Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679
Contract; vitiating circumstances; mistake; conditionality of agreement; mistakes regarding quality; special rules.
Facts: A ship, the Cape Providence, was in danger of sinking and her owners contracted with Tsavliris Salvage to send a tug and tow her to safety. The tug would take five to six days to reach the Cape Providence and Tsavliris was worried that the Cape Providence might sink before then. He looked to find a nearby ship that could stand by and rescue the crew if necessary. A ship called Great Peace was in the area. Thinking it was the closest available ship, Tsavliris contracted with the owners of the Great Peace for the ship to stand by and render assistance. Then Tsavliris discovered that the Great Peace was further away than he and its owners had thought. He also found that another ship could get to the Cape Providence more quickly. Accordingly Tsavliris tried to cancel his contract with the owners of the Great Peace. They refused to agree to the cancellation. Tsavliris then claimed that the contract was void or voidable because of both parties' mistaken belief when contracting that the Great Peace was the closest available ship.
Issue: Did the error make the contract void or voidable?
Decision: The contract was not void in common law, nor voidable in equity.
Reason: The common law takes a strict approach to the effect of mistake on contracts because it is important to preserve the reliability of agreements. Accordingly, a contract will only be made void if a mistake as to the quality of the thing contracted for 'makes the thing contracted for essentially different from the thing that it was believed to be'. In this case, although the Great Peace was further from the Cape Providence than the contracting parties had believed, it was close enough to perform the task it was engaged to do (rescue the crew) and was not therefore something 'essentially different from the thing that it was believed to be'. The contract was therefore valid despite the error.
Further, although the case of Solle v Butcher [1950] 1 KB 671 had suggested 50 years earlier that equity might set aside a contract on grounds of an error as to a 'fundamental' quality of the thing contracted for, the court held that this earlier decision was not based on sound principle and should no longer be followed.