Smith v Hughes (1871): Objective test in contract law

Areas of applicable law: Contract law – reasonable man – objective test – mistake
Main arguments in this case: Real intention of a party in a contract may not matter if the essence of the contract, when looked at objectively, differs.

The fact of the case: Mr Hughes, the defendant, specifically wanted to buy old oats from the claimant, Mr Smith. The defendant was a racehorse trainer and the new oats would not be suitable for feeding the horses. The claimant was a farmer and he brought a sample of oats to show it to the defendant and the defendant agreed to buy them. The sample shown to the defendant was of new oats, which the claimant knew as well as he also knew that the requirement was for the old oats. The defendant believed that the sample he was shown were of old oats and he placed an order on that basis. Though the claimant knew what he was supplying, he had never said or done in the course of the dealing that represented misleading or fraud – in other words, he did not say that the oats were old. When the defendant knew that he had bought new oats instead of old, he declined to make payment and buy the remaining lot. The claimant sued.

The court at first trial found in favour of Mr Hughes on the basis that there was a mistake on the defendant’s part (believing he was buying old oats), and the claimant knew about it (that he was selling new oats). The  claimant appealed.

The Court of the Queen’s Bench (now a part of the High Court of Justice) found in favour of Mr Smith, the claimant. The court held that despite the mistake by the defendant the contract was valid. The court based its decision on the fact that the contract was for selling the oats without any term in it that specifically said that it had to be old oats and if an objective test applied (if a reasonable person looked at the facts of the contract) there would be no doubt that was what it was supplied.

Furthermore, though the claimant knew of the intention of the defendant, that he wanted to buy old oats, the claimant was under no obligation to let the defendant know that he was mistakenly ordering new oats instead of old.

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