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A Deal is a Deal, Court of Appeal Rules in Drilling Rig Dispute

Contract terms agreed to at the time of signing can be regretted later with the benefit of hindsight. However, one Court of Appeal decision made clear that it is no part of the law’s role to rewrite agreements which were entered into with eyes wide open.

The case concerned the lease of an offshore drilling rig by its owner to a prospector. Drilling operations had to be suspended for several weeks due to a technical fault in the rig, which had not been in good working order on delivery. As a result, the prospector incurred wasted costs in respect of personnel, equipment and services contracted from third parties. A judge found that the owner was in breach of contract and that the prospector was entitled to compensation for those consequential losses.

In upholding the owner’s challenge to that decision, the Court noted that the contract created a detailed and sophisticated scheme for apportioning responsibility for loss and damage of all kinds. On a true interpretation of the contract, the parties had agreed that neither should be entitled to recover from the other in respect of consequential, as opposed to direct, losses arising.

The parties were entitled to make up their own minds as to how such losses would be borne and it appeared that the judge had fallen into the trap of making for them an agreement which they had not themselves chosen to make. The wording of the contract was clear and excluded liability for the relevant losses.