Great Peace Shipping Ltd v Tsavliris Salvage Ltd [2002] 3 WLR 1617

Court of Appeal

Basic Facts: X experienced structural damage to a ship in the South Indian Sea and sought salvage services. D offered to provide these services, and C’s vessel was commissioned to assist. Later, it was discovered that C’s vessel was 410 miles away, much farther than initially thought. D then hired another vessel and canceled the contract with C, who was entitled to payment for five days’ hire.

Issue for the Court: When can a common mistake regarding the subject matter of a contract void the contract?

Held :The court held that the contract could be voided due to a common mistake if performance became impossible due to a fundamental error about the subject matter. A common mistake about a fundamental aspect of the contract, such as the existence or location of the vessel, can render the contract void if it fundamentally alters the nature of the agreement.

• Lord Phillip : The principle of common mistake applies where a contract is based on a mistaken assumption that fundamentally changes the nature of what was agreed upon.