Mercuria Energy Trading SA -v- ONEX DMCC [2026] EWHC 130 (Comm)

Overview

In Mercuria Energy Trading SA v Onex DMCC [2026] EWHC 130 (Comm), the Commercial Court confirmed that an express contractual term requiring crude oil to be ‘in line with the following typicals’, was not a warranty or requirement as to the quality of the cargo, particularly when read together with the other terms and conditions of the contract (which included an express provision that the ‘typicals’ would not form part of the product’s description, quality or fitness for purpose). As this case relates to the interaction between a recap (or special conditions) and the BP General Terms and Conditions, it will be of wide interest to those in the oil and oil products trading sector. 

Facts

Mercuria Energy Trading SA (“Mercuria”) is a substantial global trader based in Switzerland. Onex DMCC (“Onex”) is based in the Middle East and its trade is largely focused on the sale of oil that originates in Iraq.

In 2022, Onex, as seller, and Mercuria, as buyer, entered into a contract for the sale of Iraqi SOMO (State Oil Marketing Organisation) Basrah Pipeline High Sulphur Straight-Run Fuel Oil (“SRFO”), which was concluded on CIF terms, incorporating (amongst other things) a Recap and the BP General Terms and Conditions (the “BP GTCs”).

The Recap

The Recap included the following terms: 

1. The product being sold was identified as “… SOMO Basrah pipeline high-sulphur straight-run fuel oil in line with the following typicals;…”, followed by a table of test results including “Organic Chloride” with a “result” of “4.10ppm” and a “Min-Max” of “5ppm Max”; and
2. separately, the SRFO was stated to meet with certain “guarantees”. There followed a table of guaranteed specifications, which did not include any reference to organic chlorides.

(together the “Special Provisions”).

The BP GTC

The BP GTCs contain the following terms: 

1. Clause 57.1 (Definitions) required:

…

“57.1.3 “the Agreement” means these General Terms and Conditions (including, where applicable, the Schedules attached hereto) together with the Special Provisions;

…

57.1.51 “Product” means wholly or partially refined petroleum product … of the grade specified in the Special Provisions…

…

57.1.59 “Special Provisions” means the oral or written agreement in which, by reference, these General Terms and Conditions are incorporated to form the Agreement;

…

57.1.61 “typical” means 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. Clause 59.1.1 provided that 

“Unless otherwise stated in the Special Provisions, the quality of …[the] Product delivered hereunder shall not be inferior to the specification (if any) set out in the Special Provisions. 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. This sub-section constitutes the whole of the Seller’s obligations with respect to the description, quality and fitness for purpose of the … Product and (save to the extent that exclusion thereof is not permitted or is ineffective by operation of law) all statutory or other conditions or warranties, express or implied, with respect to the description or satisfactory quality of the … Product or its fitness for any particular purpose or otherwise are hereby excluded ...” …” (“Clause 59.1.1”).

(together the “BP Clauses”).

A total cargo of 138,504 metric tons of SFRO was loaded in stages between 11 July 2022 and 6 August 2022 at the Port of Khor Al Zubair and Port of Fujairah respectively, then carried by vessel “RELIABLE WARRIOR” to the US Gulf Coast.

Upon discharge of the SRFO, it was discovered to have been contaminated: The cargo contained significant levels of organic chlorides, thereby rendering the SRFO unsuitable for immediate refining (organic chlorides being deleterious to refinery processes).

Mercuria sued Onex for damages, contending that the elevated level of organic chlorides in the SRFO gave rise to a breach of contract. Two issues of liability arose between the Parties, with Mercuria arguing that:[1]

1. First, Onex were obligated to deliver the SRFO “in line with” a typical organic chloride content of 4.1ppm (in the context of a maximum of 5ppm); or alternatively 
2. Second, the SRFO contamination was such that the crude was not (or not only) SOMO Basrah Pipeline High-Sulphur Straight-Run Fuel Oil. 

Decision

Liability

The Commercial Court found there was no contractual obligation on Onex regarding the levels of organic chlorides, notwithstanding the Recap which stated that the SRFO be “in line with the following typicals”.

As to this, there was no inconsistency or conflict between the Recap (as Special Conditions) and the BP GTCs. The Commercial Court applied Septo Trading Inc v Tintrade Ltd (The Nounou) [2021] EWCA Civ 718: This sets out the approach the English Courts should take towards the construction of a contract that incorporates both standard form and specially agreed terms. As such the question “is whether the two clauses can be read together fairly and sensibly so as to give effect to both. This question must be approached practically, having regard to business common sense, and is not a literal or mechanical exercise.”  There is “no magic” in the fact that a contract contains both printed and specially agreed terms. If two clauses can be read fairly and sensibly to give effect to both, then the court is likely to construe the contract accordingly.

The Commercial Court considered that the Special Provisions and the BP GTCs could fairly and sensibly be read together, such that the “typicals” identified in the Special Provisions were not binding on Onex.

