Statoil ASA v Louis Dreyfus Energy Services LP [2008]

Statoil ASA v Louis Dreyfus Energy Services LP [2008] EWHC 2257 (Comm); [2008] 2 Lloyd’s Rep 685 is a significant case that clarified the legal stance on unilateral mistake in English contract law. The central conclusion of the case is that there is no equitable doctrine of unilateral mistake under which contracts are considered voidable in English law.

Statoil, the seller, and Louis Dreyfus, the buyer, entered into a contract of sale. The contract obligated Louis Dreyfus to indemnify Statoil for any demurrage (liquidated damages for delays in loading or discharging cargo) payable to the ship owner. Statoil made a mistake in calculating the demurrage due, based on an error in the discharge date. Subsequently, Statoil and Louis Dreyfus entered into a settlement agreement according to the miscalculated sum. Upon discovering the mistake, Statoil sought to argue that the settlement agreement was either void in common law or voidable in equity due to unilateral mistake.

In the High Court, Aikens J delivered the judgment. It was held that the settlement agreement was valid, and neither void in common law nor voidable in equity. Aikens J emphasised that there is no common law rule for unilateral mistake of fact. Even if one party is aware of the other's mistake, the contract is not void. This principle, established in Smith v Hughes [1871], was applied to the case, leading to the conclusion that Louis Dreyfus' knowledge of Statoil's mistake did not render the settlement agreement void. Furthermore, Aikens J rejected the existence of a wider equitable jurisdiction to grant rescission of a contract in the case of a unilateral mistake. Even if such a jurisdiction were to exist, it was not to be exercised in this instance due to Statoil's carelessness in making the mistake.

The case also highlights the defunct equitable doctrine of unilateral mistake, which allowed a contract to be voidable in equity under certain conditions. However, Aikens J's judgment affirmed that such an equitable doctrine no longer holds sway in English law.
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