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McRae v Commonwealth Disposals Commission (1951) 84 CLR 377

Contract Law – Australia – Common Mistake – Performance – Mistake – Subject Matter - Damages

Facts

The complainant, McRae, won a tender from the defendants, Commonwealth Disposals Commission, to retrieve an oil tanker that was on Jourmaund Reef near Samarai. However, when the complainant went to the location, after laying out significant expenses for the salvage, they discovered that in fact there was no oil tanker. The Commonwealth Disposals Commission had only heard that there was an oil tanker there from gossip. They later learned that it was not.

Issues

At first instance, it was held that there was no contract between the complainant and the defendant. However, this decision was appealed by McRae. The complainant sought damages from the defendant for breach of contract, fraudulent misrepresentation of the oil tanker and for damages since they did not disclose the information about the oil tanker when it came to their knowledge that it did not exist. The defendants argued that they had no liability to pay damages for breach of contract, as it was void by common mistake that the oil tanker did not exist. The issue in this case was whether the complainant could recover damages and if the contract could be void by a common mistake.

Held

It was held that the complainant was entitled for damages from the defendant. The contract was not null and void because of a common mistake. A contract did exist between the complainant and the defendant and since this oil tanker did not exist, this was a breach of contract. Thus, the complainant was entitled to damages for breach of contract and for the purchase price amount of the oil tanker, as well as the expenses paid out for the salvage operation.


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