Raffles v. Wichelhaus [1864] EWHC Exch J19 (April 1864)

An agreement was made for cotton arriving on the ship 'Peerless' from Bombay. Unknown to the parties, two ships of that name sailed from Bombay months apart. The court held that as the parties meant different ships, there was no consensus, and therefore no binding contract.

Facts

The claimant, Raffles, agreed to sell 125 bales of Surat cotton to the defendants, Wichelhaus & Anor. The written agreement specified that the cotton was ‘to arrive ex “Peerless” from Bombay’. However, there were two ships named ‘Peerless’ sailing from Bombay: one which sailed in October and another which sailed in December. The defendants intended to purchase the cotton arriving on the October ‘Peerless’, whereas the claimant intended to supply the cotton from the December ‘Peerless’. When the December ship arrived, the claimant tendered the cotton for delivery, but the defendants refused to accept or pay for it, stating that they had expected the delivery from the earlier ship.

Issues

The primary legal issue was whether a binding contract for the sale of cotton existed between the parties. This depended on whether the latent ambiguity regarding the ship named ‘Peerless’ prevented a ‘meeting of the minds’ or consensus ad idem. The court had to determine the effect of a mutual mistake, where both parties were at cross-purposes concerning a fundamental term of the agreement.

Judgment

The Court of Exchequer gave judgment for the defendants, holding that there was no binding contract. The court accepted the defendant’s plea that the contract was void due to the ambiguity. As the parties had different ships in mind, there was no consensus on the subject-matter of the contract. The report of the case is very brief and consists mainly of the dialogue between counsel and the judges. The defendants’ counsel, Mellish, argued that the ambiguity was latent and could be revealed by parol (oral) evidence:

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.

The court, comprising Pollock, C.B., Martin, B., and Pigott, B., agreed with this reasoning. The final judgment was recorded succinctly as:

PER CURIAM. There must be judgment for the defendants.

This confirmed that where such a fundamental mutual mistake occurs, the contract is void for lack of agreement.

Implications

Raffles v Wichelhaus is a seminal case in contract law, establishing a key principle regarding mutual mistake. It demonstrates that where there is a latent ambiguity in a contract and the parties are reasonably mistaken about a fundamental term (meaning they are at cross-purposes), there can be no binding agreement because there has been no consensus ad idem. The case is a classic illustration of how an objective approach to contract formation may be supplemented by subjective considerations when a fundamental ambiguity arises. It clarifies that a seeming agreement on paper is not sufficient if the parties had entirely different, but equally reasonable, understandings of its core subject matter. The decision remains a cornerstone of contract law courses, teaching the importance of certainty of terms and the consequences of mistake.

Verdict: Judgment for the defendants.

Source: Raffles v. Wichelhaus & Anor [1864] EWHC Exch J19 (April 1864)