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126 Chapter 4Misrepresentation, mistake, duress and illegality

Unilateral mistake

Unilateral mistake meaning no agreement was made

If the parties to the contract were at cross purposes when making the offer and acceptance

there may have been no real agreement. If the reasonable person could not objectively say

which of the parties’ views was obviously correct then there will be no contract. If the

reasonable person could say that the view of one or other of the parties was obviously

correct then there will be a valid contract.

Unilateral mistake as to the terms of the contract

If one of the parties knows that the other made the contract while making a fundamental

mistake as to the terms of the contract, then the contract can be void for mistake. In Hartog

Great Peace Shipping Ltd vTsavliris Salvage International Ltd (2002)

(Court of Appeal)

The defendants offered salvage services to a ship which was in trouble in the Indian Ocean.

A reliable third party told the defendants that the claimants’ ship, the Great Peace, was the

closest ship which could provide salvage. So the defendants booked the Great Peacefor

a minimum of five days. When the contract was made, the defendants thought that the

Great Peacewas within 35 miles of the ship in trouble. In fact, the two ships were 410 miles

apart and it would have taken the Great Peace39 hours to arrive. The defendants therefore

told the claimants that they wanted to cancel the contract, but not until they had found a

closer ship. When the defendants did find a closer ship, they cancelled the contract but the

claimants refused to accept this. The defendants argued that the contract was void for

common mistake because both parties thought that the Great Peacewas close to the ship

which was in trouble.

HeldApplying BellvLever Bros, the contract was not void for common mistake. The

contract would have been void only if the distance between the ships had meant that

the services which the Great Peacewas to provide were essentially different from what the

parties had agreed. The fact that the defendants wanted to keep the contract on unless a

closer ship could be found indicated that this was not the case.

Raffles vWichelhaus (1864)

A contract was made to buy cotton as soon as it arrived on a ship called Peerlesswhich

was sailing from Bombay. In fact, two ships called Peerlesswere sailing from Bombay.

When the contract was made the defendant was thinking of a ship called Peerlesswhich

set off in October. The claimant was thinking of a different ship which set off in December.

HeldThere was no contract because the reasonable person could not say what had been

agreed. However, if the reasonable person could have said that one or other of the ships

was obviously what the parties seemed to have intended then there would have been a

contract to buy the cotton which arrived on that ship. (This might have happened, for

instance, if one of the ships was a world famous carrier of cotton from India, while the other

was an unknown ship.)