By Himanshi Kapoor

Raffles v Wichelhaus, often known as “The Peerless case”, is a crucial case in English contract law based on mutual mistake. This case is critical because each party had a ship named ‘Peerless’ without being aware of the fact that the other party also had a ship with the same name and thus, having no clue of the other ship’s existence. In this case, it was established that the contract is not binding on the parties when there is a mutual misunderstanding about the contractual terms.

Essential details of the case

CITATION: [1864] EWHC Exch J19

     (1864) 2 H & C 906; 159 ER

COMPLAINANT/PLAINTIFF: Mr. Raffles

DEFENDANT: Mr. Wichelhaus

COURT: Court of EXCHEQUER

BENCH: Pollock C.B., Martin B., and Pigott B.                                                                   

DATE OF JUDGEMENT: 20 January 1864

FACTS OF THE CASE

Mr. Raffles (plaintiff) and Mr. Wichelhaus (defendant) entered into a contract wherein the plaintiff agreed to sell 125 bales of  Surat cotton to the defendant at the rate of 17 1⁄4 decimal per pound. The agreement specified that the cotton would arrive in Liverpool from Bombay through a ship named “Peerless”.

There were two ships in Britain named “Peerless”, one arriving in October and another in December. According to the statements given in court of law by Mr. Wichelhaus, the defendant believed that the shipment would arrive in October. Still, Mr. Raffles, the plaintiff, was unaware of any such ship and believed that the contract meant that the shipment would arrive in December. 

In December, when the shipment arrived, the plaintiff tried to deliver 125 bales of cotton to the defendant, but he refused to take the cotton, saying that the agreement was for the ‘Peerless’ that arrived in the month of October.

The plaintiff sued the defendant for breach of contract, arguing that the date of the ship was not relevant and the name “Peerless” was only mentioned in the possibility that if the ship sank en route, the contract would become void.

ISSUE

The issue before the court was whether the contract was enforceable or not, as the parties were in a disagreement with respect to the terms of the shipment and delivery.  

 Legal principle applied

A contract is invalid when there is a misunderstanding regarding the terms of an agreement.

JUDGEMENT 

After hearing all the facts and arguments given by the parties, the court found it extremely difficult to hold the defendant liable for the breach of contract as he performed it according to the contractual terms. 

The terms of the contract were vague regarding the ship as only the name was mentioned and not the time of its arrival. Thus, the court held that there was no consensus ad idem (i.e., meeting of minds) as there was a misunderstanding, and held that the contract was not binding.

According to the court, this case was a mutual mistake because both parties were mistaken about the actual agreement, and hence, the contract was not binding on the parties.

 CONCLUSION

This case established that a contract is neither enforceable nor binding if the terms of the agreement are ambiguous.