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MISTAKE under Indian Contract Act

 MISTAKE [Sec. 20,21,22]

Mistake may be defined as an erroneous belief concerning something. It may be of two kinds:

1. Mistake of law.

2. Mistake of fact.

Mistake of Law

Mistake of law may be of two types:

1. Mistake of law of the country; - Everyone is deemed to be conversant with the law of his

country, and hence the maxim “ignorance of law is no excuse.” Mistake of law, therefore, is

no excuse and it does not give right to the parties to avoid the contract. Stating the effect of

mistake as to law, Section 21 declares that “a contract is not voidable because it was caused

by a mistake as to any law in force in India.” Accordingly, no relief can be granted on the

ground of mistake of law of the country. Illustration: - (Sec. 21). 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 (i.e., the contract is valid).

2. Mistake of foreign law. -Mistake of foreign law stands on the same footing as the

‘mistake of fact’. Here the agreement is void in case of ‘bilateral mistake’ only, as explained

under the subsequent heading.

Mistake of Fact

Mistake of fact may be of two types:

1. Bilateral mistake; - Where the parties to an agreement misunderstood each other and are

at cross purposes, there is a bilateral mistake.

The following three conditions must be fulfilled:

(i) Both the parties must be under a mistake i.e., the mistake must be mutual. Both the parties

should misunderstand each other so as to nullify consent. Illustration: M, having two houses

A and B, offers to sell house A, and N not knowing that M has two houses, thinks of house B

and agrees to buy it. Here there is no real consent and the agreement is void.

(ii) Mistake must relate to some fact and not to judgment or opinion etc. An erroneous

opinion as to the value of the thing which forms the subject-matter of the agreement is not to

be deemed a mistake as to a matter of fact (Explanation to Section 20).

Illustration: If A buys a motorcar, thinking that it is worth Rs 80,000, and pays Rs. 80,000

for it, when it is only worth Rs 40,000, the contract remains good. A has to blame himself for

his ignorance of the true value of the motorcar and he cannot avoid the contract on the ground

of mistake.

(iii) The fact must be essential to the agreement i.e., the fact must be such which goes to the

very root of the agreement.

2. Unilateral mistake. Where only one of the contracting parties is mistaken as to a matter of

fact, the mistake is a unilateral mistake. Regarding the effect of unilateral mistake on the

validity of a contract. 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.”

Accordingly, in case of unilateral mistake a contract remains valid unless the mistake is

caused by misrepresentation or fraud, in which case the contract is voidable at the option of

aggrieved party. On the basis of judicial decisions, however, in certain exceptional cases even

an unilateral mistake, whether caused by fraud, misrepresentation, etc., or otherwise, may

make an agreement void ab-initio.


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