• In the case of Statoil ASA v Louis Dreyfus Energy Services LP [2008] EWHC 2257 (Comm), the court ruled that equitable principles don’t apply when it comes to unilateral mistakes.
  • This contract case is about sale of goods, rescission and unilateral mistakes.
  • In this case, D knew of the error but did not point this out to C causing C to incur losses.

Facts of the Case

  • C and D contracted for a cargo of liquid propane gas in exchange of money.
  • C sent a claim for liquidated damages to D but made a mistake regarding the amount. D came to know about this mistake but did not say anything.
  • C later attempted to correct this mistake and contended the contractual agreement regarding the demurrage charges was void/voidable. C further argued he was entitled to the full amount under the time bar provision.

Issues

  • Whether rescission is available for unilateral mistake.
  • Whether there was a demurrage time bar provision in the contract.
  • Whether C is entitled to the full payment.

Held by Court

  • C wins claim – D also agreed to pay the complete amount in the second agreement which essentially overrides the first one.

Aikens J

Demurrage time bar provision

  • C and D expressed “objective intentions” [79] to not consent with the demurrage time bar provision.

Unilateral mistake

  • According to Smith v Hughes [1871] LR 6 QB 597, unilateral mistakes inducing a party into a contract can still be binding if the mistake did not concern a contract term.
  • “Therefore the normal rule of looking only at the objective agreement of the parties is displaced and the court admits evidence to show what each side subjectively intended to agree by way of terms. If it is clear from such evidence that there was not consensus, then there can be no contract, because the parties have not truly agreed on the terms.” [87]
  • “On this analysis, the facts fall outside the classic circumstances in which the courts have admitted evidence of subjective states of mind of the parties to see whether the unilateral mistake of one which was known to the other, has created a situation where there was not, in fact, agreement. So the unilateral mistake does not affect the objective agreement of the parties.” [93]

Rescission

  • Following Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407 where rescission was unavailable for common mistake similarly here rescission is unavailable in equity for unilateral mistake.

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