Introduction
A mistake refers to an incorrect belief that is innocent in nature which leads one party to
misunderstand the other. It usually takes place when the parties to the contract are not
completely aware of the terms of the agreement and understands the terms in a different sense.
Therefore there is no consensus ad–idem i.e meeting of minds between the parties and thus do
not understand the same thing in the same sense.
The Indian Contract Act,1872 states two kinds of mistakes
Mistake of Law
The Latin maxim ignorantia juris non excusat means that ignorance of the law is no excuse.
Therefore under section 21 of the Indian Contract Act, 1872, a contract cannot be said to be
voidable due to the mistake of the parties in understanding any laws that are in force in India.
Hence the parties to the contract cannot claim relief on the grounds that they were unaware of
the Indian law.
For Example, A man was caught by a ticket conductor for traveling on a train without a ticket.
The man cannot claim that he was not aware that a ticket is required while traveling and shall
be punished under Section 138 of The Indian Railways Act, 1989.
Exceptions
1. Mistake regarding foreign law.
Under section 21 of Contract Act , Mistake regarding foreign law is considered as an excuse.
Because no party is supposed to know the provision and law enforced in foreign country .
Hence it will be treated as a exception of this law.
For example : An Indian company was supposed to sell 200 cans of concentrated sulphuric
acid containing 45% of solution to American company. Although more than 30% of solution
was banned in America unknowingly to this fact the Indian company took defense of Mistake
of law. It was acceptable as a defense because no one is supposed to know the laws of foreign.
 This mistake may relate to the mistake of the Indian laws, or it can be a mistake of foreign
laws. If the mistake is regarding Indian laws, the rule is that the ignorance of the law is not
a good enough excuse. This means either party cannot simply claim it was unaware of the
law.
 The Contract Act says that no party shall be allowed to claim any relief on the grounds of
ignorance of Indian law. This will also include a wrong interpretation of any
legal provisions.
 However, ignorance of a foreign law is not given a similar treatment. Ignorance of the
foreign law is given some leeway, the parties are not expected to know foreign legal
provisions and their meaning. So a mistake of foreign law is in fact treated as a mistake of
fact under the Indian Contract Act.
Mistake with regard to a Private Right
The existence of any private right is a matter of fact although depending on the rules of law
because it is not possible for a party to fully know the private rights of another party.
In the case of Cooper vs. Phibbs,1 The plaintiff took a lease of fishery right from the defendant
unaware of the fact that he already had a life interest in the fishery right. The plaintiff, therefore,
brought a suit for the cancellation of the lease and the defendant argued that this was a mistake
of law. It was held that a mistake as to the general ownership or right stands on the same
footing as a mistake of law and therefore was declared void.
Mistake of Facts
Mistake of fact means any contract which is performed by parties without knowing any
material fact (or ignoring the fact), which is essential for that contract. Section 20 and 22 of the
Indian Contract Act deals with ‘Mistake of Fact’. Mistake of Fact is of three types: Bilateral
mistake, Unilateral mistake and Common mistake.
In the case of The State of Maharashtra vs. Mayer Hans George, A is an officer of the court
and he is ordered to arrest Y. A arrests Z by mistake, as he believes Z is Y. Here, A can take
the base of bona fide intention as a defence in the mistake of fact.
1) Bilateral Mistake – Section 20
Section 20 will only apply when the following three conditions are fulfilled:
1)The mistake must be committed by both the parties i.e must be mutual
2)The
mistake
must
be
regarding
some
fact.
3)It must relate to a fact which is essential to the contract.
Therefore if the mistake is made regarding the existence of the subject matter or a fact essential
to the contract, it would be a void contract since there is no consensus ad idem.
But an incorrect opinion regarding the value of the thing which forms the subject matter of the
agreement is not said to be a mistake of fact and is considered inconsequential to the agreement.
Bilateral 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”. In simple words, if parties
are involved in an agreement without knowing any essential facts related to the agreement, then
it is considered as a Bilateral Mistake and that agreement will be void. For example- A agrees
to sell to B any goods supposed to be on its way from America to Bombay. It is found that
before the day of the bargain, the ship containing goods had been cast away and the goods were
lost. But neither party was aware of these facts. The agreement is void.
A, being entitled to an estate of 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.
Types of Bilateral Mistakes
1) Mistake regarding the existence of the subject matter
Sometimes the existence of the subject matter of the contract ceases to exist before the
agreement was made and the parties to the contract may not be aware of this fact. If the subject
matter on which the contract exists is not present, it is considered that the contract has perished
and hence the agreement would be considered void.
In the case of Galloway vs. Galloway(1914), A man and woman believed that they were
married and therefore made a separation agreement but it was later discovered that the man’s
first wife was alive. It was held that the separation agreement was void as it had been
entered into on the basis of the common assumption that the parties were married to each
other.
A’ and ‘B’ are involved in a contract to sell a horse in a specific amount. But, horse dies before
the contract is performed and both the parties (A and B) are unaware of this fact that the horse
does not exist. In this case, the Contract is void.
2) Mistake regarding the quality of the subject matter
If the parties to the contract are not mistaken regarding the subject matter of the contract but
regarding its quality, the contract would be said to be valid.
