Clark v. Dunraven [1877] AC 59; 79 LT 337

Material Facts:

Both the plaintiff and defendant belonged to the same yacht club and entered their yachts for a club race. One of the rules of the club was that if a yacht broke club rules and caused damage to another yacht during a race, the owner of the yacht that caused the damage would be liable to compensate the owner of the damaged yacht. Owing to the defendant’s negligence, his yacht broke one of the club rules and caused damage to the plaintiff’s yacht. The plaintiff instituted the present action for damages.

Issue:

Whether or not the defendant is liable to compensate the plaintiff for the damage caused to his boat

Argument of the Defendant:

1. That he never had an agreement with the plaintiff to compensate him in the event of damage to his boat, so he cannot be held liable. Put differently, there was no contractual relationship between him and the plaintiff that he (defendant) would compensate the plaintiff for losses.

Holding:

The defendant is liable to compensate the plaintiff for the damage because a contract was formed by implication. Each member of the club impliedly agreed to compensate other members of the club whose yachts were damaged by his own yacht.

Ratio Decidendi:

The House of Lords noted that all persons who agreed to participate in the race were agreeing to race in accordance with the various rules of the yacht club. Per Lord Herschell,

I cannot entertain any doubt that there was a contractual relation between the parties to this litigation. The effect of their entering for the race, and undertaking to be bound by these rules to the knowledge of each other, is sufficient, I think, where those rules indicate a liability on the part of the one to the other, to create a contractual obligation to discharge that liability

There was thus a contractual relationship between the members of the club because they had agreed to a set of rules that made them liable for damages to each other’s boats.

Principle in Case:

This case is often taken as an exception to the general rule that before a contract is formed, there must be an offer and an acceptance between the parties. In the present case, there was no offer from the plaintiff to the defendant, yet a contractual relationship existed between them.