Smith v Hughes is a leading English contract law case concerning mistake, the objective test of agreement, and the principle of caveat emptor (buyer beware). It is frequently cited for establishing that a contract is judged by how parties appear to agree, rather than their undisclosed intentions.
The judgements in Smith v Hughes clarify when a mistake will affect the validity of a contract and when a seller is entitled to rely on the buyer’s inspection and assumptions. This case remains a foundation for understanding when a contract may be void for mistake and the limits of a seller’s duty to correct a buyer’s misunderstanding.
Facts of Smith v Hughes
The claimant, Mr Smith, was a farmer who was offering oats for sale. He provided the defendant, Mr Hughes, a racehorse trainer, with a sample of the oats. The sample he showed consisted of green oats, which were the same type as the oats he planned to sell. After inspecting the sample, Mr Hughes later wrote to Mr Smith and ordered between 40 and 50 quarters of oats at a price of 34 shillings per quarter.
Mr Hughes had formed the belief—incorrectly—that the oats were old oats. As a racehorse trainer, he required old oats because these were suitable for feeding his horses. The price he offered was reasonable for old oats, but it was considered high for new or green oats. However, there had been no express discussion between the parties about the age or type of oats during the negotiation.
Mr Smith sent 16 quarters of oats to Mr Hughes as part of the order. Upon delivery, Mr Hughes realised that the oats were new oats, just like the sample. He refused to accept the remaining delivery and refused to pay for the oats already delivered, claiming that he had made a mistake about the type of oats he was buying.
Mr Smith brought an action for breach of contract.
At trial, the jury found in favour of Mr Hughes. They believed that Mr Hughes was under a mistake regarding the type of oats, and they concluded that Mr Smith knew about this mistake. The claimant appealed this decision.
Issues
The core question in Smith v Hughes was whether the contract was void for mistake or voidable for misrepresentation. More specifically, the issue was:
Could Mr Hughes avoid the contract on the ground that he mistakenly believed he was buying old oats, when the sample showed new oats?
There was no dispute that the parties had entered into an apparent agreement. The concern was whether the misunderstanding about the type of oats meant that no genuine consensus had been reached, or whether Mr Hughes was bound by the objective appearance of agreement.
Smith v Hughes Judgement
On appeal, the court held that the judge’s initial direction to the jury had been incorrect. As a result, a new trial was ordered. The court made several important findings.
First, the court stated that the mere fact that Mr Smith knew Mr Hughes was mistaken was not enough to make the contract void. A seller’s passive acquiescence in a buyer’s mistake does not render a contract void for mistake. In other words, the seller had no legal obligation to inform the buyer that the buyer was labouring under an incorrect assumption, provided he did not actively mislead him.
Second, the court emphasised the importance of an objective test. The key question was whether it would appear to a reasonable person, based on the parties’ conduct and the circumstances, that the contract was for the sale of old oats rather than new oats.
If reasonable observers would conclude that both parties intended to contract for old oats, then Mr Hughes would be entitled to reject the new oats. If not, then Mr Hughes had breached the contract by refusing the delivery.
A crucial point was that there had been no express discussion between the parties about old oats. The sample clearly gave Mr Hughes an opportunity to inspect what he was purchasing. Because the sample consisted of new oats, and the main delivery matched the sample, this was treated as a situation in which the principle of caveat emptor applied. The buyer was expected to check the sample carefully and take responsibility for his assumptions.
The appeal court therefore held that the matter must be reconsidered because the initial jury had been misdirected in law.
Key Legal Principles
Objective Test of Agreement
A major contribution of Smith v Hughes is its reinforcement of the objective theory of contract. Blackburn J stated that:
If a person conducts himself in such a way that a reasonable person would believe he was assenting to the terms proposed by the other party, then he is bound by those terms, even if his real intention was different.
This objective approach prevents parties from avoiding contracts simply by claiming that they secretly intended something else. Such protection is necessary for certainty in commercial dealings.
Mistake Does Not Void a Contract When There Is No Misrepresentation
The court stressed that a mistake held by one party does not automatically void a contract, particularly when there has been no misleading statement or representation by the other party. Here, Mr Smith made no representation that the oats were old. He simply provided a sample, and Mr Hughes assumed they were old.
The case demonstrates that:
- A unilateral mistake does not void a contract unless the other party actively misled or misrepresented a fact.
- A seller is not under a duty to correct a buyer’s mistaken assumption when the buyer has had a reasonable opportunity to inspect the goods.
Caveat Emptor (Buyer Beware)
Smith v Hughes is commonly cited as an example of caveat emptor. Mr Hughes had the sample in his hands. He could see the nature of the oats he was buying. His failure to realise that they were new oats was a risk he bore.
The case therefore reinforces the idea that:
- Where goods are sold by sample, the buyer must inspect the sample properly.
- A buyer cannot later claim a mistake if the goods delivered match the sample.
No Duty on Seller to Correct Buyer’s Mistake
The court made clear that a seller’s simple awareness of the buyer’s misunderstanding is not enough to invalidate a contract. Unless the seller actively misrepresents something, he is not required to intervene.
This protects sellers from responsibility for assumptions made entirely by buyers.
Void vs Voidable
Cockburn CJ added that if Mr Smith had positively represented that the oats were old, the contract would likely have been voidable for misrepresentation. Since he had not made such a representation, the matter depended solely on whether the bargain (objectively viewed) was for old oats or new oats.
Conclusion
Smith v Hughes illustrates that contracts are grounded in how parties appear to agree, rather than their inner beliefs. Because Mr Hughes had inspected a sample of the oats, and because Mr Smith had not represented that the oats were old, the contract could not simply be avoided because of the buyer’s mistaken belief. The matter was returned for a new trial to determine objectively what the parties intended to contract for.
The case continues to be a cornerstone of contract law, shaping how courts interpret agreements, evaluate mistake, and uphold commercial certainty in everyday transactions.