Smith v Hughes [1871] LR 6 QB 597

KEY POINTS

• The contract between the parties was not based on the subjective intentions of the parties but on the objective meaning of the words used in the contract.

• Contractual obligations are based on the objective meaning of the contract's language, rather than the subjective intentions or interpretations of the parties.

• If a seller offers a specific item for sale without a clear warranty or under circumstances where the law does not imply a warranty, and the buyer has the opportunity to inspect and make their own judgment, the principle of "caveat emptor" (let the buyer beware) applies. In such cases, the buyer is responsible for their choices, and the seller is not automatically responsible for any defects or issues with the item.

• In general, a unilateral mistake is not a valid reason to cancel or void a contract.

FACTS

• Mr. Hughes, a racehorse trainer, ordered oats from Mr. Smith, a farmer, based on a sample of oats provided by Smith.

• When the oats were delivered, Hughes claimed they were not the type he needed. He wanted old oats for racehorses but received new oats. Smith's sample had been of new oats.

• Hughes refused to pay for the oats and Smith sued him for damages for breach of contract.

JUDGEMENT

• The court ordered a new trial.

COMMENTARY

• Smith v Hughes serves as a reminder of the importance of contractual certainty and the need for clear, unambiguous terms in contracts. It highlights that contracts should be specific and well-defined to minimize misunderstandings and disputes.

ORIGINAL ANALYSIS

• Defendant agreed to sell “oats” to Plaintiff, Plaintiff assuming that the oats were old when in fact they were new, though Defendant had done nothing to induce Plaintiff’s belief. Nothing was said in negotiations or the contract on the matter.

• Plaintiff tried to vitiate the contract on the grounds of the mistake, since the minds were not ad idem due to the mistake.

• CA rejected this. 

Cockburn CJ

• The parties were ad idem as to the parcel of oats to be sold and price etc. The only absence of the minds being ad idem was in the case of how old the oats were.

• The mistaken belief of Plaintiff as to age was a “motive” inducing him to buy, and not an “essential condition of the contract”. Plaintiff did not make age a condition of the contract. 

Blackburn J

• Unless there is a warranty as to quality, the buyer must accept the good he has contracted to buy regardless of what quality he believed it to be.

• Even if the vendor knew of the belief under which the purchaser was operating and knew it was an incorrect belief, the purchaser is still bound unless the vendor is being fraudulent or deceitful or induced the mistake, due to general rule of no duty of disclosure.

• Also, where a mass is sold by a sample, the law is the same, provided the sample represents the mass.

• On the agreement, the intention is to be inferred objectively: If a reasonable man would believe from A’s conduct that he agreed to B’s terms, then A is bound by them regardless of his true intention.

Hannen J

• Ad Idem is crucial: if I want to buy one ship and you are selling another, but they have the same name, there is no “ad idem” and the contract is not formed.

• However where it is one party’s own fault that there is no ad idem (e.g. where a vendor displays the wrong sample for the good he intends to sell), he cannot use lack of “ad idem” as a defence.

• However if in negotiations the purchaser becomes aware that vendor gave him an incorrect sample, vendor can apply the lack of “ad idem” defence by showing that he did not intend to sell the object to which the sample related. 

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McKendrick: Important point is that where vendor (V) knows that purchaser (Pu) is mistaken as to what he is buying, there is still ad idem, whereas if Pu knows that V made a mistake but failed to tell him, V can escape the bargain on the basis of mistake. This affords greater protection to sellers that consumers.

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