| The Great Peace | |
|---|---|
| Court | Court of Appeal |
| Citation(s) | [2002] EWCA Civ 1407, [2003] QB 679 |
| Case opinions | |
| Lord Phillips MR | |
| Keywords | |
| Frustration and common mistake | |
Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407 is an English contract law case, concerning when common mistake of an agreement will render it void.
Contents |
Tsavliris are in the business of salvaging ships and aiding ships in difficulty in the South Indian Ocean. Tsavliris were advised a vessel named "Cape Providence" was in trouble. They used the Ocean Routes service to try and find a salvage tug nearby, and were told that there was one about 35 miles away called the "Great Peace". Tsavliris contacted its owners, and agreement was made to hire the tug for a minimum of five days. It then became apparent that the Great Peace was not 35 miles from the Cape Providence, but 410 miles. Tsavliris then found a closer tug and terminated the contract with Great Peace Ltd. GP Ltd sued. Tsavliris argued it was a common mistake as to the location of the stricken vessel and this invalidated the contract.
Lord Phillips MR for the Court of Appeal held that the mistake was not sufficiently fundamental to avoid the contract. It was going to take 22 hours to do 410 miles, but that was not a delay to make performance ‘essentially different from those the parties envisaged when the contract was concluded.’ In the course of the judgment, McRae v Commonwealth Disposals was approved, Solle v Butcher was disapproved, and it was opined that common mistake could not be explained on the grounds that it is an implied term, although it does apply only when a contract is silent.
| “ | [75] Just as the doctrine of frustration only applies if the contract contains no provision that covers the situation, the same should be true of common mistake…
[76] ... the following elements are necessary before a common mistake will void a contract, through analogy to frustration, from the case, Blakeley v Muller & Co 19 TLR 186, per Lord Alverstone CJ, (i) there must be a common assumption as to the existence of a state of affairs (ii) there must be no warranty by either party that that state of affairs exists (iii) the non-existence of the state of affairs must not be attributable to the fault of either party (iv) the non-existence of the state of affairs must render performance of the contract impossible (v) the state of affairs may be the existence, or a vital attribute, of the consideration to be provided or circumstances which must subsist if performance of the contractual adventure is to be possible... [82] ...while we do not consider that the doctrine of common mistake can be satisfactorily explained by an implied term, an allegation that a contract is void for common mistake will often raise important issues of construction. Where it is possible to perform the letter of the contract, but it is alleged that there was a common mistake in relation to a fundamental assumption which renders performance of the essence of the obligation impossible, it will be necessary, by construing the contract in the light of all the material circumstances, to decide whether this is indeed the case…’ [84] Once the court determines that unforeseen circumstances have, indeed, resulted in the contract being impossible of performance, it is next necessary to determine whether, on true construction of the contract, one or other party has undertaken responsibility for the subsistence of the assumed state of affairs… [or] has undertaken the risk that it may not prove possible to perform… [85] ‘Circumstances where a contract is void as a result of common mistake are likely to be less common than instances of frustration. Supervening events which defeat the contractual adventure will frequently not be the responsibility of either party. Where, however, the parties agree that something shall be done which is impossible at the time of making the agreement, it is much more likely that, on true construction of the agreement, one or other will have undertaken responsibility for the mistaken state of affairs.... [165] ‘the fact that the vessels were considerably further apart than the defendants had believed did not mean that the services that the Great Peace was in a position to provide were essentially different from those which the parties had envisaged when the contract was concluded. |
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