Raffles v. Wichelhaus International Business Law Olivier Plaetevoet Mark Lohr

Outline ● Peerless Ship Case – Contract dispute – Plantiff : Raffles – Defendant : Wichelhaus ● Transaction Diagram ● IRAC Breakdown

Transaction Diagram ● Wichelhaus to purchase cotton ● Raffles to transport cotton

Terms of Contract ● 125 bales of cotton at d per pound ● Delivered to Liverpool from Bombay ● Transported on ship named Peerless ● Payment within time agreed upon, after arrival

Issue ● Two ships named Peerless ● One to depart Bombay in October ● Second to depart in December ● Cotton delivered by second ship

Issue ● Each party had a different idea of the ship ● Wichelhaus refused to pay for the cotton, expected the first Peerless ship to deliver ● Raffles sued Wichelhaus for breach due to non- payment, claiming the second Peerless ship was the one described in the contract

Issue ● Contract did not specify time of delivery ● Also did not specify which Peerless ship was to deliver the cotton ● Naming the ship in the contract is customary as a safeguard against sunken cargo ● Does Wichelhaus owe payment to Raffles for the cotton?

Rule ● In general, courts seek to preserve contracts when possible ● Explicit terms are necessary to maintain contract, and those terms must be followed ● Breach of contract can be ruled when there is clear breach by one or both parties

Rule ● Contracts are “legally enforceable agreements between parties which reflects parties' intent” ● Contracts must have an offer, acceptance, consideration, legality, and capacity ● Acceptance is the key element of rule in this case – “Meeting of the minds” or common understanding

Application ● Contract stated the goods were "to arrive ex Peerless.” (On Peerless). Cotton did arrive on that ship. ● Why would Wichelhaus not be accountable for payment?

Application ● Can the contract be preserved? ● Were all explicit terms followed? ● Can breach of contract be ruled?

Conclusion ● Judge found: ● “It is imposing on the defendant a different contract from that which he entered into.” ● Wichelhaus signed a contract for the ship departing in October, not December

Conclusion ● “Intention is of no avail, unless stated at the time of contract.” ● It is not relevant which ship Raffles intended, only which ship was outlined in the contract ● No distinction between Peerless ships was made

Conclusion ● “The time of sailing is no part of the contract.” ● All of the explicit terms of the contract were in order ● Clarification of which ship and when it would arrive was missing

Conclusion ● “There is nothing on the face of the contract to show 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...

Conclusion ●...and parol evidence may be given for the purpose of showing that the defendant meant one Peerless and the plaintiff another. That being so, there was no consensus ad item, and therefore no binding contract.”

Final Decision ● Because there was not enough specificity in the contract, it was determined that this was a case of mutual mistake – Mutual mistake undermines “meeting of the minds” ● There was an essential part of the contract missing ● Judgment was awarded for the defendant, Wichelhaus

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