Commercial Court clarifies meaning of “Banking Days” and timing of payment obligations in ship sale contracts

On 23rd June, 2026, the Commercial Court handed down judgment in Songa Product and Chemical Tankers IV AS v Gardsea Shipping Inc [2026] EWHC 1559 (Comm), providing important guidance on (i) how “Banking Days” are to be construed in Saleform 2012 and (ii) when payment is deemed to have been made for the purposes of contractual deadlines.

The decision will be of particular interest to parties involved in ship sale transactions where timing is of the essence.

Background

The dispute arose under a memorandum of agreement (MOA) on Saleform 2012 terms for the sale and purchase of a ship.

Under clause 3, the buyer was required to release the balance of the purchase price from escrow no later than three “Banking Days” after notice of readiness had been given. Notice of readiness was served on 2nd September, 2022 and it was common ground that the third Banking Day fell on 8th September, 2022.

The escrow account nominated for receipt of the purchase price was held in Norway by the seller’s Norwegian lawyers.

Although payment instructions had been issued, the full purchase price had not reached the escrow account by midnight in Norway on 8th September, 2022. At 00:09 Norwegian time on 9th September, 2022, the seller served a notice cancelling the MOA.

The dispute ultimately turned on whether the buyer had complied with its payment obligations before the contractual deadline expired.

The arbitration

The matter first came before an LMAA tribunal which found in favour of the buyer. The tribunal held that the seller had not validly cancelled the MOA because the buyer had satisfied its payment obligations within the contractual period.

Central to the tribunal's reasoning was its interpretation of the MOA's definition of "Banking Days" which referred to banking operations across a number of jurisdictions. The tribunal considered that this definition informed not only the identification of the payment deadline but also whether payment had been made in time.

The seller appealed to the Commercial Court on a question of law, under section 69 of the Arbitration Act 1996.

Key issue on appeal

The key issue for consideration by the Commercial Court was whether the buyer had complied with its payment obligations by the contractual deadline.

In deciding this issue, the court had to consider:

1. What constitutes a “banking day” for the purposes of the MOA; and,
2. When payment is deemed to have been made, i.e. whether payment is complete when funds are instructed/transferred or only when they are actually received in the relevant account.

A distinguishing feature of this case was that the contractual definition of “Banking Days” referred to banking operations in multiple jurisdictions, in significantly different time zones. As a result, the buyer argued that the definition of “Banking Day” should influence the determination of whether payment had been made in time.

Commercial Court decision

The Commercial Court allowed the seller’s appeal, finding that the arbitral tribunal had erred in law, with the following reasoning.

1. Identifying the deadline for payment

The court drew an important distinction between identifying the final day for payment and determining whether payment had actually been made on that day.

The purpose of the contractual definition of “Banking Days” was to identify which day constituted the third banking day after notice of readiness had been served. In this case, that exercise established that the relevant deadline was 8th September, 2022.

The court held that the “Banking Days” definition went no further. It did not answer the separate question of whether payment had actually been effected before the deadline expired.

The fact that the definition referred to banking operations in multiple jurisdictions, including locations in other time zones, did not alter the analysis. Those references served only to identify the relevant contractual day on which payment had to be made.

2. Payment had to be completed at the place of performance

Having identified the deadline, the court considered whether payment had actually been made on that day.

The court held that this question was governed by ordinary principles relating to the performance of payment obligations. The relevant issue was therefore whether payment had been completed before midnight local time at the place where the obligation was to be performed.

In this case, the obligation was to release the purchase price to an escrow account in Norway. Accordingly, payment had to reach that account before midnight Norwegian time on 8th September, 2022.

Because the funds had not been received by that time, the buyer had failed to perform its payment obligations within the contractual period.

3. Commercial certainty

The judgment also reflects the court’s preference for certainty in commercial transactions.

The court rejected the suggestion that the existence of banking operations in other jurisdictions could effectively extend the deadline for performance. To hold otherwise would risk introducing uncertainty into ship sale transactions by making payment deadlines dependent on banking hours and time zones in a range of different locations.

Instead, the court adopted a straightforward approach: once the deadline day has been identified, the question is simply whether payment has been received by midnight at the place where payment is due.

Conclusion

The decision offers several practical lessons for parties involved in ship sale transactions.

First, parties should distinguish between contractual provisions that identify a deadline and those that govern how performance must be achieved by that deadline. The two questions are not necessarily the same.

Secondly, where payment is being made internationally, parties should pay close attention to the location of the receiving account. The relevant time for determining compliance may not be the time in the buyer’s jurisdiction, or indeed in any of the other jurisdictions referred to in a Banking Day definition.

Finally, the case serves as a reminder that payment obligations under Saleform contracts are often treated strictly. Even a relatively short delay can have significant consequences where the contract provides the seller with a right of cancellation.

Comment

The decision is a welcome clarification of a point that could otherwise create considerable uncertainty in international ship sale transactions.

Whilst the Saleform definition of “Banking Days” may refer to multiple jurisdictions, potentially including locations separated by many hours of time difference, the court confirmed that this definition merely identifies the deadline day. It does not determine whether payment has been made on that day.

For buyers, the practical message is clear: funds should be arranged well in advance, with sufficient allowance for banking delays and international transfers. For sellers, the judgment reinforces the importance of certainty and predictability in time-critical ship sale contracts.

The decision therefore provides a sensible and commercially coherent interpretation of Saleform 2012, ensuring that payment deadlines remain clear and objectively ascertainable, regardless of the number of jurisdictions referenced in the contract.

If Members have any questions in relation to the above issues they are invited to contact the Club for further information.