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McRae v Commonwealth Disposals Commission

[1951] 84 CLR 377

Case summary last updated at 02/01/2020 17:03 by the Oxbridge Notes in-house law team.

Judgement for the case McRae v Commonwealth Disposals Commission

D, relying on anecdotal evidence, believed there to be a marooned oil tanker and sold it to P, who after searching, found that it did not exist. CA awarded certain damages (see week 3). D had tried to escape all compensation by claiming that the tanker’s existence was one of “mutual-mistake” and therefore they should not be punished. However CA said “a party cannot rely on mutual mistake where the mistake consists of a belief which is…entertained by him without any reasonable ground”. There was a promise that the ship existed and, in the absence of a condition stating that the contract’s validity was contingent on the ship’s existing, D was too bear the loss of its making a false promise. 

CW’s conclusions: Physical impossibility is not a voiding factor in a contract where either (1) the risk can be allocated to one party or (2) the mistake is unreasonable 

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