CHAR_A01.PDF, page 1-18 @ Normalize ( CHAR_A01.QXD )

It should also be noted that the doctrine is closely connected to the
discharge of a contract by frustration. If a conference building is examined
by a potential hirer, but before the contract is concluded, and unknown to
both parties, it is destroyed by fire, then the contract would be void for
common mistake. If however the contract was formed, but the fire occurred
between then and the day of hire, the contract would be frustrated. The
distinction between the two, then, depends solely on the point in time at
which the disaster strikes.

Mistake over title

An extension of the principle of res extincta is that of res sua (literally, the
thing is his own). It will rarely arise, but in the case of Cooper v Phibbs

Mistake 187

McRae v Commonwealth Disposals Commission (1951)

The plaintiff paid the defendants for the right to salvage an oil tanker

which was said by the defendants to be laying off the journal Reef. The

plaintiff spent money on equipment and an expedition to salvage the

tanker, but it was found that there was no tanker in the area and the reef

did not exist. It was held that the defendants had warranted the

existence of the tanker in selling into the plaintiff, and the court

ordered damages to be paid.

It is interesting that if mistake had been found, the remedy for McRae

would have not been at all satisfactory, since the contract would have

merely been declared void. In the event, the payment of damages for

breach of warranty compensated him for the expense of setting up the

expedition, and is a a fair remedy in this case. However, on the facts the

situation does not seem to be very different from that in Couturier v

Hastie, except that in McRaethe tanker may never have existed.

D

NO

TANKERS

HERE

NOT THE

JOURMAND

REEF

Breach of

warranty

A finding of mistake would have meant no

compensation for McRae

Damages

£ for McRae

Figure 12.1