Summary of Facts:
Company Star Boat employed Tom as the manager for marketing and sales department. Being an agent for Star Boat, Tom frequently concluded contracts with a number of suppliers for acquiring certain parts to manufacture boats. Smooth Sailing was one of the suppliers. Tom resigned from Star Boat in July 2012 upon being offered a better position in Star Ferry. However, he acquired 4,000 parts from Smooth Sailing in August and manager of Smooth Sailing did not notice that in the contract Tom indicated his signature as “manager, Star Ferry” and thought they were dealing with Star Boat as usual. When Smooth Sailing later notified Star Boat to make payment, Star Boat wanted to ratify the contract.
First, Star Boat wants to ratify the contract, we must know that whether there is any valid contract formed. There are six elements to create a valid contract including intention to create legal relation, an offer and acceptance, consideration, privity of contract, capacity of contract and legality of contract. The first element – intention to create legal relation is not fulfilled. As Smooth Sailing intended to deal with Star Boat but not Star Ferry. However, the contract now is dealing with Star Ferry. Smooth Sailing has no intention to deal with Star Ferry. As there is no intention, no valid contract is formed.
Second, there is a unilateral mistake in this contract. Unilateral mistake involves only one party mistaken. To be operative, it must be known to the other party. Normally involve fraud on the part of the non-mistaken party. In the above case, Tom was dealing with Smooth Sailing before July. However, in August, Tom did not tell the truth to Smooth Sailing that he is the agent of Star Ferry but not Star Boat now. Therefore, Smooth Sailing thought that he was dealing with Star Boat as usual.
In the following paragraph, we list two relevant cases which are similar to the present case.