Raffles v. Wichelhaus
Citation and Court
Raffles v. Wichelhaus, 2 H. & C. 906, 159 Eng. Rep. 375 (Ex. 1864)
Facts
Raffles agreed to sell cotton to Wichelhaus, with delivery to be made “ex Peerless from Bombay.” Unknown to both parties, there were two ships named Peerless sailing from Bombay—one departing in October and one in December. Wichelhaus meant the October ship; Raffles meant the December ship. When the December Peerless arrived, Wichelhaus refused to accept the cotton, and Raffles sued for breach.
Issue
Whether a contract is formed when the parties attached materially different meanings to an essential term of the agreement—here, the identity of the ship named “Peerless.”
Holding
The court held there was no contract because the parties had never reached a meeting of the minds on the essential term of which ship would deliver the goods; the latent ambiguity meant no consensus ad idem existed.
Rule / Doctrine
A contract requires a meeting of the minds on all material terms. Where a term is ambiguous and each party attaches a different, reasonable meaning to it, and neither party knows or has reason to know of the other’s meaning, no contract is formed. This principle applies when the ambiguity goes to the very subject matter of the deal.
Significance
The classic English case on latent ambiguity and the requirement of mutual assent. The “two ships Peerless” problem is a canonical illustration of how objective ambiguity in a key term can prevent contract formation. Fundamental to understanding the doctrine of mutual mistake and offer-acceptance in contracts.