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Mistake (Contract Act)


Mistake (Contract Act)
Mistake (Contract Act)

Content:-



Mistake (Section 20)


Mistake refers to an erroneous belief regarding something, and it can be classified into two types:



(i) Mistake of Fact, and

(ii) Mistake of Law.



(i) Mistake of Fact


Mistake of Fact can further be categorised into two types:



(a) Bilateral, and

(b) Unilateral.

 
 

Bilateral Mistake of Fact


A ‘Bilateral Mistake of Fact’ occurs when both parties to the agreement are mistaken about a fact that is essential to the agreement. In such cases, the agreement is void, not just voidable. Bilateral mistakes of fact involve two elements:



(i) The mistake must concern a matter essential to the contract, and

(ii) Both parties must commit the mistake.



Such mistakes may occur under different circumstances, as discussed below:



(1) Mistake Regarding the Existence of the Subject Matter


This occurs when the subject matter of the agreement (e.g., articles or goods) did not exist at the time the contract was made. For example:



- Barkha offers to sell her cow to Banwari, but the cow had already died before the agreement was made, unbeknownst to both parties.



- Commodities on a ship destined for Kolkata were lost at sea before the agreement to sell them was made, with neither party aware of the loss.



In such cases, the agreement is void due to the mistake of fact regarding the existence of the subject matter.



(2) Mistake Regarding the Identity of the Subject Matter


This occurs when the parties agree on two distinctly different things. For instance, if one party thinks of one thing while the other thinks of something else, the agreement is void due to the mistake of identity of the subject matter.



(3) Mistake Regarding the Title to the Subject Matter


This mistake occurs when the buyer believes the seller has a valid title to the subject matter, but in reality, they do not. The agreement would be void due to the mistake regarding the title to the subject matter.



(4) Mistake Regarding the Quantity of the Subject Matter


This occurs when there's a discrepancy between the quantity of the article ordered and the quantity supplied. For example, if there's a misunderstanding between the buyer and seller regarding the number of items to be supplied, the agreement may be void due to the mistake regarding the quantity of the subject matter.



(5) Mistake Regarding the Price of the Subject Matter


This occurs when there's a misunderstanding between the parties regarding the price of the subject matter. If the parties agree to a price based on erroneous information, the agreement may be void due to the mistake regarding the price of the subject matter.




Unilateral Mistake


Unilateral mistake occurs when only one party to the contract is mistaken about a fact, while the other party is not. Contracts resulting from unilateral mistakes are valid and enforceable, not voidable.


Exceptions:


(1) Where the unilateral mistake concerns the Nature of the Contract


If one party enters into a contract without intending to do so due to misrepresentation or coercion, the contract is void.


(2) Where the unilateral mistake is regarding the Quality of the Contract


In the case of Hindley selling various lots of hemp and tow through an auction, Scriven mistakenly believed that he was bidding on a lot of hemp when, in fact, it was a lot of tow. Consequently, Scriven bid an amount suitable for hemp but excessive for tow. It was determined that the contract could be voided due to the mistake regarding the quality of the promise. [Scriven vs Hindley (1913) 3 K. B. 564].


(3) Where the unilateral mistake is regarding the Identity of the Person with whom the contract is being made


Unilateral mistake concerning the identity of the person occurs when an individual enters into an agreement with someone, mistakenly believing them to be someone else. For instance, if Ram intends to contract with Ghanshyam but mistakenly contracts with Shyam, believing him to be Ghanshyam, it constitutes a unilateral mistake regarding the identity of the person.

 
 

Mistake of Law (Section 21)


Mistake of Law can be of two types:


(a) Mistake of the Law of the Land

(b) Mistake of Foreign Law



(a) Mistake of the Law of the Land


The principle of "Ignorance of law is no excuse" applies to the law of the land. Contracts are not voidable due to mistakes about the law in force in India.



(b) Mistake of Foreign Law


Mistakes about foreign law are treated as mistakes of fact, not law, and are subject to the same rules as mistakes of fact.



Remedies available in cases of Mistake


An agreement made with a mistake is void. Remedies depend on whether the contract has been executed or not:



(a) If the contract is yet to be executed, the aggrieved party may repudiate the contract.


(b) If the contract has been performed, the benefiting party must restore the benefits to the aggrieved party or compensate them for any losses.


 
 


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