Mistake under Indian Contract Act, 1872
Mistake in Indian Contract Law
Mistake is an important factor that can affect the validity of a contract. Under the Indian Contract Act, a contract may be void or voidable if it is based on a mistake.
Types of Mistakes under the Indian Contract Act, 1872
There are mainly two broad types of mistakes recognized:
1. Mistake of Fact
Definition: When both parties misunderstand a fact that is material to the agreement.
Effect: A contract is void if there is a mutual mistake about a fact essential to the agreement.
Section 20 of the Indian Contract Act (which deals with contracts induced by fraud or misrepresentation) and judicial decisions discuss the effect of mistakes.
Types of Mistake of Fact:
Unilateral Mistake: Mistake made by one party only.
Mutual Mistake: Both parties are mistaken about the same fact.
2. Mistake of Law
Mistake of Law means ignorance or misunderstanding of the law.
Effect: Generally, a mistake of law does not void a contract because everyone is presumed to know the law.
However, if a party is induced by a fraudulent misrepresentation of law, the contract may be voidable.
Important Provisions and Judicial Interpretations
Section 20 (Fraud) and Section 19 (Misrepresentation) imply that if a contract is entered into based on mistake, misrepresentation, or fraud, the contract may be voidable.
Mutual Mistake of Fact: When both parties misunderstand the same fact, the contract is void (no consent).
Unilateral Mistake: Usually, a contract is not voidable unless the other party knows or ought to know about the mistake.
Examples of Mistake
If two parties contract for the sale of goods which both believe to be in existence, but they do not exist, the contract is void due to mutual mistake.
If a buyer mistakes the quality of goods and buys them, generally the contract is valid (no mistake of fact affecting validity).
Mistake about the law or ignorance of the law is not an excuse.
Summary Table
| Type of Mistake | Contract Validity/Effect | Explanation |
|---|---|---|
| Mutual Mistake of Fact | Contract is void | Both parties mistaken about a fact essential to the contract |
| Unilateral Mistake of Fact | Contract generally valid, except if other party knows of mistake | Mistake by one party only |
| Mistake of Law | Contract is valid | Ignorance of law is no excuse |
| Mistake by Fraud or Misrepresentation | Contract is voidable | Induced by fraud or misrepresentation |
Case Law Examples
Raffles v. Wichelhaus (1864): Mutual mistake as to the ship’s identity — contract void.
Bell v. Lever Bros (1932): Contract void for mutual mistake only when mistake is fundamental.
Satyabrata Ghose v. Mugneeram Bangur & Co. (1954): Indian Supreme Court emphasized the distinction between mistake of fact and law.
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