There were two ships named Peerless. The Plaintiff agreed to sell the Defendant 125 Bales of Cotton, which it would put on the ship “Peerless”, sailing from Bombay. “Peerless” No. 1 sailed from Bombay in October and did not contain the bales of cotton. “Peerless” No. 2 sailed from Bombay in December, containing the cotton.
There are several applicable rules to be considered in the case of the two ships Peerless: (1) when terms in a contract are ambiguous, generally accepted terms are understood to be correct; (2) If there is no meeting of the minds as to the thing agreed upon (in this case, which ship “Peerless”), there is not a valid contract; (3) The concept of mutual mistake dictates that if both parties are mistaken, there is not a meeting of the minds and (4) if there are competing meanings for contractual terms, the parties are charged with the meaning that a reasonable person would attribute to that term.
Both Plaintiff and Defendant agreed to the item sold and the price and method of conveyance, via the ship “Peerless.” The problem came about, when it became evident that there were two ships “Peerless.” Plaintiff brought suit seeking performance of the contract because he did as told and shipped the cotton via “Peerless” and defendant countered, contending that the cotton did not arrive on time, as it was expected on the October ship, rather than the December ship. Judgment was entered for the Defendant.
This case considers the question of whether a binding contract arises when both parties are mistaken as to an integral term of the agreement.
Judgment for Defendant.
The court found it impossible to hold the Defendant liable for breach, when his performance was rendered, according to his understanding of the contractual terms.
Looking at the rule of law, as illustrated above, we can see how it was applied to the facts of this case: (1) the contractual terms were ambiguous regarding the ship, and the court first attempted to apply generally accepted terms; when that failed, because there was no generally accepted term for shipping vehicle, the court found (2) that there was no meeting of the minds as to the ship, and invalidated the contract. This was (3) a mutual mistake case because both parties were mistaken as to the thing agreed upon, and neither could be held to the terms of the contract.
Consider the Restatements views on mutual misunderstanding. “There is no manifestation of mutual asset to an exchange if the parties attach materially different meanings to their manifestations and (a) neither party knows or has reason to know of the meaning attached by the other” (i.e. in the case of mutual mistake, both parties are forgiven for their misunderstanding and allowed to walk away.)