Price volatility of commodities can often result in non-delivery or non-acceptance of goods, the two most common breaches of international trade contracts. But breach in itself, is not worth very much unless there is a loss. And the law’s approach to understanding loss is nuanced, providing a starting measure of loss based on an “available market” price. In the world of international trade, what constitutes an available market, a prerequisite in establishing market loss, is a multi-factorial inquiry. Is an innocent party required to scour the globe for the cheapest possible substitute cargo to show that it has mitigated its loss? These issues were front-and-centre in the recent Singapore High Court decision in Shri Bajrang Power and Ispat Ltd v Steel Corp Ltd [2025] SGHC 107.
In this case, the claimant Indian steel manufacturer, Shri Bajrang Power and Ispat Ltd (“Shri Bajrang”), contracted with the defendant, Steel Corp Ltd (“Steel Corp”), a UK metals trader, to buy 30,000 metric tons of pig iron for steel production. The shipment was due to arrive in India in August 2023, but Steel Corp failed to deliver. When the contract was terminated, Shri Bajrang, did not purchase Indian pig iron as at the relevant time, it was about US$80 per metric ton more than the contract price with Steel Corp. Instead Shri Bajrang sourced the raw material of steel scrap from the domestic Indian market, from which pig iron could be processed and incurred further processing costs to convert the steel scrap to pig iron, which meant it incurred a loss of US$35 per metric ton when compared to the original contract price of US$381 per metric ton.
This decision to resort to steel scrap with further costs of processing into pig iron, was contested by Steel Corp, who alleged that cheaper sources of pig iron were available in South Africa (US$371.77 per metric ton) and Russia (US$397.03 per metric ton) – both of which would have resulted in cheaper substitute goods than what Shri Bajrang actually did.
- The ’Available Market’
A claim for losses for non-delivery falls under section 51 of the Sale of Goods Act 1979 (“SGA”), of which section 51(3) states that where there is an available market for the goods in question, damages are to be ascertained by the difference between the contract price of the goods and the current price of the goods in that market.
This raised a question as to what the ‘available market’ is. The key question is where substitute goods of the same type can be readily bought in order to meet demand, in the buyer’s commercial context. This is ultimately, fact-specific, as the Court explained, and to be determined from the buyer’s (i.e. Shri Bajrang’s) perspective. Shri Bajrang’s position was that the Indian market, and not the global market was the relevant ‘available market’ in question. Steel Corp argued that the ‘available market’ should include cheaper overseas sources such as Russia and South Africa, which if Shri Bajrang had utilized would have reduced the loss exposure of Steel Corp.
The Court however agreed with Shri Bajrang and held that available market would be the Indian market, and not the global market. This is because it was both reasonable and common practice for Shri Bajrang to source from the Indian market, especially at such short notice. The key considerations therein were the availability and accessibility of substitute goods to the buyer.
Pragmatically, the Court analysed that a buyer whose contract had just been breached by the seller would need to source a substitute within a reasonable time and with a certain degree of assurance that it would get the supply. The Indian (local) market ticked both of those boxes.
- Reasonable Mitigation: Relevance in Assessing Damages
Where there is an available market, the loss would be the difference between market price and contract, but this theoretical loss is only the starting point until the Court examines whether the innocent party has mitigated and in turn suffered actual loss.
In analysing as such, the Court applied the English case of Bunge SA v Nidera BV [2015] Bus LR 987 (“Bunge”). In Bunge, the UK Supreme Court held that normally, even when there is an available market for the goods in question, “the injured party will be required to mitigate his loss by going into the market for a substitute contract as soon as is reasonable after the original contract was terminated. Damages will then be assessed by reference to the price which he obtained”. The Court in Bunge further observed that in practice, a party chooses not to mitigate its losses, damages will generally be assessed by reference to the market price at the time when it should have taken mitigatory measures. As such, the relevant market price for the purposes of assessing damages will generally be determined by the principles of mitigation. This is in line with an innocent party’s duty to mitigate its losses.
Rather than awarding damages based on a hypothetical market price for pig iron (which was about U$80 per metric ton more than contract price), the Court looked at the actual extra costs Shri Bajrang incurred). By using steel scrap instead of expensive Indian pig iron, Shri Bajrang had incurred an additional cost of US$35 per metric ton to make the steel scrap usable for steel production. As a result, damages were assessed on the actual difference in production costs, not on what might have been lost in theory. This reflects the fundamental tenet of ordinary legal damages – they are meant to compensate, not reward.
The other question the Court answered is what constituted reasonable mitigation. The Court emphasised that the duty to mitigate is not a demand for extraordinary measures. In following the Singapore Court of Appeal case of The “Asia Star” [2010] 2 SLR 1154, the Court held that the duty to mitigate is subject to the principle of reasonableness, and what is ‘reasonable’ is ascertained on the facts. In this case, Shri Bajrang’s decision to buy steel scrap locally was found to be reasonable, given the need for reliable supply and the company’s usual business practices. The Court rejected Steel Corp’s argument that Shri Bajrang should have hunted all over the globe for the lowest possible price (including sourcing from Russia or South Africa), especially since local sourcing is standard and provides greater certainty of supply.
Conclusion: Damages, Sensibly Assessed and Mitigated
In short, when faced with a breach of contract, an aggrieved buyer may turn to loss assessed on available market price, which is an assessment grounded in commercial reality rather than hypothetical possibility. Once loss has been established, the law will balance this with reasonable mitigatory steps required of the innocent party. The aggrieved buyer should therefore focus on practical, commercially sensible steps to mitigate its losses while documenting its actions and decisions. In this situation, the courts will look for reasonableness, not stainless perfection.
