Raffles v. Wichelhaus
2 H. & C. 906 (1864)
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Rule of Law:
When a material term of a contract is latently ambiguous, and each party has a different but reasonable interpretation of that term, no mutual assent or "meeting of the minds" occurs, and therefore no enforceable contract is formed.
Facts:
- Raffles and Wichelhaus entered into an agreement for the sale of 125 bales of Surat cotton.
- The contract specified that the cotton was "to arrive ex 'Peerless' from Bombay."
- Unbeknownst to the parties, there were two different ships named "Peerless" sailing from Bombay.
- One ship named "Peerless" sailed from Bombay in October, while another ship with the same name sailed in December.
- Wichelhaus, the buyer, intended to purchase the cotton arriving on the October "Peerless."
- Raffles, the seller, intended to sell the cotton that was being shipped on the December "Peerless."
- Raffles tendered the cotton from the December ship, but Wichelhaus refused to accept or pay for it.
Procedural Posture:
- Raffles (plaintiff) filed a declaration in the Court of Exchequer against Wichelhaus (defendants) for breach of contract.
- Wichelhaus filed a plea (an answer) stating they intended the contract to refer to the ship 'Peerless' that sailed in October, not the December one offered by the plaintiff.
- Raffles then filed a demurrer to the plea, arguing that even if the defendants' facts were true, they did not constitute a legally sufficient defense.
- The Court of Exchequer heard oral arguments on the demurrer.
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Issue:
Is a contract for the sale of goods enforceable when a material term, such as the name of the ship designated for delivery, refers to two different ships, and the buyer intended one ship while the seller intended the other?
Opinions:
Majority - Per Curiam
No. When there is a latent ambiguity in a material contract term and no consensus ad idem (meeting of the minds), there is no binding contract. The court accepted that the identity of the ship was a material term of the contract, as it could affect the timing of arrival and the market price of the goods. Because the defendant meant one ship and the plaintiff meant another, the parties never actually agreed to the same contract. The court reasoned that the ambiguity was latent—not apparent on the face of the document—and parol evidence was admissible to show that the parties had different ships in mind. The judges' analogies to two estates of the same name or goods in two different warehouses underscore that the specific vessel was an essential part of the bargain, not an incidental detail.
Analysis:
This case is a cornerstone of contract law, establishing the doctrine of mutual mistake regarding a material term. It clarifies that objective manifestations of assent are insufficient to form a contract if a latent ambiguity leads both parties to have different, reasonable understandings of an essential term. The decision solidifies the principle of consensus ad idem (meeting of the minds) as a prerequisite for contract formation. It has significant impact by allowing courts to consider parol evidence to uncover such latent ambiguities and declare a contract void, protecting parties from being bound to an agreement they never truly made.
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