1) Introduction:
When the consent of the parties to the contract is caused by mistake then it is not free consent which is important for the valid contract. One or both the parties may be working under some misunderstanding of some fact relating to the agreement. If such misunderstanding is not in the agreement, then parties can enter into an agreement. Such contract are said to have been caused by mistake.
Mistake can be work in two ways:
1. When the mistake in the mind of the parties is such that there is no genuine agreement at all.
2. There may be an original agreement, but there may be mistake as to a matter of fact relating to that agreement.
1. Meeting of two minds ( Consensus ad idem): Mistake in the mind of the parties then there is no genuine agreement at all. There may be no meeting of two minds i.e. absence of “consent”. For the valid contract both the parties should have given their consent and it must be free. If two or more parties don’t agree to the same thing in the same manner then there is a no consent so no contract can be arise or enforced.
Case Law: Raffles v. Wichelhaus:[1]
In this case, the buyer and the seller enter into an agreement where seller has to supply a cargo of cotton to arrive “ex Peerless from Bombay”. There were 2 ships of the same name and both were to sail in October and in December from the Bombay. The seller sends cotton by December ship but the buyer refused to accept the same. In this case, the offer and acceptance didn’t match and there was no contract so it was held that, the buyer was entitled to refuse to take delivery.
2. Mistake as to a matter of fact which is essential to the agreement: (Section 20)
When both the parties in the agreement are under mistake as to a matter of fact essential to the agreement then the agreement is void. For e.g. Mr. A agrees to buy a certain horse from Mr. X. It prove to be that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is not valid.
2) Requirements under section 20:
a. both parties in the contract should be under a mistake.
b. mistake should be regards a matter of fact.
c. The fact regarding which the mistake is made must be essential to the agreement.
1. Mistake of both the parties:
When both the parties in the agreement are under mistake then the agreement is void. If the mistake is only by one of the parties who has some mis-impression then the validity of the agreement is not affected.
Case Law: Ayekam Angahal Singh v. The Union of India[2]
In this case law, there was auction for the sale of fishery rights and the plaintiff was the highest bidder making a bid of Rs. 40,000/-. The fishery rights had been auctioned for 3 years. The rent was Rs. 40,000/- per year. The plaintiff sought to avoid the contract on the ground that he was working under a mistake and he thought that he had made a bid of Rs. 40,000/-, being the rent for all the 3 years. It was held that since the mistake was one-sided, the contract was not affected and the same could not be avoided.
2. Mistake of fact:
There should be mistake of fact and not mistake of law. A contract is not revocable because it was caused by a mistake as to any law in force in India; but a mistake as to a law in force in India has the same result as a mistake of fact. Everyone is assumed to know the law of the land. Ignorance of law has no excuse. If a person wanted to escape the contract on the ground that there was a mistaken impression in his mind as to the existence of some law while he entered into the contract, he will not get any help.
3. Mistake essential to the agreement:
The mistake is regarding a fact essential to the agreement or not depends on a particular contract. The effect of mistake in various situations is are as follows:
i. Mistake as to the existence of the subject-matter:
If both the parties to a contract believe in the existence of the subject-matter, which in fact does not exist, the agreement is not valid.If the subject-matter of the contract has already perished, there is nothing regarding which the contract is being made. For e.g., in a contract for the sale of specific cargo, if the ship carrying the same has been cast away and the goods lost, or the sale is of a specific horse, which has already died the agreement is void, if neither of the parties was aware of the actual details. This agreement is void for another reason i.e., the performance of the agreement is impossible.
Mistake regarding quality of the subject-matter only:
If the parties in the contract are not mistaken as to the subject-matter, but only regarding its quality, i.e., when the subject-matter has been clearly identified although its quality has not been , the agreement is valid.
ii. Mistake as to possibility of performance of the contract:
When the performance of the contract is not legally possible. For e.g., Mr. A agrees to take a lease of a fishery from Mr. B. If it expel that Mr. A is himself already the tenant for life, and the Mr. B has no interest which could be transferred to Mr. A, it is not legally possible for Mr. B to perform this contract. The agreement having been entered into under a mistake, is void.
iii. Mistake as to title:
Sometimes the parties may be labouring under a mutual mistake as to the title to the goods sold. The buyer may already be the owner of what the seller claims to sell. Actually , there is nothing which the seller has to transfer. The transfer of ownership is considered but the same is not possible as the buyer is already the owner. Such an agreement is void due to mutual mistake. The position in this case is similar to the one where the subject-matter, unknown to the parties, is not in existence.
iv. Mistake as to promise:
If there is a mistake because of which the promise does not review the real intention which was there in the proposed agreement, such an agreement would be void.
v. Mistake as to the identity of the parties:
If I intend to enter into contract with Mr. A for the purchase of goods and I place order, Mr. B cannot accept this offer, and if Mr. B supplies me the goods, I have no obligation to pay to him because I never wanted to make any contract with him.
vi. Mistake as to the existence of a material fact:
If the mistake is regarding a fact essential to the agreement, the agreement is void. But if the mistake does not relate to the existence of a material fact concerning the subject-matter of the contract, the validity of the contract may not be affected thereby.
3) References:
2.https://blog.ipleaders.in/mistake-of-fact-and-mistake-of-law-under-the-indian-contract-act1872/
3. https://lawbhoomi.com/provision-of-mistake-under-indian-contract-act-1872/
4. https://lexforti.com/legal-news/mistake-under-the-indian-contract-act-1872/
5. https://en.wikipedia.org/wiki/Mistake_(contract_law)
[1] https://www.lawteacher.net/cases/raffles-v-wichelhaus.php
[2] https://www.casemine.com/judgement/in/56b49277607dba348ffffd6c
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