Statoil ASA v Louis Dreyfus Energy Services LP

Contract terms are determined objectively from the parties’ communications and conduct. In commercial negotiations using an “accept/except” format, a response identifying the terms accepted may sufficiently reject an omitted term without expressly stating that it is rejected. A recap prepared by a broker does not bind the parties unless objectively accepted.

A unilateral mistake affects a compromise contract at common law only where the mistake concerns a term of the contract, rather than a factual assumption motivating the agreement. There is no general equitable jurisdiction to rescind a valid contract for unilateral mistake as to such an assumption, absent misrepresentation. A subsequent oral agreement may supersede an earlier settlement agreement where the parties objectively agree to vary or replace it.

Statoil, the seller of a cargo of liquid propane gas, claimed the balance of demurrage from Louis Dreyfus Energy Services LP. The parties disputed whether their sale contract contained a 90-day demurrage time bar, whether a January 2007 settlement for US$103,527.84 was binding despite Statoil’s calculation error, and whether a later telephone conversation created a settlement for the corrected demurrage figure.

The claim was heard at first instance in the Commercial Court. The principal questions were whether the time-bar wording formed part of the contract, whether unilateral mistake entitled Statoil to avoid the January settlement, and whether the parties subsequently agreed a replacement settlement.

1. Contract terms. Applying the objective approach in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601, the August exchanges showed that the parties agreed the principal sale terms but did not agree a demurrage time bar. In the “accept/except” exchange, Statoil’s specification of the demurrage rate without the proposed time-bar wording sufficiently indicated rejection of that wording. The broker’s recap was not accepted and could not introduce the term. Statoil’s later failure to object to other terms did not alter that conclusion. The contract contained no demurrage time bar (paras 68–83).
2. January settlement and mistake. The January agreement was a compromise contract concerning the amount payable, not a contract whose term was that discharge had ended on 13 October 2006. Under Smith v Hughes [1871] LR 6 QB 597, a known unilateral mistake about a motivating fact does not prevent contractual formation where the fact is not a contractual term. The common-law doctrine therefore did not assist Statoil (paras 84–96).
3. Equitable relief. The court rejected the suggested wider equitable jurisdiction to rescind a valid contract for unilateral mistake about a fundamental assumption. The reasoning in Huyton SA v Distribuidora Internacional De Productos Agricolas SA de CV [2003] 2 Lloyd’s Rep 780 was not supported by the authorities considered. The approach in Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679 strongly indicated that no such jurisdiction existed. In any event, the mistake resulted from Statoil’s carelessness, so rescission would not have been equitable (paras 97–106).
4. March agreement and outcome. On the balance of probabilities, the March telephone conversation produced an agreement that LD would pay the corrected demurrage, subject to a six-hour adjustment. The subsequent email and invoice recorded, rather than imposed, that agreement. It superseded the January settlement. Judgment was therefore entered for Statoil for US$435,833.12, with interest left for further argument if required (paras 107–116).

First-instance decision. No earlier appellate decision is stated in the judgment.