[MUSIC PLAYING]
CHARLES FRIED: We've seen that if you make a deal that in every respect
looks like a proper contract-- there's an offer, there's acceptance,
there's a bargain-- but it turns out that one or both of the parties
went into the deal under an important mistaken assumption--
the cotton is on the wrong ship, the cow is not barren, but pregnant--
when one or the other discovers the mistake, in certain situations,
they can call the whole thing off.
Now, I'd like to explore an analogous problem in contract law.
But the surprise comes up later.
It wasn't lurking there the whole time only to be discovered later;
it genuinely just happened later.
The two ships Peerless were a problem waiting to happen.
It was there all along, and only when the second ship came
in did the parties wake up to the fact that they
had made their contract under a mistaken assumption.
But surprises can pop up after the bargain has been struck.
Sometimes, the court will look at the surprise
and conclude that the fairest thing to do is to call the whole thing off.
However, sometimes, when the risk was or should have been understood,
the courts will still enforce the contract as written.
To begin, let's go back to 1902, when there
were to be two processions, grand events,
with all kinds of gilded carriages, royalty, and military guards and so on,
in connection with the coronation of King Edward VII in London.
Krell had an apartment on the parade route.
And he advertised that for the sum of 75 pounds, a considerable sum of money
in those days, Krell would allow a person and his guests
to view the parades on those two days from his windows.
Henry took Krell up on this proposal, sending Krell
a check for 25 pounds with his agreement to pay the balance two
days before the first of the two parades was to take place.
The parades were to take place on June 26 and 27.
And the rest of the money was to be paid by the end of the day on the 24th.
Sometime before the end of the day on the 24th, the king became ill,
and the two processions were canceled.
As you might expect, Henry did not pay the remaining 50 pounds,
although we may suppose that Krell would have been perfectly happy to allow
Henry and his probably very many guests to come and sit in his apartment
and look out the window at nothing at all on those days.
So Krell sued Henry for the 50 pounds, saying, in effect,
hey, a deal's a deal.
I agreed to let you have the use of my apartment on those two days,
and you can still have the use of my apartment on those two days.
After all, I didn't promise to put on a royal procession for you.
Henry defended.
And not only did he decline to pay the 50 pounds.
He sued Krell to get back the 25 pounds he had already paid down.
Henry's point was that the existence of the two royal processions
was the basis for this contract.
Of course Krell hadn't promised to put on a procession.
But the whole point of the contract was to view it.
In fact, the advertisement that Krell had posted
and to which Henry had responded had said
something like, "75 pounds for the privilege of
viewing the processions on those two days from my windows."
It certainly isn't as if Krell had broken his promise,
because he had not made a promise to put on a procession.
But, Henry said, and the court agreed, that the basic premise
of the undertaking was that there would be a procession.
That's why these two people made the bargain they did.
And if this underlying premise disappears,
then there's no point to the contract.
The contract's purpose is frustrated, and the deal should be called off.