McRae v Commonwealth Disposals Commission

McRae v Commonwealth Disposals Commission
Court High Court of Australia
Citation(s) [1951] HCA 79, (1951) 84 CLR 377
Keywords
Frustration

McRae v Commonwealth Disposals Commission [1951] HCA 79 is an Australian contract law case, relevant for English contract law, concerning the common mistake about the possibility of performing an agreement.

Facts

The Commonwealth Disposals Commission sold McRae a shipwreck of a tanker on the "Jourmaund Reef", near Samarai supposedly containing oil. The McRae brothers went to the island and found no tanker. It later became clear that the Commission officer had made a 'reckless and irresponsible' mistake in thinking that they had a tanker to sell (the Court found that they had relied on mere gossip. The McRae brothers incurred considerable expense in fitting out a salvage operation.

The McRae brothers commenced an action claiming damages against the Commission. First they claimed damages for breach of contract to sell a tanker at the location specified. Second, they claimed damages for fraudulent misrepresentation that there was a tanker. Third, they claimed damages for a negligent failure to disclose that there was no tanker at the place specified after the fact became known to the Commissioner. CDC argued there was no liability for breach of contract because it was void given the subject matter did not exist.

Judgment

The High Court of Australia held that McRae succeeded in damages for breach of contract. They rejected the contract was void because CDC had promised the tanker did exist. Courturier v Hastie was distinguished because there the parties had both shared the assumption the corn existed, but here CDC had actually promised the tanker existed and therefore had assumed the risk that it did not.

A general ruling that can be gleaned from the court's judgment is that in circumstances where parties have equal knowledge as to the existence of the subject matter, and it turned out to be false, then it would justify the implication of a condition precedent. In that case, the contract would be void for the failure of the condition precedent, and parties would be restored to their original position. However, in a case where only one party has knowledge of the subject matter (such as the present circumstances), and the other simply relies on what the first party intimates, then there could be no condition precedent. The first party promises or guarantees the existence of the subject matter and will be in breach if it does not exist.[1]

See also


References

  1. ↑ McRae v Commonwealth Disposals Commission (1951) 84 CLR 377.
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