Unilateral mistake of fact

Statoil ASA v Louis Dreyfus Energy Services LP [2008] All ER (D) 116 (Sep) QBD (Comm) 29 September; NLJ 3 October

A dispute as to the amount of demurrage payable by the defendant was resolved by agreement, from which the claimant tried to resile on the ground that the agreement was made on the basis of a mistake as to the appropriate amount of demurrage actually due. The defendant accepted the claimant had erred in calculating the sum and that it had realised the claimant had made the mistake, but decided to keep quiet about it before the settlement agreement. The general rule of common law is that if one party has made a mistake as to the terms of the contract and that mistake is known to the other party, then the contract is not binding. The reason was that although the parties appeared to have agreed terms, it was clear they were not actually in agreement. Therefore the normal rule of looking only at the objective agreement of the parties was displaced and the court would admit evidence to show what each side subjectively intended to agree by way of terms. If it was clear from such evidence that there was not consensus, then there could be no contract. Some of the cases spoke of such a contract being ‘void’, but it was clearer to say that there was never a contract at all.