Legal Case Summary
McRae v Commonwealth Disposals Commission (1951) 84 CLR 377
Contract Law – Australia – Common Mistake – Performance – Mistake – Subject Matter – Damages
Facts
The complainant, McRae, won a tender from the defendants, Commonwealth Disposals Commission, to retrieve an oil tanker that was on Jourmaund Reef near Samarai. However, when the complainant went to the location, after laying out significant expenses for the salvage, they discovered that in fact there was no oil tanker. The Commonwealth Disposals Commission had only heard that there was an oil tanker there from gossip. They later learned that it was not.
Issues
At first instance, it was held that there was no contract between the complainant and the defendant. However, this decision was appealed by McRae. The complainant sought damages from the defendant for breach of contract, fraudulent misrepresentation of the oil tanker and for damages since they did not disclose the information about the oil tanker when it came to their knowledge that it did not exist. The defendants argued that they had no liability to pay damages for breach of contract, as it was void by common mistake that the oil tanker did not exist. The issue in this case was whether the complainant could recover damages and if the contract could be void by a common mistake.
Decision / Outcome
It was held that the complainant was entitled for damages from the defendant. The contract was not null and void because of a common mistake. A contract did exist between the complainant and the defendant and since this oil tanker did not exist, this was a breach of contract. Thus, the complainant was entitled to damages for breach of contract and for the purchase price amount of the oil tanker, as well as the expenses paid out for the salvage operation.
Updated 20 March 2026
This case summary remains accurate as a description of the 1951 High Court of Australia decision in McRae v Commonwealth Disposals Commission (1951) 84 CLR 377. The case continues to be cited as good law in both Australian and English contract law on the doctrine of common mistake and the allocation of contractual risk, and its authority has not been displaced.
Readers should be aware that this is an Australian authority and its direct applicability in English law must be treated with some care. In English law, the leading cases on common mistake remain Bell v Lever Brothers Ltd [1932] AC 161 and Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407, the latter of which confirmed that equitable rescission for common mistake is not available where the mistake does not render the contract void at common law. McRae is widely discussed in English academic and judicial contexts as a persuasive authority on the question of which party assumes the risk of a non-existent subject matter, and it remains a relevant and frequently referenced case in this area. No subsequent developments have undermined its value as a teaching authority.
