David Mildon reports on the implications of the settlement in National Power v United Gas. David Mildon QC is a barrister at Essex Court Chambers.

Where gas is sold and delivered in a bottle few would dispute that the buyer could no longer reject the gas after he has burnt it. So if it transpired during combustion that the gas was off-specification the buyer would be limited to claim in damages.

Is the position any different if the gas is delivered into a pipeline system where it becomes commingled with other gas and is eventually burnt at some indeterminate time and place?

The Court of Appeal was due to be grappling with this question about now, but the recent settlement in Nat-ional Power v United Gas Company means that the first instance (and unreported) judgment of Judge Colman will remain undisturbed for the moment.

Since 1990, a market has developed for the large scale purchase and sale of the North Sea gas at the beachhead where it enters the UK's onshore pipeline system.

Gas sold under such arrangements is not physically separated from other gas at the point of delivery, as it would be if it were sold in a bottle. Instead it is continuously measured at the beachhead delivery points and then allocated between the sellers and buyers.

Having entered the on-shore pipeline system the gas then becomes commingled with other gas and eventually emerges in somebody's gas appliance.

In National Power v United Gas Company Judge Colman held that the disputed gas was non-contractual. But he also held that it was too late for the buyers to reject it after it had entered the onshore pipeline system and been sub-sold. This was so despite the fact that the buyers had no means of finding out that the gas was non-contractual before they paid for it.

The case was decided under the old Section 35 Sale of Goods Act but parts of the reasoning would survive the amendments introduced by the 1994 Act.

Although dressed up as sales of physical gas, in practice the parties to this kind of transaction are really trading in drawing rights on the system. Banking law might provide an alternative solution to the problems raised.