Contract law training: 'Mistaken' agreement upheld

In an outcome of interest to proponents of thorough contract law training, the high court of England and Wales has decided to uphold an agreement between two global firms entered into "by mistake".

A shipping dispute between Norwegian oil and gas company Statoil and US commodities trader Louis Dreyfus Energy Services saw the former erroneously calculate the fee it was owed for services provided.

These involved Statoil's chartering of a ship to Mexico to deliver liquid propane gas to a buyer arranged by Louis Dreyfus.

Outlining the case, Mr Justice Aikens noted that Louis Dreyfus had sought to uphold an agreement which was based on the oil firm's mistake, despite a later telephone conversation between the parties which clarified the situation and functioned as "an oral agreement".

"The general rule at 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," he acknowledged during his ruling.

Concluding that the parties' oral agreement superceded their original contract, although this in itself still stood, the judge ordered Louis Dreyfus to pay the full and final fee to Statoil.

In related news, corporate finance house Cenkos Securities is seeking to sue an investment firm over unpaid fees it maintains were agreed in another enforceable "oral contract" whose validity it aims to uphold.