Raffles V. Wichelhaus- Mutual Mistake the Doctrine Term Paper

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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.

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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….....

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