UK: Assessment Of Damages For Breach Of Contract Of Affreightment

Last Updated: 23 December 2013
Article by Kevin Cooper and Ruth Monahan

Flame SA v. Glory Wealth Shipping Ltd [2013] EWHC 3153 (Comm)

It is a fundamental principle of English law that, when assessing damages for breach of contract, any damages awarded should compensate the innocent party for the loss of its contractual bargain. In other words, the innocent party should be put in the same position that it would have enjoyed had the contract been performed.

The Commercial Court has now clarified that, when assessing damages for repudiatory breach of contract, it is necessary for the innocent party to prove its damages by showing that, had the other party performed its obligations, the innocent party would have been able and willing to perform its side of the bargain. An innocent party, who at the time of the repudiatory breach would have been unable to perform its side of the bargain – and therefore would have been unable to earn the contract price – is not entitled to be placed in a better position by an award of damages than it would have been in if the contract had not been repudiated.


The parties agreed, under a contract of affreightment ("COA"), that the Owners would carry cargoes of coal between 2009 and 2011. The Charterers failed to provide laycans for some of the shipments and the Owners accepted the breach as a repudiatory breach, terminated the COA and sought damages from the Charterers in arbitration proceedings.

The Charterers submitted that the Owners were only entitled to substantial damages if the Owners could prove that, had the Charterers declared any of the laycans in question, the Owners would have been able to perform the corresponding voyages by going out into the market and chartering in a vessel at the relevant time. They argued that, as a result of the market's collapse in 2008, the financial position of the Owners had so deteriorated that, had the Charterers declared the laycans, the Owners would not have been able to provide the required vessels.

The arbitration panel rejected Charterers' submission and awarded Owners damages of over USD 5 million (the quantum being so great due to the sudden collapse of the freight market in 2008 which caused an exceptional difference between the COA and market rates).

Commercial Court Decision

The Court held that the arbitration panel had been wrong in law and that, when assessing the level of damages for anticipatory breach (the acceptance of which had terminated the contract), it was necessary for the innocent party to prove damage by demonstrating that, had there been no repudiation, it would have been able to perform its obligations under the contract.

The reasoning behind the decision is that an assessment of loss requires an assessment of what would have happened but for the repudiation. If the Court assumes that an innocent party would have been able to perform, the Court might put the innocent party in a better position than it would have been inhad the contract been performed. This would be a breach of the compensatory principle that underlies the assessment of damages.

In so finding, the Court had regard to the importance the majority of the House of Lords attributed to the compensatory principle in the Golden Victory (which was not binding on the facts of this case). The background facts of the Golden Victory meant that, if damages were assessed at the date of breach, the Owners would have lost a charterparty that would be quantified as having slightly less than four years to run. If damages were assessed at the date of the subsequent arbitration hearing, the loss would be quantified as being considerably less because at that stage war, a specified event under the charterparty, had broken out, pursuant to which the Charterers would have been entitled to terminate. The majority of the House of Lords considered that what was known at the date of the hearing of the arbitration had to be taken into account. In other words, where a contract gives the party in breach the right to cancel the contract on the occurrence of a specified event, and such an event occurs even after the innocent party has accepted a repudiatory breach as terminating the contract, then the possibility that the party in breach would have exercised his right to cancel can be taken into account when assessing the damages caused by the repudiatory breach. In that case, Lord Scott referred to the compensatory principle as follows: "The lodestar is that damages should represent the value of the contractual benefits of which the claimant had been deprived by the breach of contract, no less but also no more".


The Court's decision in Flame SA v. Glory Wealth is a reflection of the English law compensatory approach to the assessment of damages. In practical terms, it means that in circumstances where a party is assessing whether or not to accept a repudiatory breach and terminate a contract, that party will have to consider whether, but for its acceptance of the repudiatory breach, it would be able to perform its obligations under the contract.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.