8.2.5.2 Notes - Raffles v. Wichelhaus | Kessler, Gilmore & Kronman | September 20, 2012

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8.2.5.2 Notes - Raffles v. Wichelhaus

by Kessler, Gilmore & Kronman
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NOTE

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1. Kyle v. Kavanagh, 103 Mass. 356 (1869), involved a contract for the sale of land located on "Prospect Street" in Waltham. In the seller's action for the price, the buyer pleaded that there were two "Prospect Streets" in Waltham; the seller had offered to convey land located on the other Prospect Street. In affirming a judgment for the defendant-buyer the Court approved the instructions that the trial judge had given the jury. These were that

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if the defendant was negotiating for one thing and the plaintiff was selling another thing, and their minds did not agree as to the subject matter of the sale, there would be no contract by which the defendant would be bound, though there was no fraud on the part of the plaintiff.

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Id. at 357. That, said Morton, J., was "in accordance with the elementary principles of the law of contracts." ld. at 359-360. Holmes, in the course of his discussion of Raffles v. Wichelhaus (see Note 4, infra), after giving the citation to Raffles, added: "Cf. Kyle v. Kavanagh, 103 Mass. 356, 357." The "Cf." reference presumably meant that Holmes thought that Raffles and Kyle were "like" cases. Do you agree?

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2. Mellish, as counsel in the principal case, argued that no contract had been formed because there had been no meeting of the minds. Subsequently, as a judge of the Court of Appeal, he had occasion to consider the problem of the revocability of offers in Dickinson v. Dodds, L. R. 2 Ch. D. 463 (1876). For his views on the relevance of the "meeting of the minds" theory in that context, see his opinion in the Dickinson case, reprinted supra p. 316.

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3. Section 2-322 of the Uniform Commercial Code deals with the meaning to be given a contract term which provides for "delivery of goods 'ex-ship.'" Comment 2 to §2-322 is as follows: "Delivery need not be made from any particular vessel under a clause calling for delivery 'ex-ship,' even though a vessel on which shipment is to be made originally is named in the contract, unless the agreement by appropriate language restricts the clause to delivery from a named vessel."

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The Code Comment might be read to support Milward's argument that it was "immaterial by what ship the cotton was to arrive," no objection having been made by the defendant to either the time or the method of delivery. Such support, of course, came a hundred years too late to do Milward and his client any good.

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In technical language, Milward's argument might be put this way: the promise to ship the cotton by a particular ship named Peerless was merely an independent covenant and not a true condition of the contract. The author of the Code Comment evidently took the same position. On the distinction between covenants and conditions (or between independent and dependent promises), see the Introductory Note to Chapter 9.

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Does the court's decision seem to rest, implicitly, on the assumption that the name of the carrying vessel was a true condition and not merely a covenant? Suppose the court had agreed with Milward that it was "immaterial by what ship the cotton was to arrive." Would that change the result if it still appeared that the parties were mistaken as to which Peerless was meant?

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4. Holmes, in his lecture on void and voidable contracts in The Common Law (M. Howe ed. 1963), offered what might be called an objectivist explanation of the principal case. After stating the facts, he continued (at 242):

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It is commonly said that such a contract is void, because of mutual mistake as to the subject-matter, and because therefore the parties did not consent to the same thing. But this way of putting it seems to me misleading. The law has nothing to do with the actual state of the parties' minds. In contract, as elsewhere, it must go by externals, and judge parties by their conduct. If there had been but one "Peerless," and the defendant had said "Peerless" by mistake, meaning "Peri," he would have been bound. The true ground of the decision was not that each party meant a different thing from the other, as is implied by the explanation which has been mentioned, but that each said a different thing. The plaintiff offered one thing, the defendant expressed his assent to another.

