had made the product significantly less valuable, did not mean that it had lost its commercial identity.
The decision will therefore be a significant obstacle to any party seeking to make a claim against a seller based on non-compliance (even drastic non-compliance) with typical characteristics advertised in a sale contract also incorporating the BP GTCs. However, each case will still turn on the particular words used in the contract, and the door may still be open in a more extreme case, such as where there is no separate identification of “typicals” and “guarantees”, or where stronger words of obligation than “in line with” are used in the specially agreed terms.
Finally, the case also illustrates an interesting point of principle on the assessment of damages under s. 53 of the Sale of Goods Act 1979, namely that it is not necessary to assess sound value and unsound value on the same date. The Judge distinguished the decision of Hamblen J in The Mercini Lady [2013] 1 Lloyd’s Rep. 360, holding that each case is highly fact sensitive. As Mercuria had acted reasonably in its attempts to sell the cargo, the measure of its loss was to be assessed by comparing the value of the cargo at the time of breach with its value as at the date it was sold, several months later.
David Lewis KC and Andrew Feld were instructed by Jonathan Spearing of Stephenson Harwood LLP.
