Mistake in Indian Contract Act

 MISTAKE in Indian Contract Act, 1872

By: Robin Pandey                                                                                            Date: 10/03/2022

Mistake means an erroneous belief about something. It has not been defined in the Indian Contract Act, 1872. Mistake which vitiates a contract must be fundamental, e.g., "as to the substances of the whole consideration going. to the root of the matter". Sections 20, 21 and 22 deal with mistake. 

According to Section 20, "Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void." 

Section 21 provides: "A contract is not voidable because it was caused by a mistake as to any law in force in India, but a mistake as to any law not in force in India has the same effect as a mistake of fact. “

Section 22 lays down: "A contract is not voidable merely because it was Caused by one of the parties to it being under a mistake as to a matter of fact. “

Thus mistake may be divided into the following types:

1. Mistake of law 

(a) Mistake of Indian Law;

(b) Mistake of Foreign Law. 

2. Mistake of fact 

(a) Bilateral mistake; 

(b) Unilateral mistake

1. Mistake of law Mistake of Indian Law: Section 21 states that a contract is not (a) voidable because it was caused by mistake as to any law in force in India. Thus ignorance of Indian law is no excuse. It is the duty of every citizen to know either by professional advice or otherwise so much law as concerns him for the matters he is transacting. A person cannot avoid a contract entered into on the ground of mistake of law. Illustration appended to Section 21 provides that where A and B make a contract grounded on the erroneous belief that a particular debt is barred by the Indian Law of Limitation the Contract is not voidable.

However, relief can be granted where the mistake is so fundamental as to prevent any real agreement ""upon the same thing in the same sense from being formed. Thus if there is no consensus ad idem it is immaterial of what kind the mistake was or how it was brought about. [Also See: Section 72 of the Act.]

(b) Mistake of Foreign Law: As no one is expected to be conversant with the foreign law, section 21 provides that a mistake as to law not in force in India has the same effect as a mistake of fact

2. Mistake of fact

Mistake of fact Mistake of fact may be of two types, e.g. (a) bilateral mistake and (b) unilateral mistake.

(A) Bilateral mistake as to a matter of fact essential to the agreement 

Section 20 says that where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. The explanation to Section 20 states that an erroneous opinion as to the value of the thing which forms the subject matter of the agreement is not to be deemed as mistake as to a matter of fact. The conditions for application of Section 20 are as follows:

 (a) Both the parties to an agreement are under a mistake, 

(b) the mistake relates to a matter of fact, and 

(c) the fact about which they are at mistake is essential to the agreement:

The Section gives the following illustrations:

(a) A agrees to sell to B a specific cargo of goods supposed to be on its way from England to Bombay. It turns out that, before the day of bargain, the ship conveying the cargo has been cast away, and the goods lost. Neither party was aware of this fact. The agreement is void as the subject-matter of the agreement was non-existent at the time of making of the agreement. 

(b) A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of bargain, though neither party was aware of the fact. The agreement is void. This is also a case of non-existent of the subject-matter of the agreement. 

(c) A. being entitled to an estate for the life of B, agrees to sell it to C. B was dead at the time of the agreement but both parties were ignorant of the fact. The agreement is void.

(B) Unilateral mistake 

Section 22 provides that "A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact." A mistake by one of the parties is called unilateral mistake and it does not affect the validity of the contract. This is best explained with the help of the following case: