Vitol SA v Norelf Ltd, The Santa Clare [1996] AC 800
[1996] 3 WLR 105; [1996] 3 All ER 193; [1996] 2 Lloyd’s Rep 225; [1996] CLC 1159; (1996) 15 Tr LR 347; (1996) 93(26) LSG 19; (1996) 146 NLJ 957; (1996) 140 SJLB 147
CONTRACT, REPUDIATION, SALE OF GOODS, GOODS REJECTED BEFORE DELIVERY, ANTICIPATORY BREACH, POSITION OF AGGRIEVED PARTY, FAILURE TO PEFORM A CONTRACT
Facts
The defendant buyers – Vitol (V), entered into a contract with the plaintiff sellers – Norelf (N) to purchase a cargo of propane at a price of $400 per tone. The cargo was to be shipped from Houston in the US and delivered between 1 and 7 March 1991. On 8 March, the buyers sent a telex to the sellers that they had been advised that the vessel would not complete loading until 9 March and accordingly, the cargo would not be delivered on time. In light of the breach of this condition, V wanted to reject the cargo and repudiate the contract. The vessel completed loading and neither party took any steps to perform the contract. On 15 March, N resold the propane at a price of $170 per tone. The sellers claimed damages worth of $1m as they had to sell the propane at a loss. The arbitrator rejected the claim on grounds that the buyers’ rejection letter constituted an anticipatory breach of contract and the sellers’ failure to take any action to perform the contract constituted acceptance of the repudiation of the contract. The second part of the arbitrator’s decision was appealed and the appeal was dismissed at first instance. The sellers appealed to the Court of Appeal and the Court of Appeal allowed a further appeal. The sellers appealed and the buyers cross-appealed to the House of Lords.
Issues
(1) Can an aggrieved party accept repudiation of a contract merely by failing to perform its part of the contract?
(2) Is this a question of law or a question of fact?
Decision/Outcome
The appeal was allowed and the cross-appeal was dismissed.
(1) Whether an aggrieved party can accept repudiation of a contract merely by failing to perform its part of the contract is a question of law under s. 1(2) Arbitration Act 1979.
(2) When the contract was repudiated by the buyers, the sellers had a choice of either accepting the repudiation or affirming the contract.
(2) The sellers’ failure to perform the contract could not constitute acceptance of the buyers’ anticipatory repudiation of the contract as the failure did not evince a clear and unequivocal choice not to affirm the contract.
Updated 21 March 2026
This case note accurately summarises the facts, issues, and outcome of Vitol SA v Norelf Ltd [1996] AC 800. The legal principles established by the House of Lords remain good law. The core holding — that an aggrieved party may in principle accept a repudiation by conduct, including a failure to perform, provided that conduct clearly and unequivocally communicates acceptance — continues to be applied in English contract law.
One point of context worth noting: the procedural question in the case concerned the jurisdiction of courts to consider questions of law arising from arbitration awards under s. 1(2) of the Arbitration Act 1979. That Act has since been repealed and replaced by the Arbitration Act 1996, which governs appeals on points of law from arbitration awards under s. 69. This does not affect the substantive contract law principles discussed in the article, but students should be aware that any reference to the 1979 Act is now of historical interest only. The Arbitration Act 1996 is itself currently subject to reform: the Arbitration Act 2025 has received Royal Assent and will amend the 1996 Act, though the provisions relevant to appeals on points of law are not materially altered in ways that affect this case’s continued authority.
The article contains a minor factual ambiguity in the summary of the outcome: it was the buyers whose appeal to the House of Lords was allowed (restoring the arbitrator’s decision that the sellers had accepted the repudiation by their failure to perform), and the sellers’ cross-appeal was dismissed. Readers should consult the full judgment for clarity on this procedural point.
