Raffles v. Wichelhaus- Mutual Mistake the Doctrine

Raffles v. Wichelhaus- Mutual Mistake The doctrine of mutual mistake is a defense used to avoid liability under a contract, because mutual assent is necessary for the creation of a contract. To use the doctrine of mutual mistake, an adversely affected party must demonstrate that both parties to the contract had erroneous assumptions regarding the same fact (Mallor, 246). Furthermore, to avail oneself of the doctrine of mutual mistake, a party must demonstrate the following three elements: "1. The mistake relates to a basic assumption on which the contract was made. 2.

The mistake has a material effect on the agreed-upon exchange. 3. The party adversely affected by the mistake did not bear the risk of the mistake" (Mallor, 246). Unless these three elements are met, a party is not entitled to use the doctrine of mutual mistake to excuse non-performance of a contract. The first element in a mutual mistake defense is that the parties have both been mistaken about a basic assumption on which the contract was made.

In the contract for the sale of cotton that existed between Raffles and Wichelhaus, there were several basic assumptions about the sale. The first assumption was that the contract was for the sale of 125 bales of middling fair merchant's Dhollorah Surat cotton. The second assumption was that cotton was to be shipped on the Peerless. The third assumption was that Wichelhaus was to pay a certain price per pound of cotton.

The parties' contract was silent about the issues relied upon by Wichelhaus in order to demonstrate mutual mistake: the time of sailing and the time of tender. Because neither of these was mentioned in the parties' contract, and neither party alleged that the discussed either of them outside of the terms of the contract, they could not be assumptions upon which the contract was based. The second element in a mutual mistake defense is that the mistake had an effect upon the agreed upon exchange.

This element generally refers to instances where the parties' both misunderstand the nature of the subject of the contract. For example, in Sherwood v. Walker, the parties agreed to the sale of a cow that both believed was barren. When it was discovered that the cow was not barren, but was, in fact, pregnant, the seller was able to avoid the contract. Where one party will receive "an unexpected, unbargained for gain while the other experiences an unexpected, unbargained for loss," the doctrine of mutual mistake applies (Wilken v.

First Source Bank, 548 N.E. 2d 170, as cited in Mallor, 245). In the case of Raffles v. Wichelhaus, there was no evidence that either party experienced an unexpected gain or loss; there was simply some confusion about which Peerless would be carrying the cotton. In fact, even if cotton prices had dropped between the arrival of the October Peerless and the December Peerless, Wichelhaus specifically failed to plead that he had suffered any loss because of when the cotton was shipped, and thus tendered to him.

Furthermore, because "either Peerless may have been a sailing vessel, subject to the vagaries of wind and weather- or both of them may have been," (Gilmore, 37), there was no evidence that the October Peerless was scheduled to arrive before the December Peerless. Finally, in order to avail oneself of a mutual mistake defense, the adversely affected party must demonstrate that he did not bear the risk of the mistake. As the adversely affected party, Wichelhaus had the burden of proving all three elements, and there was simply.