Couturier v Hastie [1856] UKHL J3 (26 June 1856)

A contract was made for the sale of a cargo of corn believed to be in transit. Unbeknownst to both parties, the corn had already deteriorated and been sold. The House of Lords held the contract was void as its subject matter did not exist.

Facts

A contract was made in London for the sale of a cargo of Indian corn, which both parties believed was being shipped from Salonica to the United Kingdom. However, prior to the date of the contract, the cargo had begun to ferment and deteriorate. The master of the ship lawfully sold the corn at Tunis to prevent its total loss. Upon discovering these facts, the buyer (Hastie) repudiated the contract. The seller’s agent (Couturier) brought an action against the buyer for the purchase price, arguing the buyer had purchased the ‘adventure’ or the commercial interest in the cargo, including all risks.

Issues

The central legal issue for the House of Lords was the proper construction of the contract. The key question was whether the buyer was liable to pay for goods that, unknown to both parties, had ceased to exist at the time the contract was made. Was the contract for the sale of identifiable goods, or was it for the chance of receiving the goods, with the buyer assuming the risk of their non-existence?

Judgment

The House of Lords unanimously found in favour of the buyer (Hastie), holding that the contract was void. The judgment of the Court of Exchequer Chamber was reversed.

The Lord Chancellor’s Reasoning

Lord Chancellor Cranworth, delivering the leading judgment, concluded that the contract was for the sale of specific, existing goods. Since the goods were not in existence at the time of the contract, there was a total failure of consideration, and the contract could not be enforced. He rejected the argument that the buyer had purchased a mere ‘chance’ or ‘adventure’.

The contract plainly imports that there was something which was to be sold at the time of the contract, and something to be purchased. No such thing existing, there was no contract which could be enforced.

He further clarified the court’s interpretation of the agreement:

Looking at the contract itself, alone, it appears to me clearly that what the parties contemplated, those who bought and those who sold, was that there was an existing something to be sold and bought… The buyer bought and the seller sold a cargo of Indian corn. By the terms of the contract it was to be a cargo of ‘fair average quality’ when shipped. It was not a cargo of Indian corn of any quality. I think the contract was for the sale of a cargo of corn, and there was no such cargo in existence.

The court reasoned that the contract was contingent upon the existence of its subject matter. As the subject matter had ceased to exist, there could be no valid contract.

Implications

Couturier v Hastie is the foundational authority for the doctrine of ‘res extincta’ (the thing has perished) within the law of common mistake. It establishes the principle that where both parties enter into a contract under the mistaken belief that the specific subject matter exists, when in fact it does not, the contract is void ab initio. This principle protects a party from being liable to pay for something which does not exist. The case’s core principle was later codified in section 6 of the Sale of Goods Act 1893 (and now the Sale of Goods Act 1979), which states that a contract for the sale of specific goods is void if, without the seller’s knowledge, the goods have perished at the time the contract is made.

Verdict: The appeal was dismissed. The judgment of the Court of Exchequer Chamber was reversed, meaning the buyer (Hastie) was not liable to pay for the cargo as the contract was void.

Source: Couturier & Ors v Hastie & Anor [1856] UKHL J3 (26 June 1856)