In its review of the contractual language, the Commercial Court gave weight to the following:

1. The Special Provisions separately identified “typicals” and “guarantees”. The “typicals” referred to the organic chloride content of the cargo, whilst the “guarantees” did not. This strongly suggested that the items identified by each category were distinct and fell to be considered separately. The table of “guarantees” are the only specifications which Onex was prepared to and would guarantee; 
2. under the BP GTCs (clause 57.1.61), a "typical" is merely a characteristic “often attributable to the Product but given without guarantee and without any promise that the typical quality or attribute would in fact be present” and therefore on the face of the BP GTCs, a “typical” is not a guaranteed specification or a warranty.
3. the wording in the Special Provisions - "in line with the following typicals” - was construed in accordance with the definition of “typicals” found in Clause 57.1 (Definitions) of the BP GTCs. The parties had used the word “typicals” in the sense defined therein, i.e. as a characteristic often attributed to a product, but without any guarantee, representation or warranty as to its condition. This was consistent with the reading of Clause 59.1.1: “typicals” do not form part of the cargo’s description, quality or fitness for purpose;
4. the Commercial Court rejected an argument by Mercuria that the “typicals” ought to be defined by reference to the Special Provisions only (sidelining the BP GTCs).  Agnan SpA v Tradax Ocean Transport [1987] 2 ALL ER 565 was followed: The contract must be construed as a whole and it “would be quite wrong to approach this question of construction with any predisposition to find inconsistency between the special condition and the [printed terms]. They are all part of the same contract… the parties expressly chose to make their contract subject to the [printed terms]”; and
5. the use of the words “in line with” was not sufficient to elevate a “typical” characteristic into a warranty as to the SRFO. Rather, these were no more contractually significant than wording such as ‘as follows’ or ‘in accordance with’.

In relation to the argument that the cargo had ceased to be SRFO, the Commercial Court was satisfied on the evidence before it that the cargo remained SRFO, notwithstanding its elevated organic chloride content. As such, there was no breach of description.

The Commercial Court considered that the most powerful evidence the cargo had not lost its commercial identity as SRFO was the fact that 93.53% of the cargo was subsequently on-sold as “Iraqi SRFO”. to Trafigura, Hartree and Buckeye .

Comment

It is not a revelation that parties buying and selling crude oil will agree a contractual regime that incorporates both industry standard and a recap (or special terms). However, the Commercial Court’s decision in Mercuria is important because it reinforces exactly how matters of contractual interpretation will be approached where there is said to be an inconsistency between the industry standard terms and recap/special terms. The exercise that will be undertaken is: 

1. The starting point is ascertaining the intention of the parties as it appears from the language that they have used against the commercial setting in which the contract has been concluded; 
2. the correct approach to construction is to take a practical approach, and not a literal or mechanical one; 
3. if, upon a practical construction, the printed term effectively deprives the special term of any effect, the two clauses are likely to be inconsistent; and
4. if, however, the two clauses can be read fairly and sensibly so as to give effect to both, then the court is likely to construe the contract accordingly. 

Accordingly, this case is a stark reminder to consider how any incorporated industry standard terms interact with the recap/special terms agreed. Specifically, if a recap has agreed to incorporate industry standard terms, it is important not to read the recap in isolation as its objectively ascertained intention will most likely be judged through the prism of the incorporated standard terms. 

The BP GTCs are widely used in the industry. As such, this case will provide important guidance to those incorporating the BP GTCs and will have broad application. In particular, the decision of the Commercial Court is likely to stand for the proposition that “typical” in any recap or special terms that are incorporated in the BP GTCs, is unlikely to give rise to any contractual obligation as to specification or quality.  That said, the case does not set a precedent for (absent provisions of the type in the BP GTCs), whether the words “typicals” might give rise to a contractual obligation on specification or quality. The words used by the parties in the relevant contract will remain central to determining whether the widely used “typicals” wording creates enforceable obligations. 

Another practical implication is the impact of the on-sale conduct of the buyer on contamination disputes, with such conduct being used as evidence against a claim of loss of commercial identity of goods. Any buyer will wish to ensure that in any on-sale, goods are correctly described (so as to avoid claims in contract and misrepresentation). That is probably the reason that the Commercial Court took comfort in this case that the description of the goods for on-sale (as SRFO), meant that it could be satisfied that the description remained correct once the buyer became aware of the issue. That said, it might be said that whether a cargo is SRFO (or any other product) should be judged on a purely objective basis without reference to its description in any document. 

Buyers faced with contaminated cargo may face a dilemma of having to mitigate their losses, often by reselling quickly under the original description. While it will wish to ensure that the goods are properly described, this may have challenges when sales happen back-to-back.

Judge: Lionel Persey KC (sitting as a Judge of the High Court).
 

[1] Mercuria [51]