## Facts

- A seller agreed in writing to sell, and a buyer agreed to purchase, 125 bales of Surat cotton “to arrive ex ‘Peerless’ from Bombay,” with payment due after arrival and removal from the quay in Liverpool.
- Unknown to the parties at contracting, two different ships named *Peerless* sailed from Bombay to Liverpool: one in October and another in December.
- The seller tendered cotton arriving on the December *Peerless*; the buyer refused acceptance and payment, asserting he contracted for cotton arriving on the October *Peerless*.
- The seller sued for breach based on non-acceptance and non-payment.
- The buyer filed a special plea alleging the parties referred to different ships; the seller demurred, arguing the plea did not state a legal defense.

## Issues

1. Whether the term “Peerless” created a latent ambiguity, permitting extrinsic evidence to show the parties referred to different ships.
2. Whether mutual assent existed where each party attached a different meaning to an essential shipping identifier in the contract.

## Decision

- The Court of Exchequer held the buyer’s plea was a sufficient defense on demurrer.
- The court concluded no binding contract was formed because the parties did not agree on the same ship identified as *Peerless*.
- Judgment was entered for the buyer, and the seller could not recover for breach.

## Legal Principles

- A contract is not formed without mutual assent on essential terms; if the parties’ understandings differ on an essential identifier, enforcement may be denied.
- A latent ambiguity arises when language that appears clear becomes uncertain when applied to external facts; extrinsic evidence may be used to show the competing meanings.
- When an ambiguity concerns a material term and each party reasonably refers to a different subject matter, a court may treat the agreement as void for mutual misunderstanding rather than select a meaning that would impose a different bargain.

## Conclusion

Because “Peerless” referred to two different ships and each party meant a different one, the agreement lacked mutual assent on a material term, so no enforceable contract existed and the buyer was not liable for breach.


Raffles v. Wichelhaus, 159 Eng. Rep. 375 (Exch. 1864)