SW Legal studies in Business

Disappointed Party to Failed Contract Has No Basis for Suit
Description Appeals court affirmed the dismissal of a suit brought by a French oil company against an American oil company for a failed effort to buy oil production rights in Nigeria. The contract was rescinded by the parties, so there could be no breach, and the claim of fraud fails completely given the sophisticated nature of the transaction and parties to the deal.
Topic Contracts
Key Words Breach; Fraud; Misrepresentation
C A S E   S U M M A R Y
Facts Perenco is a French energy company that operates in SW Legal Africa. Wanting to expand into Nigeria, it negotiated with Ashland to buy its Nigerian oil interests, which were two Nigerian subsidiaries which had production rights from the Nigerian government. The parties agreed that since Perenco was buying the stock in the subsidiaries, rather than buying underlying assets, that no approval was needed from the Nigerian agency that oversees oil operations in the country. Ashland's representative in Nigeria warned Ashland that while the sale was legal, in practical terms they needed government approval. That information was not shared with Perenco. Perenco was later told, in Nigeria, that the government did not approve of the sale. Ashland rescinded the contract and returned the $1 million deposit that Perenco had made and cancelled the deal. Perenco sued for breach of contract, fraud and misrepresentation, seeking $300 million in damages for loss of the benefit of the bargain. The district court dismissed the suit. Perenco appealed.
Decision Affirmed. Perenco waived any right to bring fraud or misrepresentation claims against Ashland by agreeing to terminate the stock purchase when the parties learned of the disapproval of the Nigerian government. "Both parties to this complex, arms-length transaction are sophisticated, well-represented corporations which have had extensive prior experience with the vagaries of oil exploration and production in Africa. ... In short, sophisticated and experienced parties, supported by platoons of lawyers, consultants, and advisers, cannot simply shut their eyes when entering into a complex multi-million-dollar transaction in a volatile venue, then claim to have been deceived or misled when the deal later heads south." The parties followed the terms of the contract, which was rescinded when problems arose. The contract also specifically stated that Perenco could never "be entitled to any consequential or speculative damages including, without limitation, lost profits." Hence, Perenco agreed by contract that it could not bring the suit it has brought.
Citation Perenco Nigeria Limited v. Ashland, Inc., 242 F.3d 299 (5th Cir., 2001)

Back to Contracts Listings

©1997-2002  SW Legal Studies in Business. All Rights Reserved.