Founded in 1966 as a trader of oil and oil products, Vitol is a company with no


Founded in 1966 as a trader of oil and oil products, Vitol is a company with no external shareholders. All shareholders are also employees. It is a conglomerate company of energy companies that work in oil transportation, energy market intelligence, refining, distribution, and trading and financing.1 It is unencumbered by external shareholders and the need to answer to analysts and investment funds. Instead, Vitol is a group of separate companies, each staffed by energy professionals with a true depth of experience in the business of oil transportation, market intelligence, refining, distribution, marketing, trading, and finance.
Vitol entered into a contract on January 13, 2000, for the delivery of oil with the defendant, Koch Petroleum Group, a component of Koch Industries, Inc., a Wichita, Kansas, private company with over \($100\) billion in worldwide revenues and over 70,000 employees. The sales contract required that Koch deliver 75,000 barrels of heating oil to a barge designated by Vitol within a window of time between February 3 and 5, 2000.2 Later that January, Vitol sold the oil to a third party, Castle Oil Corporation. Castle Oil and Vitol agreed that the oil would be delivered to Castle Oil’s barge on February 3, and they communicated that fact to Koch. Koch agreed. Koch was unable to deliver the oil on February 3 despite being told by Vitol that time was of the essence regarding that date for Castle Oil. Koch did deliver the oil on February 4, but that oneday difference caused Castle Oil to cancel its contract with Vitol. Castle sued Vitol for breach and was awarded a \($1.7\) million arbitration judgment. Vitol then sued Koch for recovery of the \($1.7\) million it had to pay Castle.
The issue here is that of perfect tender. Koch claimed that it substantially complied with the contract as delivery of the oil was to be during the February 3 to 5 time window. Vitol argued that the contract was modified with Koch’s acceptance to delivery specifically on February 3.
1. Did Koch’s failure to deliver the oil on February 3 constitute something less than “perfect tender” and thus a breach of contract?
2. Did that one-day difference in delivery constitute a breach of the perfect tender rule?

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Dynamic Business Law

ISBN: 9781260733976

6th Edition

Authors: Nancy Kubasek, M. Neil Browne, Daniel Herron, Lucien Dhooge, Linda Barkacs

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