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5. Friendly, J., found himself confronted with what may have been a Raffles-type situation in Frigaliment Importing Co., Ltd. v. B.N.S. International Sales Corp., 190 F. Supp. 116 (S.D. N.Y. 1960). The contract called for the shipment from New York to Switzerland of 75,000 pounds of 2.5-3 pound "chickens" at 33 cents per pound, FAS New York. (By agreement of the parties, the case was decided on the assumption that New York law governed.) The New York seller procured and shipped 75,000 pounds of "stewing chickens," the New York market price being 30 cents per pound. The Swiss buyer, having accepted and presumably paid for the shipment, brought an action for breach of warranty on the ground that "chickens" meant "broilers." The New York market price for broilers at the relevant time had been 37 cents per pound. Thus the seller stood to make a profit of not more than 3 cents per pound on the stewing chickens and would have incurred a loss of at least 4 cents a pound on broilers. Judge Friendly concluded that both parties had acted in good faith — that is, the seller, honestly and reasonably, had believed that "chickens" meant (or included) stewing chickens; the buyer, honestly and reasonably, had believed that "chickens" meant only broilers. With the Raffles analogy evidently in mind, Judge Friendly commented that "the case neatly illustrates Holmes' remark 'that the making of a contract depends not on the agreement of two minds in one intention, but on the agreement of two sets of external signs — not on the parties' having meant the same thing but on their having said the same thing.'" (The passage quoted was taken from a paper by Holmes called The Path of the Law, in Collected Legal Papers 167, 178 (1920); Holmes was paraphrasing his earlier discussion of Raffles in The Common Law (see Note 4 supra). After having canvassed the various "objective" meanings of "chicken," Judge Friendly concluded that, in the trade, the word was used both in a narrow sense ("only broilers") and in a broad sense (any kind of chicken, including stewing chicken). He gave judgment for the defendant on a burden of proof theory: "[P]laintiff has the burden of showing that 'chicken' was used in the narrower rather than the broader sense, and that it has not sustained."

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A year after he had decided the Frigaliment case as a District Judge, Judge Friendly sat as a member of a three-judge panel in Dadourian Export Corp. v. United States, 291 F.2d 178 (2d Cir. 1961). The case involved a sale by the United States of surplus army property which had been advertised as Cargo Nets made of Manila rope. Dadourian, without having inspected the nets but relying on the advertisement plus an oral statement by a Property Disposal Officer at the base where the nets were stored, bid $30,893 and, when its bid was accepted, made a down payment of $7,000. A clause in the standard government contract form provided that the United States disclaimed any "guaranty, warranty, or representation, express or implied, as to quantity, kind, character, quality, weight, size or description." The nets were not "cargo nets" (they were "saveall nets," which are not as strong as cargo nets) and not all of them were made of Manila rope. On discovering these facts, Dadourian refused to accept them or to pay the balance due under the bid and sued the United States to recover its $7,000 down payment. The United States resold the nets for $7,830.30 (at the resale the nets were not described as being made of Manila rope) and counterclaimed for damages measured by the contract price ($30,893) less the down payment and the resale price. The majority of the panel, in an opinion by Medina, J., held that, under the disclaimer of warranty clause and in the light of Dadourian's failure to inspect the nets before making its bid, Dadourian could not recover the down payment. With respect to the counterclaim for damages, the case was remanded for further hearings on the propriety of the resale. (No further proceedings in the case were reported.)

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Judge Friendly dissented from the holding that Dadourian was not entitled to a rescission of the contract and a return of the down payment. He commented:

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Finally — and I pose this as a question rather than a conclusion — does not a buyer's right to reject goods not conforming to the description rest on a concept even more basic than breach of warranty? . . . [I]s there not a failure of the minds to meet bringing into play a principle akin to that of Raffles v. Wichelhaus? . . .

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Id. at 187. To his citation of Raffles, Judge Friendly appended the following footnote: "It may be that [the Frigaliment case], decided by the writer, might better have been placed on that ground, with the loss still left on the plaintiff because of defendant's not unjustifiable change of position. . . ." Id. at 187 n.4.