In the case of Smith vs Hughes(1870), The plaintiff agreed to buy certain Oats from the
defendant believing that they were old when in reality they were new. It was held that the
defendant cannot avoid the contract on the ground that he was mistaken as to the oldness
of the oats.
3) Mistake regarding the quantity of the subject matter
If both the parties to the contract are under a mistake as to the quantity of the subject matter,
the agreement is said to be void.
For Example, Ankita agreed to buy a car from Prankur based on his letter in which the price
mentioned was 50000 instead of 5 lakhs due to a typing error. The said agreement is considered
void due to a mistake as to the quantity of the subject matter.
4) Mistake regarding the title of the subject matter
Sometimes the buyer of said property or good may already be the owner of what the seller
wishes to sell. Both the parties here might be under a mutual mistake as to the title of the said
good or property. Since in such a case there is nothing that the seller can transfer, there is no
contract which subsequently becomes void. This can be explained in the case of Cooper v
Phibbs(1867).
. Matter as to the identity of subject matter
‘A’ and ‘B’ made a contract in which ‘A’ promise to sell his car to ‘B’. ‘A’ has two different
types of car (one for racing and other for tourism purpose). Here, the real identity of the car is
not clear and both the parties are thinking about different types of car. In this case, the Contract
is void.
The case of Boulton v Jones2, it was held that Jones had never made contract with Boulton and
he was not bound to pay for the goods.
In the case of Cundy v Lindsay, it is held that contract as a mistake as a matter of identity will
be automatically void.
2) Unilateral Mistake -section 22
Section 22 in The Indian Contract Act, 1872
Contract caused by mistake of one party as to matter of fact.—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.
Section 22 of the act says that a contract cannot be said to be voidable just because one of the
parties to the contract was under a mistake as to a matter of fact concerned to the contract.
Therefore, a unilateral mistake does not affect the validity of the contract and cannot be a
ground for setting aside the contract in the court of law.
In the case of Tapline vs. Jainee,3 The buyer at an auction brought a property described with
reference to a plan. The buyer was under the assumption that he was well versed with the
property and therefore did not refer to the plan. Later he discovered that a garden plot which
he thought was a part of the property was not in fact included in the plan. It was held that the
buyer cannot revoke the contract on the grounds of the unilateral mistake made by him and was
bound by the contract.
Exceptions to a Unilateral Mistake
In case of a unilateral mistake, the contract can only be avoided if it is proved that the contract
was caused due to fraud or misrepresentation on the part of one of the parties to the contract.
1) Mistake by one party as to the nature of the contract
When a mistake is made by one of the parties regarding the very nature of the contract being
entered into and such a mistake is known to the other party, such a contract is said to be void.
This may happen because while executing a contract, a party may not understand the nature of
the contract he is entering into either due to fraud or misrepresentation by the other party or
due to the old age or ill health of the person consenting to such a contract.
In the case of Dularia Devi v Janardan Singh (1990), An illiterate woman put her thumb
impression on two documents thinking that both of them were to gift some property to her
daughters. Later she discovered that the second document was to defraud her out of more of
her property. Although this was a unilateral mistake on the part of the illiterate woman yet since
the consent for the said agreement was gained by fraud and the woman was not aware of the
nature of the transaction, the contract was held void by the courts.
3
(1880)
2) Mistake by one party regarding the identity of the parties to the agreement
Generally, the identity of the parties entering into an agreement is not essential to a contract.
But in certain cases, when a unilateral mistake is made regarding the identity of the parties to
the agreement due to misrepresentation by one party who claims himself to be someone who
he really is not, In such cases the agreement is said to be void
In the case of Cundy v Lindsay (1878), Lindsay & Co were manufacturers of linen
handkerchiefs amongst other things who received an order of 250 Dozen handkerchiefs from a
man named Blenkarn, who imitated the signatures of “Blenkiron & Co.” a reputed firm located
at “123, Wood Street”. The man further mentioned his address to be at 37, Wood Street,
Cheapside. Lindsay and Co assumed that the order was from the reputed firm located at Woodstreet and thus delivered the order. Later the man sold the goods to an innocent party, Cundy.
When Blenkarn failed to pay for the said order Lindsay & Co sued Cundy for the goods.
Lindsay and Co claimed that since they sold the goods to Blenkarn under the mistaken
assumption that they were selling it to Blenkiron & Co, there was no real consent to the contract
of sale.
It was held that there was a unilateral mistake by the claimants regarding the identity of the
other party making the contract void and hence the title of the goods did not pass to Blenkarn,
and therefore could not have passed to Cundy who was liable to return the goods back to
Lindsay and Co.
Unilateral Mistake makes a contract voidable:
If any unilateral mistake is induced by fraud or misrepresentation, then the contract is voidable
for that party who has done the mistake in the contract. In simple words, if ‘A’ creates such
types of situations and do such types of activities in order to deceive ‘B’ and ‘B’ has also done
a mistake as a result of A’s action and made a contract with ‘A’. Then, Contract will be voidable
at the option of ‘B’.
Common Mistake:
When both parties are mistaken for the facts related to the subject matter of the agreement. The
court can declare the entire agreement as void in such kind of mistake. If the contract contains
a small error relating to the subject matter, then there is a very less chance that the court will
rule that the contract is void. If any part of the contract that does not contain a mistake is still
valid.