‘Mistake’ in general meaning is something that does not work out in search of a solution. Word ‘Mistake’ is used interchangeably with ‘error’. In law, misunderstanding or erroneous belief about a material fact may prevent the formation of a valid contract. According to Section 10 of the Indian Contract Act 1872, Free consent of parties is an essential element of any contract. Section 14 of the Indian Contract Act states that ‘Free consent means consent not caused by coercion, undue influence, fraud, misrepresentation and mistake’.
A mistake means ‘believe in those things which do not exist in reality’. Thus, the mistake is an erroneous belief.
‘Mistake’ is not defined in the Indian Contract Act. Section 20 , 21 and 22 deals with the concept related to mistake. ‘Mistake’ can be defined as any action, decision or judgement that produced an unwanted and unintentional result. A Mistake is said to have occurred where parties intending to do one thing by error do something else. Phillips v. Brooks Ltd is an English contract law case concerning mistake . It was held in this case that a person is deemed to contract with the person in front of them unless they can substantially prove that they instead of them intended to deal with another person.
A mistake is of two types:
Mistake of Law means any contract which is performed by parties without knowing the law (or by ignoring the law), which is essential for that contract. Section 21 of the Indian Contract Act deals with ‘effect of mistake as to law’.
In this case, the person was not knowing the clauses of the Immigration Act 1971, for staying beyond the time limit by the leave. Here, he cannot apply for defence under the mistake of law.
Mistake of Law can be of two types:
A and B make a contract grounded on the erroneous belief that a specific debt is barred by the Indian Law of Limitation, then the contract is not voidable.
A murdered B, A cannot apply for the defence of mistake of law that is; he was not aware of law related to the murder.
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.
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.
Essentials elements of Bilateral mistakes are:
(i) Both parties must be under a mistake.
(ii) The mistake must be of fact, not of law.
(iii) The mistake must be related to an essential fact.
Now, It is very important to know what are the essential facts which make an agreement void. An agreement is a void where there is a bilateral mistake as to the subject matter. A bilateral mistake as to the subject matter includes the following:
‘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.
‘A’ and ‘B’ made a contract in which a transaction of 200 pens in return of some amount involves. But 100 pens are sold early by the brother of ‘A’ before the contract could be performed and both the parties (A and B) were unaware of this fact that only 100 articles do exist. In this case, the contract is void.
‘A’ and ‘B’ made a contract together in which ‘A’ sold his car in return of some amount to ‘B’. They believed that the car is for racing purpose but the car was for tourism purpose. In this case, the Contract is void.
‘A’ and ‘B’ made a contract to sell things in consideration for some money which was not a valid amount and both the parties (A and B) are unaware of this fact. In this case, the Contract is void.
‘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.
In the case of Cundy v Lindsay , it is held that contract as a mistake as a matter of identity will be automatically void.
Sometimes, a contract is made but during the performance of the same, we come to know that it is impossible to fulfil the performance of the contract. The agreement is void where there is a mistake as to the possibility of performance. Impossibility is an excuse for non-performance of a contract. Impossibility can be of two types:
According to Section 22, 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.
Such a mistake does not invalidate the agreement. For example, ‘A’ and ‘B’ made a contract in which only ‘A’ was under a misbelief for any product which is in the transaction. Then, the contract is not voidable for ‘A’ and will be classified as a valid contract.
There are a few cases which make a contract void and voidable, merely by a mistake of the fact of a one-party.
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’.
Unilateral mistake makes a contract void in two cases:
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.
Bell v Lever Brothers Ltd is an English contract law case decided by the House of Lords . Within the field of mistake in English law , it holds that common mistake does not lead to a void contract unless the mistake is fundamental to the identity of the contract.
According to Section 10 of the Indian Contract Act, 1872 ‘All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object’. According to Section 14 of the Indian Contract Act, ‘Consent is said to be free when it is not caused by mistake subject to provision of Section 20, 21 and 22. The mistake can be of two types: Mistake of law and mistake of fact. The mistake of fact is an excuse under non-performance of duties under contract but the Mistake of law is not an excuse under non-performance of duties under the contract.
