Raffles v Wichelhaus

Raffles v Wichelhaus [1864] EWHC Exch J19, often called "The Peerless" case, is a leading case on mutual mistake in English contract law. The case established that where there is latent ambiguity 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.

The case's fame is bolstered by the ironic coincidence contained within: each party had in mind a particular ship, with no knowledge of the other's existence, yet each ship was named Peerless.

Facts

 * Raffles is the cotton supplier.
 * Wichelhaus is the cotton purchaser.
 * There is a steep drop in prices between October and December.
 * Wichelhaus does not want the December cotton delivery because of the drop in cotton prices.

The claimant (Raffles) entered into a contract to sell 125 bales of Surat cotton at fair market price to the defendant (Wichelhaus) at the rate of $17 1/4$ d. per pound. 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 British ships named Peerless arriving in Liverpool 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 claimant thought the contract was for the cotton on the December ship. When the December Peerless arrived, the claimant (Raffles) tried to deliver it, however the defendant repudiated the agreement, saying that their contract was for the cotton on the October Peerless.

The claimant 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 sink en route, 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 claimant's Peerless.

Judgment
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 ("meeting of the minds"), the two parties did not agree to the same thing and there was no binding contract. This is a classic example of mutual mistake, wherein both parties misunderstood the contract. Therefore, the defendants prevailed, and did not have to pay.

Text of the judgment
Declaration. For that it was agreed between the plaintiff and the defendants, to wit, at Liverpool, that the plaintiff should sell to the defendants, and the defendants buy of the plaintiff, certain goods, to wit, 125 bales of Surat cotton, guaranteed middling fair merchant's Dhollorah, to arrive ex “Peerless” from Bombay; and that the cotton should be taken from the quay, and that the defendants would pay the plaintiff for the same at a certain rate, to wit, at the rate of 17¼d. per pound, within a certain time then agreed upon after the arrival of the said goods in England. Averments: that the said goods did arrive by the said ship from Bombay in England, to wit, at Liverpool, and the plaintiff was then and there ready, and willing and offered to deliver the said goods to the defendants, &c. Breach: that the defendants refused to accept the said goods or pay the plaintiff for them.

Plea. That the said ship mentioned in the said agreement was meant and intended by the defendants to be the ship called the “Peerless,” which sailed from Bombay, to wit, in October; and that the plaintiff was not ready and willing and did not offer to deliver to the defendants any bales of cotton which arrived by the last mentioned ship, but instead thereof was only ready and willing and offered to deliver to the defendants 125 bales of Surat cotton which arrived by another and different ship, which was also called the “Peerless,” and which sailed from Bombay, to wit, in December.

Demurrer, and joinder therein.

Milward, in support of the demurrer. The contract was for the sale of a number of bales of cotton of a particular description, which the plaintiff was ready to deliver. It is immaterial by what ship the cotton was to arrive, so that it was a ship called the Peerless. The words “to arrive ex ‘Peerless,’” only mean that if the vessel is lost on the voyage, the contract is to be at an end. Pollock CB It would be a question for the jury whether both parties meant the same ship called the Peerless.] That would be so if the contract was for the sale of a ship called the Peerless; but it is for the sale of cotton on board a ship of that name. Pollock CB The defendant only bought that cotton which was to arrive by a particular ship. It may as well be said, that if there is a contract for the purchase of certain goods in warehouse A., that is satisfied by the delivery of goods of the same description in warehouse B.] In that case there would be goods in both warehouses; here it does not appear that the plaintiff had any goods on board the other “Peerless.” Martin B. It is imposing on the defendant a contract different from that which he entered into. Pollock CB It is like a contract for the purchase of wine coming from a particular estate in France or Spain, where there are two estates of that name.] The defendant has no right to contradict by parol evidence a written contract good upon the face of it. He does not impute misrepresentation or fraud, but only says that he fancied the ship was a different one. Intention is of no avail, unless stated at the time of the contract. Pollock CB One vessel sailed in October and the other in December.] The time of sailing is no part of the contract.

Mellish (Cohen with him), in support of the plea. There is nothing on the face of the contract to shew that any particular ship called the “Peerless” was meant; but the moment it appears that two ships called the “Peerless” were about to sail from Bombay there is a latent ambiguity, and parol evidence may be given for the purpose of shewing that the defendant meant one “Peerless,” and the plaintiff another. That being so, there was no consensus ad idem, and therefore no binding contract. He was then stopped by the Court.

Per Curiam. 1 There must be judgment for the defendants.Note that the process of demurrer is a common law practice that seeks to dismiss a lawsuit on the grounds that the facts are true, and are not enough to warrant legal action. In this case, the defendant demurred, seeking dismissal. The Court agreed. The paragraphs with names at the front (Milward, Mellish) are that of the lawyers arguing for the respective parties, and present the arguments of the parties, interspersed with questions from Judge Pollock from the three Judge panel.