The brief facts were that one OW entity had contracted to supply
a vessel with bunkers but the actual physical supply had been
sub-contracted to a Rosneft entity. The contract between
Rosneft and OW gave OW 30 day credit terms and included a retention
of title clause ("ROT"), i.e. a clause which said that
title in the bunkers would stay with Rosneft until payment was
received from OW.
OW entered liquidation and did not pay Rosneft even though the
bunkers had been supplied to the vessel which proceeded to burn
them. As it was concerned about having to pay twice, the vessel
sought a declaration that it did not have to pay OW.
A key question the Supreme Court considered was whether a bunker
supply contract on credit terms was a contract for the sale of
goods pursuant to the Sale of Goods Act 1979.
The Court ruled that it was not a sale of goods. Instead
the Court found that it was a unique agreement pursuant to which
the purchaser bought the right to consume the bunkers prior to
Practically, this meant that the ROT was meaningless and OW, as
contractual supplier to the vessel, was entitled to receive payment
for the bunkers.
The Supreme Court's decision came as a surprise to most in
the industry who had thought that they were selling goods when they
"sold" bunkers. It remains to be seen whether other
goods which are sold on the understanding that they will be
consumed, on-sold or manufactured prior to payment will not be a
sale of goods.
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