Visalia Marketing Corp & Anor v Seadrill Limited & Anor

A binding contract may arise before execution of a contemplated formal agreement where the parties’ communications and conduct objectively show sufficient agreement and an intention to create legal relations. A condition requiring disclosure to a third party may be sufficiently certain even where the parties have not agreed the precise form of the disclosure. Commercial risk-mitigation measures, including anti-corruption safeguards, do not necessarily prevent contractual formation. Where services are provided on a shared understanding that payment or a contract will follow, failure of that basis may support restitution if no contract is formed. A term will be implied only where necessary for business efficacy or so obvious as to go without saying.

The claim arose from negotiations concerning a joint venture between Seadrill and Sonangol for offshore drilling operations in Angola. Visalia and Mr Kennedy alleged that Seadrill agreed to pay a US$1.5 million fee and 4% of specified drilling revenue under a Representation Agreement, although the agreement was never formally executed. Seadrill relied on outstanding disclosure and anti-corruption requirements and on its subsequent corporate reorganisation.

The principal issues were whether a binding contract had arisen by 5 February 2019, whether the claimants alternatively had restitutionary rights, whether a trust arose, whether New Seadrill Ltd was liable, and how any fee was to be quantified.

1. Contract formation. There was a binding contract between Visalia and Seadrill Management as at 5 February 2019. The parties had agreed the substance of the Representation Agreement, intended to be legally bound, and understood that the agreement would be executed once the agreed disclosure condition was satisfied.
2. The payment obligation covered US$1.5 million upon execution of the shareholders’ agreement and 4% of Contract Revenue, subject to a condition that the disclosure letter be signed by Sonangol’s chief executive. The parties had not agreed the precise form of the letter, provided it demonstrated awareness of the Representation Agreement and its commercial basis. The condition was satisfied by the letters signed by Mr Saturnino or, alternatively, Mr Martins.
3. The anti-corruption safeguards were risk-mitigation measures and did not prevent contractual formation. Subsequent attempts to renegotiate the escrow or disclosure arrangements did not undo the contract. Visalia therefore succeeded against Seadrill Management. The claims against Old Seadrill Ltd and Mr Kennedy’s personal claims failed.
4. Restitution. If there had been no contract, Visalia would have been entitled to restitution from Seadrill Management and Old Seadrill Ltd for failure of basis. The defendants were enriched by services which facilitated the joint venture, and the fee represented the value of that benefit. The contractual finding meant that the restitutionary claim failed.
5. Trust and corporate succession. No express trust arose over the relevant revenues. New Seadrill Ltd assumed no liability by novation, estoppel or independent unjust enrichment.
6. Quantum. The fee included the dayrate element of Integrated Services revenue and the incentive element of Performance Bonus revenue for Quenguela and West Gemini, subject to the effect of liquidated damages. It excluded West Gemini revenue earned before novation and Performance Bonus revenue relating to Libongos. Further quantification was left as a consequential matter.