Raffles v. Wichelhaus
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Raffles v. Wichelhaus (1864) 2 Hurl. & C. 906 Court of Exchequer — often called the Peerless case — is a leading case on mutual mistake in the English law of contract. The case established that when both parties of a contract are mistaken as to an essential element of the contract, the Court will attempt to find a reasonable interpretation from the context of the agreement before it will void it.
[edit] Background
The plaintiff entered into a contract to sell 125 bales of Indian cotton to the defendant. The contract specified that the cotton would be arriving in Liverpool on the ship Peerless from Bombay ("to arrive ex Peerless from Bombay"). It so happened that there were two ships named Peerless arriving from Bombay, one departing in October and another departing in December. The defendant, according to statements presented in court, thought the contract was for cotton on the October ship while the plaintiff thought the contract was for the cotton on the December ship. When the December Peerless arrived, the plaintiff tried to deliver it, however the defendant repudiated the agreement, saying that their contract was for the cotton on the October Peerless.
The plaintiff sued for breach of contract, arguing that the date of the ship was not relevant and the only purpose of specifying the name of the ship is that in the contingency that the ship sunk enroute, the contract could be voided.
The issue before the Court was whether the defendant should be bound by the agreement to buy the cotton of the plaintiff's Peerless.
[edit] Ruling
Though courts will strive to find a reasonable interpretation in order to preserve the agreement whenever possible, the court in Raffles could not determine which ship named Peerless was intended in the contract. Consequently, as there was no consensus ad idem (as defendant alleged), the two parties did not agree to the same thing and there was no binding contract. Therefore, the defendants prevailed, and did not have to pay.
