Following is the case brief for Raffles v. Wichelhaus, Court of Exchequer, (1864)
Case summary for Raffles v. Wichelhaus:
- Raffles and Wichelhaus entered a contract to buy and sell Surat cotton shipped by a ship called the ‘Peerless’ which was sailing from Bombay, India.
- Unbeknownst to both, there was a Peerless that sailed from Bombay in both October and December and the contract did not specify.
- The court objectively considered the parol evidence offered and decided that the contract was invalid because a mutual agreement never occurred.
Raffles v. Wichelhaus Case Brief
Statement of the facts:
Raffles and Wichelhaus entered into a contract in which Raffles would sell Wichelhaus 125 bales of Surat cotton from Bombay on a ship called the Peerless. The cotton was delivered to a ship called the Peerless and arrived to Wichelhaus in December. Wichelhaus wanted the cotton to be delivered by a ship also called the Peerless by October. Once the cotton arrived, Wichelhaus refused to pay for the bales, claiming the cotton was supposed to be delivered by the Peerless which left Bombay two months earlier in October. In response, Raffles sued Wichelhaus for the contract price under a theory of breach of contract.
Rule of Law or Legal Principle Applied:
When parties to a contract mutually misunderstand the terms of their agreement, no contract exists.
Issue and Holding:
Is a mutual misunderstanding by the parties a ground for invalidating a contract? Yes.
The court found for Wichelhaus, holding a contract is not formed absent a mutual understanding of material terms.
Per Curium opinion. Argument by Defendant: A contract is not formed where there exists a mutual misunderstanding between the parties. In examining the terms of a contract, the court will consider the contract itself. Since the contract does not specify which Peerless was specifically supposed to deliver the cotton, the court permitted the parties to enter parol evidence to clear up the latent ambiguity. The court held that since the evidence showed that each party meant a different ship in their understanding of which Peerless was to deliver the cotton, the formation requirement to have a “meeting of the minds” never occurred. As a result, no binding contract was formed.
Argument by the Plaintiff: The contract is valid on its face and should be enforceable.
This case established that when there is a mutual misunderstanding of the contract terms, no binding contract can be formed because the parties never actually came to an agreement.