London Arbitration 7/22

X supplied Owners with bunkers which had been purchased from its subsidiary Y under a sale contract. Y in turn had bought those bunkers from the Supplier who, fearing Y’s failure to pay, obtained payment from Owners directly. Owners subsequently resisted X’s claim for payment of the price and pleaded “failure of consideration” as the sale contract between X and Y limited consumption to X’s own vessel prior to payment. The Tribunal found that the remittance to the Supplier did not release Owners from their payment obligation to X nor did they have any right to set-off. Owners’ defence of failure of consideration also failed as the definition of “Buyer” in the sale contract included the “vessel supplied”, thus Owners had acquired the right to use the bunkers.