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6. In his Dadourian dissent Judge Friendly seems to suggest that he might better have decided Frigaliment on the "principle . . . of Raffles v. Wichelhaus" but that, if he had done so, he would have decided the case the same way (judgment for the defendant seller), because of the seller's "not unjustifiable change of position." But did not the seller in Raffles make a "not unjustifiable change of position" when he shipped the cotton on the December Peerless? Do you think that Judge Friendly meant that in cases of this type (whatever "this type" is) the loss always falls on the plaintiff in the ensuing litigation i.e., on the seller if the buyer rejects the tender and the seller sues for the price (or for damages), but on the buyer if, after accepting and paying for the goods, he discovers his "mistake" and sues for rescission and restitution (or for damages)? At first blush this interpretation of the Dadourian footnote may seem discreditable to Judge Friendly; on further consideration there may be more to it than initially meets the eye. Do you think that the buyer in Raffles, if he had accepted and paid for the cotton, would (or should) have succeeded in an action for restitution on the ground that he thought the cotton had been shipped on the October Peerless? It is, of course, in the highest degree unlikely that the confusion about the two Peerlesses was the real reason for the buyer's rejection of the seller's tender; What do you think the real reason was?

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7. Assume that the seller in Raffles had not shipped any cotton on either Peerless and the buyer was suing seller for damages for breach of contract. What result? This hypothetical made its first appearance as a question on a Contracts examination. The students on whom it was inflicted split down the middle for and against liability. The hypothetical was then submitted to a jury of law professors who were all teaching Contracts. The law professors, like the first-year law students, split down the middle. How do you account for the diversity of views that the question inspired?

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8. The centennial of Raffles was admirably celebrated in an article by Young, Equivocation in the Making of Agreements, 64 Colum. L. Rev. 619 (1964). Professor Young distinguished between vagueness or impreci- sion in the use of language and equivocation (or the use of words, fre- quently names or technical terms, that turn out to have multiple and inconsistent meanings). He concluded that the rule of Raffles v. Wichelhaus should apply only to cases of equivocation. Does Professor Young's analysis of Raffles seem to be in the same vein as Holmes' analysis of the case (Note 4 supra)?

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9. In the 1960s Professor Corbin, possibly under the stimulus of Judge Friendly's opinion in Frigaliment, added a series of new sections to his chapter on Interpretation (these sections appear in the Supplement to 3 Corbin, ch. 24). In Section 543B, Process of Interpretation — Objective Meanings, he commented at length on Frigaliment as well as on Holmes' discussion of Raffles ("It should not be sacrilege to suggest that there is an 'ambiguity' in Holmes' use of the word 'said' . . ."). With respect to Frigaliment, he did not quarrel with Judge Friendly's disposition of the case but did deplore his attempt to find an "objective" meaning for "chicken." Referring to his own boyhood, Corbin wrote: "For ten years on a Kansas farm it had been a regular job to 'feed the chickens' with no suggestion that the old hens and roosters were to be excluded." Other new sections which Corbin added at this time included §543A, What is Ambiguity?; §543AA, Growth of the Law, in Spite of Long Repetition of Formalistic Rules; §543D, Semantic Stone Walls — What Are They Made Of? These sections must have been among the last things Corbin wrote before his hearing and eyesight failed; they are of extraordinary interest.

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10. Restatement Second §20 "codifies" Raffles in Illustration 2. Further illustrations in §20 and Illustration 6 to §153 (When Mistake of One Party Makes a Contract Voidable) play games with the Raffles fact situation by making various assumptions about whether one party or both parties knew of the existence of the two Peerlesses and, if so, further knew which of the Peerlesses the other party had "intended."

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June 02, 2014

8.2.5.2 Notes - Raffles v. Wichelhaus

8.2.5.2 Notes - Raffles v. Wichelhaus

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