Meaning of Mistake

Mistake means erroneous belief concerning material fact about a contract.

Classification of mistake —

  1. Mistake of fact
    1. Bilateral Mistake
    2. Unilateral Mistake
  2. Mistake of law

Bilateral Mistake—Regarding the bilateral or mutual mistake act S. 20 specifically says —“Where both the parties to an agreement a| under a mistake as to a matter of fact essential to the 'agreement' til agreement is void.”

But, “an erroneous opinion as to the value of the thing which forms th subject-matter of the agreement is not to be deemed to be a mistake as to matter of fact.” The same proposition has been very aptly put by Tyabji — “When both the parties (and not only one party) to a agreement —(the existence of an agreement implies that both parties, have agreed on the same thing in the same sense (S. 13) are under a mistake  to a matter of fact not as to matter of law, not merely as to opinions or expectation of what may result from the transaction), and such a matter 1 fact is essential to the agreement so that the matter of fact affeacts the substance of the whole transaction the agreement is void (and not mere) voidable).”


Essentials of S. 20

  1. 20 will apply only when the following three things are satisfied—


  1. 20 will apply only when both the parties to an agreement are under mistake of fact essential to the agreement. Thus, where both the parties agree to sell and purchase of a particular good having the same thing in the mind, the mistake of one as to the quality, quantity or value of the goods does not invalidate the contract. For example—In Smitu Vs. Hughes, (1872) 6 Q. B. 597, A agreed to buy certain Oats from B believing that they were old. In fact, Oats were new. It was held that A could not avoid contract on the ground that a had a mistaken impression as to the oldness of the Oats.

Examples of Bilateral Mistake—

(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 before the day of the bargain, the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of these facts. The agreement is void.

(b) A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void.     ^

(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.


Unilateral Mistake—Regarding the unilateral mistake S. 22 says, “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, the mere fact that one of the parties to the contract acted under a mistake, is no ground for setting aside the contract of Unilateral Mistake. For example—

Exception to Unilateral Mistake—If mistake is unilateral the transaction can only be avoided if it can be shown that the mistake was caused by fraud or by misrepresentation on the part of the other party. Thus, we can say that contract can be avoided when there is a mistake by one party as to the nature of the transaction and such mistake being known to the other party. For Example; A, an old man, who was illiterate was made to sign a document, which was a promote. A thinking the document to be a will where his signature was required as a witness to it signed the document (the promote). Subsequently, B endorsed the promote to a stranger C, who paid value for it and was ignorant of the fact that the endorser had obtain it from A by fraud. C. then filed a suit against A to recover the amount stated in the promote. The court held that C could not recover from A gave the following reasons for its decision—

“The transaction between A and B was a result of mistake by A as the very nature of the transaction (such mistake being caused by fraud), such mistake was known to B, the so-called contract between A and B void (not merely voidable) and B acquired no title to the promote. As B no title, he could transfer none to C. Therefore, C could not recover.”

Similarly, we can say that a contract can be avoided when there is mistake by one party as to the identity of the other party, such mis being known to the other party. For example—


  1. Mistake of Law—S. 21 says about the effect of mistake of law—“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 law not in force in India has the sam$ effect as a mistake of fact.”

Kinds of Mistake of Law—A mistake of law is of three kinds—

(i) Mistake with Regard to Native Law—The maxim is ignorantia ju non excusat (ignorance of law is no excuse). The word ‘juris’ in the maxi is used in the sense of denoting general or ordinary law of the count Where the word juris is used in the sense of denoting private right maxim has no application. For example—

A, a widow, is entitled to certain occupancy rights. A remarries believing that she has lost her occupancy rights by reason of her second marriage agrees to take the land from B, her Zamindar, on an increased rate of rent Both A and B honestly believe that A has lost her occupancy rights. The contract is not voidable. (Sahiban Bibi Ys. Madho Lai, 1906, 4 A.L., S. 475).

(ii) Mistake with Regard to Private Right—Existence of any particular private right is a matter of fact, though depending on rules of law. For Instance, a man's ignorance that he can heir to such property is a matter of a fact. A man’s promise to buy that which, unknown to him, already belongs to him is not to be made binding by calling his mistake as to the ownership, a mistake of law. Mistake as to general ownership or right stands on the same footing as the mistake of fact. For example—

(iii) Mistake with Regard to Foreign Law—Mistake relating to foreign law stands on the same footing as a mistake of fact. For example—

agreement in which A agreed to pay B Rs. 100 per month. They were not in fact, validly, married. A having fallen into arrears, B sued A to recover the amount. In this case since there was a mutual mistake of fact essential t the agreement, hence the agreement is void.


Mistake as to subject matter of the contract

Error in respect of the thing which is the subject-matter of the agreement, renders agreement a nullity owing to the want of consent. Mistake must be as to t identity of subject-matter and not merely of its quality. If A buys a vase from a dealer, and both of them genuinely believe that the vase is an antique while in fact it is not, this would not be a case of mistake in identity but mere mistake in the quality of the thing, insufficient to avoid the contract. For example —

    1. In an auction sale, X gives a bid for lot A while the auction is for B. Here the bidder is in error of the subject-matter of the agreement and is binding contract can result on the fall of hammer.
    2. In

Raffles Vs. Wichelhaus, & C. 906

    the defendant agreed buy of the plaintiff a cargo of cotton ‘to arrive ex Peerless from Bombay There were two ships called peerless, and both sailed from Bombay, Wichelhaus meant a Peerless which arrived in October, and Raggles meant Peerless which arrived in December. It was held that there was no contract Thus, we can say that the consent is the very basis of the contract and without which no binding contract is made between the parties


Meaning of Free Consent

Not only consent, but free consent, declared by S. 10 to be necessary to complete the validity of a contract Where there is no consent, there can be no contract at all. Where the; consent, but there is generally a contract voidable at the option of the whose consent was not free.

According to S. 14 of Indian Contract Act, consent is said to be free it is not caused by

  1. Coercion as defined U/S. 15,
  2. Undue influence defined U/S 16,
  3. Fraud as defined U/S 17,
  4. Misrepresentation defined U/S. 18 or
  5. Mistake subject to the provisions of Ss. 20, 21, & 22 Consent is said to be so caused when it would not have been given but the existence of such coercion, undue influence, fraud, misrepresentation mistake (S. 14) If the consent is given under any of the first four circumstances, then the contract is voidable at the option of the party whose consent was so caused (Ss. 19 and 19A). If the consent is caused by mistake of fact of both the parties, then the agreement is void (S. 20). It is thus essential for the formation of a valid contract that there should be free consent of both the parties.





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