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Sky Petroleum Ltd v VIP Petroleum Ltd [1974] 1 All ER 954

Contract law – Sale of goods – Specific performance

Facts

The plaintiffs, Sky Petroleum, entered into a contract with the defendant, VIP Petroleum, and agreed to purchase at a fixed price their entire order of motor petrol and diesel fuel for their filling stations for the next ten years. A minimum annual quantity for the order of petroleum was stated in the contract. During a time when there was limited fuel supplied and the plaintiffs could not find another source, the defendants attempted to terminate the contract on the basis that the plaintiffs had broken the credit terms of the agreement between the parties. The plaintiffs brought an action to restrain the defendants from withholding supplies.

Issue

The facts of this case were quite rare on the basis that the defendants were the only supplier to the plaintiff at the time of the fuel supply restrictions. The case was concurrently pending trial to determine some of the matters of the dispute between the parties so it was important for the court to focus on the concept of whether specific performance could be enforced in the circumstances.

Held

The court held that an injunction, under the circumstances would essentially be an order of specific performance of the contract to sell, which would normally be refused on the basis that damages would be sufficient. However, in the rare situation where the defendant was the only supplier and the only method which would enable the plaintiff to carry on their business, an injunction would be granted as damages would no longer be a sufficient remedy.


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