Global supply chains have never been more fragile. From geopolitical tensions around the Strait of Hormuz to cascading disruptions across energy and commodities markets, sellers and traders are increasingly tempted or forced to walk away from delivery obligations. For buyers left empty-handed, the immediate question is a practical one: what can you actually recover?
Singapore law provides a framework for answering that question, but as recent case law confirms, the answer is rarely straightforward.
The Starting Point: Section 51 of the Sale of Goods Act
Under Singapore law, damages for non-delivery are governed by Section 51 of the Sale of Goods Act (SGA). The foundational principle is straightforward: damages are compensatory, intended to place the innocent buyer back in the position they would have occupied had the contract been properly performed.
However, the section 51(3) clarifies if a seller fails to deliver goods and similar goods are available in the market, the buyer’s compensation is calculated as the difference between what they agreed to pay under the contract and what those goods actually cost in the market at the time they should have been delivered. Simply put, if the market price has gone up since the contract was signed, the seller must cover that price gap for the buyer.
What Counts as an “Available Market”?
Before the Section 51(3) measure can even be applied, there must be an available market for the goods. Critically, Singapore courts have interpreted this concept through a commercial, not merely theoretical lens.
This was illustrated vividly in Shri Bajrang Power and Ispat Ltd v. Steel Corp Ltd [2025] SGHC 107. The dispute involved a failed delivery of 30,000 metric tons of steel-making pig iron from Türkiye to India. When the seller failed to deliver, the buyer sourced steel scrap from the Indian market instead of pursuing pig iron from overseas suppliers in South Africa or Russia. The seller argued this was an unreasonable mitigation choice given cheaper alternatives technically existed abroad.
The Singapore High Court disagreed. Affirming that commercial reality must guide the available market analysis, the Court found that sourcing from the Indian market was entirely reasonable given the risks of overseas procurement, including shipping delays, customs uncertainties, and the challenges of dealing with unfamiliar suppliers. The relevant market is not the theoretical or global market, but the one that offers the claimant a practical and reasonable means of replacement.
When Mitigation Overrides the Market Rule
Perhaps the most significant aspect of Shri Bajrang Power case is the Court’s treatment of mitigation. Even though an available market for pig iron existed in India, the Court declined to award damages based on the market price for pig iron. Instead, because the buyer had purchased steel scrap, a substitute material at a price lower than the prevailing Indian pig iron market price, the Court held that damages should be calculated by reference to the actual substitute transaction rather than the hypothetical market difference.
This means that Section 51(3) is not an automatic entitlement, but a starting point; and second, commercial context matters, the reasonableness of mitigation efforts depends on the specific circumstances facing the innocent party, including operational continuity and market familiarity.
This approach reflects a broader principle. While the classic market-difference method relies on a legal fiction of immediate market substitution, resort to an actual substitute transaction allows courts to award compensation without conferring a windfall on the claimant. The compensatory principle, in other words, cuts both ways.
The Role of Sub-Contracts and Consequential Losses
A recurring issue in commodity disputes is whether a buyer can recover loss of profits from a sub-sale or downstream contract when the seller fails to deliver. Under Singapore law, the default position is that such losses are not recoverable unless sub-sale arrangements were within the reasonable contemplation of both parties at the time of contracting.
In Gimpex Ltd v Unity Holdings Business Ltd, despite the existence of a downstream sub-sale arrangement, the court declined to award loss of profits because the seller had no knowledge of the sub-contract and its terms at the contract date. The court’s reasoning leaves room for recovery of sub-sale losses where the seller was actually aware of the onward transaction, but the bar is a meaningful one.
While the standard position firmly supports the market rule over sub-sale consideration, courts may depart from it where the very nature of the contractual relationship was defined by knowledge of a specific onward transaction. Absent that, the Section 51(3) market-difference measure remains the default.
Practical Guidance for Buyers and Sellers
Against this legal backdrop, both buyers and sellers in volatile markets would do well to heed some practical guidelines including the importance of reviewing contractual provisions carefully upon any sign of default, convening a dedicated response team, and documenting all mitigation efforts meticulously from the outset. In a moving market, timing matters, and perceived delays in taking reasonable mitigation steps can reduce the quantum of damages a buyer ultimately recovers.
For sellers, the risks run in the opposite direction. Attempting to exit a contract under the guise of force majeure when the real driver is price movement is increasingly scrutinised by tribunals.
Conclusion
Singapore’s framework for measuring non-delivery damages is principled, but it rewards preparation and penalises passivity. The market rule provides a starting point, but as Shri Bajrang Power confirms, actual mitigation steps will often shape the final award. Sub-sale losses require foreseeability, and commercial conduct post-breach will be closely examined.
In an era of supply chain disruption and commodity price volatility, parties to international sale contracts should not treat the law on non-delivery damages as background noise. It may well determine how much or how little you recover when a deal falls apart.
