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Great Peace Shipping Ltd V Tsavliris Salvage Ltd Notes

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This is an extract of our Great Peace Shipping Ltd V Tsavliris Salvage Ltd document, which we sell as part of our Contract Law Notes collection written by the top tier of Oxford students.

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Great Peace Shipping Ltd v Tsavliris Salvage Ltd [2002] 3 WLR 1617 Court of Appeal Basic Facts X suffered structural damage in the South Indian Sea. D offered salvage facilities which were accepted. D looked for a merchant vessel to assist in this process, and were given the names of four vessels supposedly nearby by Y. The Great Pearce was apparently the closest, so D commissioned from C them to assist. D suddenly found out that the ship was 410 miles away, so instead commissioned a different ship and cancelled the contract with C. The contract stipulated that this was allowed on the payment of 5 days hire to C, but D refused to pay it. Issue for the Court When can a common mistake void a contract?
Held Lord Phillips MR

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This principle is as follows: o In contracts in which the performance depends on the continued existence of a given person or thing,
? a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance.

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that excuse is by law implied, because from the nature of the contract it is apparent that the parties contracted on the basis of the continued existence of the particular person or chattel.

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So we have to ask what makes performance of a contract impossible: o This is the non-existence of a state of affairs
? Which is the existence, or a vital attribute, of the consideration to be provided
? or circumstances which must subsist

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if performance of the contractual adventure is to be possible

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Thus, a contract may be impossible to perform where o The item for consideration does not actually exist. o A vital attribute of the item for consideration does not exist o The circumstances which make the performance of contractual adventure possible do not exist
? The latter two only come into play when the mistake over the perceived circumstances or attributes make contract performance essentially different from that which the parties agreed. Dismissing Implied Terms analysis

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The theory of the implied term is as unrealistic when considering common mistake as when considering frustration. o Where a fundamental assumption upon which an agreement is founded proves to be mistaken,
? it is not realistic to ask whether the parties impliedly agreed that in those circumstances the contract would not be binding.

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But if not, the avoidance of a contract on the ground of common mistake results from a rule of law under which, if it transpires that one or both of the parties have agreed to do something which it is impossible to perform, o no obligation arises out of that agreement.

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BUT Just as the doctrine of frustration only applies if the contract contains no provision that covers the situation,

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