McRae v Commonwealth Disposals Commission;

Material Facts:

The plaintiff purchased an oil tanker with its contents lying on the “Jourmand Reef” near Samarai from Commonwealth Disposals Commission. Upon reaching the Samarai, the plaintiff discovered that there was no oil tanker and no “Jourmand Reef” and they sued for damages. The defendants contended that the contract was void on grounds of a non-existent subject matter.

Issues:

1. Whether or not the plaintiff was entitled to damages from the defendant.

Holding:

1. That the plaintiff was entitled to damages from the defendant.

Ratio Decidendi:

The court held that unlike in Couterier v Hastie where the parties all shared the assumption that the subject matter existed, this case was one where the defendant had promised the existence of the subject matter which turned out to be false. The defendant was thus liable for breach of contract.