McRae v Commonwealth Disposals Commission (1951) 84 CLR 377

Key Point

Common mistake as to the existence of the subject matter of contract does not render the contract void is the mistake is without reasonable ground.

Facts

  • The Commission (D) invited tenders for purchase of wrecked tanker on Jourmaund Reef; C won the tender
  • It was later found out that no such tanker at location provided by D
  • C brought action for breach of contract
  • D claims there was no contract due to common mistake

Held (High Court of Australia)

C’s claim succeeded; the contract was not void as D had no reasonable grounds for the mistake.

Webb J

  • Common mistake does not void a contract where the mistake consists of a belief that is entertained by a party without reasonable ground and he is at fault for inducing that belief in the other party.
  • Couturier v Hastie is distinguished as here D had entertained the belief that the tanker existed with no reasonable ground and induced the mistake upon C.

Commentary

This Australian authority was approved by the English High Court in Associated Japanese Bank (International) v Credit du Nord SA [1989] 1 WLR 255.