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Mistake

The term ‘mistake’ means an incorrect belief about something. It is, in fact, an erroneous (incorrect) belief which leads one party to misunderstand the other. It generally takes place where the concerned parties are not fully aware of the terms of the agreement, and they take the terms in different sense. Hence, there is no consent at all because the two parties do not understand the same thing in same sense.

Types of mistakes

From the subject point of view, the following mistakes are important.
  • Mistake of Law
     
    The mistake of Law may be of two types namely,
    • Mistake of Indian Law
    • Mistake of foreign Law
  • Mistake of Fact
     
    The mistake of fact may be of two types namely,
    • Bilateral mistake
    • Unilateral mistake

Mistake of Law

When one or both the parties to an agreement are under an erroneous understanding of the relevant law. Then agreement shall be said to be caused by mistake of Law. This mistake may either be mistake of Indian Law or mistake of foreign Law.
  • Mistake of Indian Law: Everybody is expected to know the law of the country where he lives, particularly, the laws which are relevant for his activities. The Latin maxim stands thus ‘Ignorantia juris non excusat’ which means ignorance of law is no excuse. In other words, a party cannot get exemption from the act done in ignorance of law. A contract is not voidable because it was caused by a mistake as to any law in force in India.
     

    Example: X and Y entered into a contract on this erroneous belief that a particular debt was not barred by the Limitation Act. The contract cannot be avoided on the ground of mistake because both are expected to know the law of the land.

  • Mistake as to the foreign Law
     
    Mistake as to the foreign Law (law of some other country) is treated as a mistake of fact as a person cannot be expected to know law of a foreign country. Hence, a contract becomes void on the ground of mistake of foreign law.

Mistake of Fact

When parties to the contract are under an erroneous belief regarding a fact which is essential to the subject matter of the contract then they are said to be under mistake of fact. The mistake of fact can be further studied under different heads as follows
  • Bilateral mistake Sec. 20
     
    The term ‘bilateral mistake’ means that both the parties to the agreement are under a mistake. The case of bilateral mistake is an instance of lack of “consent”, thus in case of bilateral mistake there is no consensus ad idem. According to Sec. 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.”
     
    A mistake shall be termed as bilateral if it satisfies the following two conditions:
    • The mistake must be mutual i.e. of both the parties to the contract.
    • The mistake must relate to a matter of fact essential to the agreement

Types of bilateral mistake

An agreement is void where there is a bilateral mistake as to the subject matter. A bilateral mistake as to the subject matter includes the following:
  • Mistake as to the existence of subject matter: Sometimes, the subject matter of the agreement would have ceased to exist before the agreement was made and both the parties may not be aware of this fact. In such cases, the agreement is void.
     

    Example: A agrees to buy a certain horse from B. It turns out that the horse was dead at the time of bargain, though neither party were aware of the fact. The agreement is void because there is a bilateral mistake of fact as to the existence of the subject matter.

  • Mistake as to the title of subject matter: Sometimes the buyer is already the owner of a property which the seller wants to sell to him. But the concerned parties are not aware of the fact. It happens when both the parties are mistaken about this fact. In such cases, the agreement is void as there is a mistake about the title of the subject matter.
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  • Mistake as to the quantity of the subject matter: If both the parties are working under a mistake as to the quantity of the subject matter, the agreement is void.
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  • Mistake as to the price of the subject matter: Where there is a mutual mistake as to the price of the subject matter, the agreement is void.
     

    Example: A has agreed to buy a car from B, based on his letter in which he said the price was ₹ 7,500 instead of ₹ 75,000 due to a typing error. The agreement is void because there is a mistake as to the price of subject matter.

  • Mistake as to the identity of the subject matter: It usually happens when one party intends to deal in one thing and the other party intends to deal in another.
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  • Mistake about the possibility of performance: The fact of possibility of performance is an essential fact. If an agreement is impossible to perform, but the fact of impossibility is unknown to both the parties, the agreement is void. The impossibility may either be physical or legal.
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Unilateral mistake

It is the mistake in which only one of the parties to an agreement is at mistake about the facts which are essential to the agreement. Generally, a unilateral mistake does not render the agreement void i.e., it does not affect the validity of the agreement. Where the agreement is otherwise valid, the mistake of only one of the parties cannot affect its validity.

 

Example

X sells rice to Y by showing a sample. Y thought that the rice is Basmati and purchased it. But the rice was local. It is a mistake of fact by Y and he is bound by the contract.

 
Exceptions
 
However, there are certain cases in which a unilateral mistake renders an agreement void. These are the cases in which a unilateral mistake has the effect of defeating the true consent of the parties and may be discussed as under:
  • Mistake about the identity of the parties to an agreement: The identity of parties entering into an agreement is not necessarily essential to the contract. In certain cases the identity of the parties to the contract is essential and hence a unilateral mistake as to identity of the party in such circumstances renders a contract void. The mistake about the identity occurs when one of the parties represents himself to be some person, other than who he really is.
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Note: The jeweler intended to contract with a person who came to his shop irrespective of the identity of such person. The intention of the jewller was very clear regarding the person he was contracting with. The fact that such person being Sir GB came to his knowledge later and therefore there was no mistake as regards to identity of the person and hence it was not void under the provisions of unilateral mistake. The only recourse for the jewller is to file the case under fraud against Mr. X.

  • Mistake about the nature of transaction: There can be unilateral mistake regarding the very nature of transaction to be entered into in such cases the contract would be void. While executing a deed, a person may not understand the nature of the transaction that he is entering into. A person may sign a gift deed thinking that it is only a power of attorney. This may happen because of a fraud by the other person or because of the absence of sufficient caution by the signing person owing to a state of health or old age.

Effects of mistake

The effects of mistake are as follows
 
In case of bilateral mistake
The agreement is void
In case of unilateral mistake
The agreement is valid
In case of unilateral mistake as to identity of a person contracted with and the identity of person being of material importance
The agreement is void
In case of unilateral mistake as to nature of contract
The agreement is void
In case of mistake as to Indian law
The agreement is valid
In case of mistake as to foreign law
The agreement is void




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